This thesis discusses the compensation incentives in a Chinese commercial bank (it will be mentioned in the thesis as “the Bank”). We analyze the payment policy, the status of employee’s salary, the performances of the Bank, and performance indicators for the appropriate compensation by the Bank. Data were collected through a questionnaire sent to the employees of a small town branch of one of the largest Chinese banks. As observed in the study, the mechanism of base salary combined with performance salary is well established in China. However, four main problems still exist, (i) the overall level of salaries and employee benefits is still low, (ii) the lack of awareness in payroll strategy, (iii) inadequate welfare and (iv) the shortage of long-term incentive plans. In order to compensate the weaknesses as found in this thesis, some solutions are proposed, such as the implementation of a more democratic pay system, more weight of long-term incentives, strengthening the pay management of senior executives, and determining a reasonable goal for a comprehensive performance evaluation.