Mainland pension reform a boon for headhunters

January 05, 2015 09:55
The new policy will require China's nearly 40 million public sector employees to make contributions to the pension fund. Photo: AFP

China’s effort to eliminate its dual-track pension system will prompt a migration of talent from the public sector to the private sector, benefiting job agents and headhunters.

The reform measures, announced by the central government at the end of last year, aim to unify pension system for both public and private sectors.

Under the current dual pension system, government employees do not need to contribute to their pension accounts but they can get 80 to 90 percent of their salary after retirement. Employees of a privately-owned enterprises, however, must contribute at least 8 percent of their salaries to the pension accounts. In spite of the contribution, they may only get 40 to 60 percent of their salary after retirement.

According to the Ministry of Finance's Fiscal Science Research Institute, the monthly pension for retired civil servants and staff in public institutions is 2.1 and 1.8 times the common pension level of 1,900 yuan (US$306).

The system, a legacy of the planned economy era when all workers were supposed to be employed by the state and hence protected under the state pension system, is apparently unfair nowadays. It has also become a source of public outcry for a long time. The recent reform wants to end this.

The new policy is to require the nearly 40 million public sector employees to make contributions to the pension fund. Their pension replacement rates are also expected to be lowered to match those of private sector employees.

Although the policy hinted that an occupational annuity would be established and pay would be raised to hedge the loss public sector employees may experience, it is for sure that the pension gap between the two groups will be narrowed.

The new pension policy has already dealt a heavy psychological blow to civil servants and public sector employees.

A stable job and handsome social security benefits are the two major factors that attract many young people to work for the government. Now that the pension advantage, a major benefit, will gradually be phased out, public sector employees find less attraction to stay.

According to a December report by Zhijuzk, which specializes in studies of public policies and civil servants, an increasing number of public sector employees are looking for new jobs in the private sector in the past six months.

Nearly half of the civil servants it surveyed recently said they were planning to resign. Zihjuzk said the percentage was much higher than a few years ago.

The talent migration from the public to the private sector may be a boon for job agents and headhunters as the trend will help boost the talent base for them.

Previously, public sector employees are not their traditional source of talent because of the job stability. But now job agents should turn their attention to this sector.

According to the Zhijuzk survey, the industries that public sector employees are interested in and can be good at include finance, general office administration, government relations, public relations, advertising and consulting. Headhunters should keep an eye on these areas.

In terms of age, those in their late 20s and early 30s are most eager to leave. More senior executives or officials are also keen to try the private sector. As such, the sector offers both middle and senior talent base for job agents.

About 12 percent of those who resigned from the public sector in the past half year chose to set up their own business. And most of them raised capital from various investors.

As a result, private equity fund managers, venture capitalists and angel investors could also benefit from this round of talent migration.

-- Contact us at [email protected]


The writer is an economic commentator. He writes mostly on business issues in Greater China.