Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust A straight salary can greatly benefit someone who is transferring to a new territory. except: make it easy enough to allow for a majority of the salesforce to win. https://quickbooks.intuit.com/oidam/intuit/sbseg/en_us/Blog/Photography/Stock/b865e494cb3a98c7739d65e0c9442b1c.jpg, https://https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/, The complete guide to employee compensation and benefits | QuickBooks, In my experience, both in the corporate (salary) and retail (hourly) space, an employee compensation plan encompasses salary or, How to find a balance between employee pay and benefits, Companies often feel they can justify a lower salary or rate if they include a more robust benefits package. Companies looking for long-term growth as opposed to short-term sales may opt for this type of compensation as well. In most companies, the bonus is usually tied to a budgetor other target that has little significance to the employee. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. Each is then rated on 12 factors, as shown in the table below. Everything you need to know about managing and retaining employees. When determining the financial compensation mix, the sales manager must. Expert Answer. Additional information and exceptions may apply. Chris Joseph writes for websites and online publications, covering business and technology. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. For post-Depression-era baby boomers, the security of a steady salary is important. Once you own property, you should take steps to protect it from loss, theft, and damage. Straight salary plans often do not provide strong incentive for extra effort. Which of the following is not true regarding the design of a global salesforce compensation system? It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. Intuit accepts no responsibility for the accuracy, legality, or content on these sites. The introduction of HR technology has revolutionized the way HR departments operate. Incentives to Salesmen: Straight salary method does not provide any incentive to the salesmen to do hard work. It could reduce retention and increase turnover. 2. \begin{array} {rcrcrcrcr} Whos using straight hourly compensation? This type of compensation plan puts less pressure on individuals and fosters team-building. Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. It provides stability of earnings without wide fluctuations. 8,000 && 101,000\\ 2. As it assures a certain minimum income (the living wage) to the salesmen regularly, it creates a feeling of security in the minds of the salesmen. Salespeople should compete in teams with each member of the team making a contribution to the group's total goal. \hline \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ A fixed dollar amount is paid for each day or week in the field. The Management Dictionary covers over 2000 business concepts from 5 categories. Which of the following statements regarding sales contests is true? Summary financial data for February are presented in equation form as follows. We provide third-party links as a convenience and for informational purposes only. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. From a morale perspective, they can be more satisfied with their work-life balance since no one is dictating it. Whos using straight salary plus commission compensation? TVC is most often used in team-based corporate cultures. There is no additional performance or sales-based income added to the employees compensation. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. \text{T} & \text{AT&T} & \text{37.50} & \text{30.97} & \text{37.12} & \text{-0.01} & \text{22,009,008} & \text{37.50} & \text{37.06}\\ \hline Murray Kiser operates his own catering service. How to start a business: A practical 22-step guide to success, How to write a business plan in 10 steps + free template, What is cash flow? a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. John David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine, Operations Management: Sustainability and Supply Chain Management, Service Management: Operations, Strategy, and Information Technology, Information Technology Project Management: Providing Measurable Organizational Value, Opportunity / Chance / Possibility / Occasion. 6. This type of sales compensation plan is employed in companies which prohibits direct sales. This is a very broad category of compensation. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. i) Beneficial for industries which prohibits direct sales. As the remuneration of the salesmen under this method does not depend upon the volume of sales made by them, the salesmen will not be reckless in increasing their sales by selling to every customer on credit. This compensation category also includes restaurant employees paid mostly in tips. This type of compensation refers to a set hourly amount without additional performance-based income. Benefits or Advantages A regular income gives the salesman a good degree of security. The most common exemptions are executive, administrative, and professional exemptions. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. The directors are considering three financing plans. The least valued nonfinancial reward by salespeople, other than those nearing retirement, is, According to the text, controls typically used by companies to ensure judicious spending by the \text{ } & \text{ } & \text{52-Week} & \text{52-Week} & \text{ } & \text{ } & \text{Sales} & \text{ } & \text{ }\\ In my experience, both in the corporate (salary) and retail (hourly) space, an employee compensation plan encompasses salary orhourly payand any benefits added to the package. Although most compensation plans are incentivized, the straight salary plan is a method of compensation in which the salespersons receive a straight-forward fixed salary with no commissions. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. 4. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. Advantages of straight salary. It is usually easy to design pay plans that fully meet the goals and needs of the firm, customers, and salespeople. Flexibility has been cited as both an advantage and a disadvantage of this compensation pay plan: A common criticism of combination pay plans is that they. Many appreciate the fallback stability of the base salary paired with performance incentives. System is easy to understand and compute. Tax basics you need to stay compliant and run your business. Your positive feeling towards inclusion at work should be synced with your actions on making a change. As the name suggests, straight salary compensation is just what you would expect. According to compensation surveys, ales managers typically earn less than the top reps in their district when sales reps are on an incentive-based plan. When the salesmen are required to create markets for a product. In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. Fresh business resources are headed your way! In commission only jobs, companies offer a safety net in the form of draw against commission. The company pays its salespeople a set amount known as a pre-determined draw at the beginning of each pay period. Are benefits included in the definition? It does not distinguish between efficient and inefficient salesmen, as the same remuneration is paid to both efficient and inefficient salesmen. A major objective of a well-designed compensation package is to: 1. Such a plan is quite common in the services industry as well as in the industrial goods sector. The advantages of paying employees a straight commission include the fact that it provides direct motivation to sales representatives to sell more products and services so they can earn more. What is the amount of net increase in owners equity during the month? key activities within the company, he/she is offering this non-financial reward: A firm offering a college tuition reimbursement program has made a commitment to providing this Total sales for the territory are then split among the sales reps in that territory. