Abstract: With the gradual improvement of China’s socialist market economic system, the strategy of building up a powerful nation relying upon human talents has become an urgent and major task. There are many types of public institutions in China and the situation is complicated. Therefore, the types and quantity of talents involved in public institution are enormous, and the salary of institutions is an important weight to attract and retain talents. But there are still many defects existing in the current salary system of public institutions, which obstruct the development and perfection of the socialist market economic system objectively. Hence, it is imperative to further reform the salary system of public institutions in China. In this paper, through the discussion of the relevant concepts of the salary system and the reform process of the salary system of China's public institutions, the problems and their influencing factors of the compensation system under the current economic mechanism are analyzed and summarized. Through systematic analysis of the causes of these problems, the author put forward targeted countermeasures and suggestions on the basis of it.

Key words: compensation system, public institution, reform, performance