Abstract: Indications show that the current pay practices of university which is researchoriented is difficult to adapt to the strategic needs of building an innovative country. Through modeling and system simulation, this paper reveals that performance incentives have a doubleedged sword effect, and the best pay structure of s lies in maintaining a balance between fixed pay and flexible pay ratio of about 7/3, in order to effectively balance the “incentive effect” and “crowdingout effect” of the performance pay. Considering the reform of income distribution of institutions which is struggling to put forward, this paper finds that the post performance salary system itself is rational. However, the current pay level does not reflect the characteristics of human capital and post properties, so that the university pay mode of professors in China is suffering from the plight of the system: the acquiescing or lack of effective regulation to “outside system income” caused the upside down of pay structure. This paper argues that it is better to strengthen the functions and proportions of basic performance pay, improve pay structure, and urge the change of compensation policy curve from a steep type to a flat type on the basis of improving professors’ pay level, rather than correcting the distortion of performance assessment information with huge costs.           

Key words: professor pay structure, optimization and simulation, basic pay for performance