---
title: "Employee Compensation: Earning Model or Secured Money Model?"
description: "Money is a primary motivator for employees, and how it is given affects their performance. The conventional 'earning model' sets targets and rewards after achievement, but small companies may benefit from a 'secured money model' where rewards are given upfront and recovered if targets are missed, boosting employee motivation and trust."
author: "潘文富"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-05-05"
language: "en"
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---

# Employee Compensation: Earning Model or Secured Money Model?

> Money is a primary motivator for employees, and how it is given affects their performance. The conventional 'earning model' sets targets and rewards after achievement, but small companies may benefit from a 'secured money model' where rewards are given upfront and recovered if targets are missed, boosting employee motivation and trust.

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Money is one of the primary motivators for employees. The amount of money affects their performance, and how the money is given also affects their state.
The conventional way of giving money is the "earning model," where the boss sets goals, employees strive to achieve them, and then economic rewards are paid out upon achievement. Of course, if goals are not met or exceeded, there are penalties and special reward benchmarks.
From the boss's perspective, this earning model is normal and has been in use. Employees must first produce results and make money for the company, and then the company rewards them accordingly. Without confirmed performance output, the company cannot measure the employee's work ability and value. Without performance as a benchmark, it's impossible to give money. So, the vast majority of bosses adopt this model: employees work first, and rewards are given later.
From the boss's standpoint, this earning model is perfectly fine, but employees think differently:
> 1. Are the goals set reasonably?
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> 2. Are the reward benchmarks corresponding to the goals reasonable?
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> 3. Do the goals and reward benchmarks align with the overall local salary levels?
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> 4. Does the company have a corresponding backend system to support this, or does the salesperson have to do it all alone?
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> 5. How are the impacts of various historical legacy issues on performance achievement accounted for?
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> 6. How are the impacts of internal friction and buck-passing among departments and personnel on performance calculated?
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> 7. How should the impact of product quality issues or company decision errors on performance achievement be calculated?
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> 8. **Most importantly, can the boss's words be trusted?**

Arguably, breaking down these issues one by one and implementing them thoroughly is a huge project. For large companies, this may not be a problem: they have scale, strong systems, and robust backend support. Goal and salary settings are scientifically calculated and generally in line with market rates. Moreover, the larger the company, the stronger its credibility in employees' minds; what is promised will be delivered, and employees don't worry about that.

For small companies, however, this is more troublesome. Not to mention other issues, the very aspect of the boss's credibility becomes a problem. After all, a small company with weak strength naturally has reduced credibility in employees' eyes. If the boss also has some intentional or unintentional acts of breaking promises, it's even worse. Coupled with those objective problems, employees' motivation and confidence in striving for rewards are greatly diminished.

**Small companies may consider adjusting to the "secured money model."** The so-called secured money model means setting goals first, then paying the goal achievement rewards to employees in advance. After employees complete the tasks, it's done. If there is an excess, additional rewards are given. Of course, if goals are not achieved, rewards are recovered according to the corresponding proportion, meaning the money paid in advance is taken back. If employees fail to achieve goals for 2-3 consecutive months, they are switched back to the earning model.

Of course, for employees, once the money is in their pockets, they are naturally reluctant to give it back. To keep the money, they will find ways to achieve the goals.

**This secured money model has a simple structure and, from an objective perspective, has the following characteristics:**
> 1. It directly reflects the boss's credibility, or rather, trust in employees, because money is given before seeing results.
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> 2. Regarding the amount of money, Chinese people care more about the speed of payment.
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> 3. In the earning model, there is risk for employees working first and getting paid later. Now the boss pays first, which means the boss takes on the risk himself, because there is a risk that some employees may not achieve goals and the money may need to be recovered.
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> 4. Although various difficulties still exist, under the motivation of securing the money, employees themselves will find ways to overcome these difficulties.
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> 5. There may still be employees who quit midway without completing financial settlement, which could cause financial losses to the company. The boss may suffer, but this loss is visible to all, and the boss does not abandon trust in all employees because of the dishonest behavior of one or two employees.

In summary, large companies with solid systems and credibility can use the earning model without issues. Small companies with limited scale and lack of backend systems may consider introducing the secured money model, exchanging increased investment and risk-taking for employee execution.

Author: Pan Wenfu
Born into a private business owner family, he managed a family-owned distribution company for many years, during which he also served as a business manager and trainer in several production enterprises. His research focuses on internal management of small and medium-sized private enterprises, with main topics including personnel management, cost control, management backend construction, and military veterans entering private enterprises. He continuously breaks down over 400 topics related to internal management of private enterprises and keeps updating material collection and solutions.

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