There are some problems in the salary system of W company, such as a narrow gap between different level of basic salary, poor incentive effect of merit pay, and ignorance of employees’ competence improvement.The salary system of W company is optimized by adopting the C-2P model based on competence, position and performance. In other words, the pointfactor method is adopted to evaluate the position value, the accounting method of merit pay is changed, and the employees’ competence is included in the salary system. As a result, the salary is related to the position, performance and competence. The optimized salary system helps much better to realize the internal fairness of the company, and makes merit pay more incentive and flexible. At the same time, employees speak highly of the new salary system with their job satisfaction improved and the staff turnover rate decreased to 3%, and the performance of the production department and marketing department has improved.