By deciding on a target state that shall be approached with the occupational annuity plan, our clients wish to achieve the following objectives: firstly, to narrow income differentials of ordinary employees compared to the market standard and therewith stabilizing this group of employees; and secondly, to incline overall earnings towards the group of employees with high specialization, managerial requirements and in severe talent competition, and therefore, through occupational annuity, impelling compensation above ordinary market level.

Such a process of attaining target state for different levels of employees indicates that the curve we¡¯ll see is not flat but rising, which denotes that contributions for the annuity plan are not proportional. And this in turn is of realistic significance as in the common case resources of contribution are limited. On the premise of assuring general preference, it is a key matter of concern for each decision maker to use the fund in the human investment approach: investment most favorable for the enterprise¡¯s long range development and long-term financial benefit.

Check The Results ¨C Once Again By Various Means

Similar to compensation design, there are many approaches for the specific operation of how contribution payment can be done. In general the uniform proportional approach, differing proportional approach, contribution coefficient approach, substitution rate-oriented approach or a combination of these are often used for the annuity contribution design. But whichever approach is adopted, attention should be paid attention to the comparison between the final result and the target of contribution formula design, which requires repeated testing of mass data. The most common instrument to do so is the compensation curve comparison on a mass sample basis.

In such a process, there are special matters of concern as follows:

1¡¢Does the result show a converse development to general preference required by the occupational annuity system? It may be visually judged by the concavity of the curve, but as a more precise approach, it may be tested by reference to ACP/ADP and other indicators.

2¡¢Does the target group receive effective an incentive enough? For the group of employees that the enterprise wishes to retain, the contribution figure can¡¯t be too high. When the contribution paid at present can really become available for those employees in their pension fund, it will gain the enterprise a lot more than it costs: satisfaction, loyalty and therefore higher efficiency of special employees.

3¡¢Is there overmuch financial pressure? In general, the gross contribution amount of the occupational annuity may be subject to the general effect of the enterprise¡¯s financial budget, tax cost, and long range operational expectation etc., which is the ¡°cost curve¡± of contribution design.