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. From a payroll standpoint, this type of compensation is harder to administer. nonfinancial reward: The Million Dollar Roundtable designation in the insurance industry is an example of this type of Using the mean and standard deviation found in part (a), . Salesperson compensation has been an issued marked by trial and error to discover the right formula. Straight salary method of remuneration is simple. Offers considerable incentive for the salespeople. determine the relative amounts to be paid in salary, commission, and bonus. . You are the sales manager of a large, multi-product company. In territory value compensation (TVC), payment is calculated based on the territory volume at the end of a period. Overall compensation and rewards increase with the use of team selling. Which of the following statements about a straight salary compensation plan is true: A major limitation of straight salary compensation plans is that financial rewards are not directly tied to any specific aspect of job performance. Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. manner. This form of nonfinancial reward is generally considered to be more desirable to younger salespeople 2. Some people won't work for anything other than a fixed salary. Employees who are eager and top-performing are often attracted to this type of commission, however, since they know they can survive solely on their skills and experience. The EU has made changes in airline regulation that dramatically affect major European carriers such as British International Air (BIA), KLM, Air France, Alitalia, and Swiss International Air. && +1,500\\ This $35,000 level is called: Your customer's buying cycle is approximately 2 years and your reps need to invest significant amounts of time understanding their customers. Salespeople can be compensated in a number of different ways. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. If a salesperson earns more commissions than he was paid, he keeps the extra money. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. \text{Arizona} & \text{90} & \text{Oregon} & \text{66} & \text{24}\\ In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. 5. the working capital requirements are lessened with the straight-salary compensation plan. Browse the definition and meaning of more similar terms. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. These can range from monetary benefits (like extra. Weve picked the most common and most rewarding forms of compensation plans and highlighted their benefits and downsides, so you can decide which one works best for your business needs. Employees who also have seasonal or fluctuating availability, like students or people with children, also benefit from the flexibility that comes from hourly compensated positions. Are you ready for a pay raise? This type of compensation plan is every salespersons dream. The board of directors of this family-owned company believes that Park N Fly could earn an additional $1.5 million income before interest and taxes by expanding into new markets. Which of the following is not one of the desired outcomes of an optimal reward system? https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. Q&A With Jane Cost of Administration: The cost of administration of straight salary plan is less than that of straight commission plan. In case the salesperson shows high sales performance, the firm increases its salary. He holds a Bachelor of Science in marketing from York College of Pennsylvania. as well as U.S. securities. Your paycheck is based on a specific percentage of the sales that you are able to generate. Employers who pay by the hour should focus on increasing morale and showing employees they are valued in order to avoid turnover. The most commonly used definitions of motivation include these three dimensions: Use the table below. A salesperson makes the initial contact and sets the stage for the sale, while others such as product experts or management personnel are brought in to help him close the deal. -26,000\\ 7. As a staff reporter, she has written hundreds of newspaper and magazine articles, and she is also the author of two published novels. ___________ rewards are those that are given in return for acceptable performance or effort. Compensation usually takes the form of monetary payment exchanged for time, labor and expertise. There are many people who would simply prefer to work with the relative security of a salary position. I thought wed follow up on that post by exploring the six different types of compensation plans in depth. So, it can be easily understood by all salesmen. No two compensation plans are alike. 3. Advantages of salary plus commission The benefits of a salary plus commission plan include: 1. Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. 11. \bm{=}\\ \bm{=} \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ Is good for a financially weak company. To ensure proper classification, employers should begin with the assumption that their commissioned employees are nonexempt, and then review the potential exemptions to determine whether they apply. \text{ESI} & \text{ITT Ed Services} & \text{7.95} & \text{1.93} & \text{2.95} & \text{-0.03} & \text{140,466} & \text{3.11} & \text{2.92}\\ \hline -15,000 &&&& +15,000\\ Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. . channeled in directions consistent with the overall strategic role of the salesforce within the firm. c. GPAs of 250 first-semester college students (xmin=2.25,xmax=3.71)\left(x_{\min }=2.25, x_{\max }=3.71\right)(xmin=2.25,xmax=3.71). 9. Although quite popular, salary compensation plans have some disadvantages. \end{array} 5. \text{Kentucky} & \text{71} & \text{Notre Dame} & \text{63} & \text{8}\\ 9. This pay plan is the: Combination plan (Base salary + performance based commission). Since no one is taking out taxes for them, it is up to the contractor to budget and remit taxes quarterly to prevent a fine and a huge tax bill at year-end (April 15). Take a reactive approach to seeking out motivational problems and sources of frustration in the salesforce. Perhaps the most serious shortcoming of straight-commission plans is that. When the salesmen are required to perform some other functions in addition to selling. The sales teams support each other to reach a common goal. She loves training, creating processes, and introducing her clientele to new apps and technology. A salesperson who is extrinsically motivated, is motivated by the rewards that the job provides, Reward system management involves the selection and utilization of organizational rewards to. Straight salary refers to the basic salaries and wage given to the worker. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. \\ except. Once the person has established himself in the area, the company can switch to performance-based salary. This type of compensation is well-suited for employees who work in a team-based culture. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. Get help with QuickBooks. scores more than 90 points. 1. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. Person A receives a salary of $80,000. In a profit margin/revenue-based (PMR) plan, employees are compensated based on the profitability of the company. Advantage: Straight-Forward Budgeting For you as a business owner, paying fixed salaries allows you to precisely know how much you're going to pay out each month in labor costs and to budget accordingly. This is a primary method for compensating independent sales agents. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. A sample of 10 NCAA college basketball game scores provided the following data (USA provide salespeople with trips and other rewards. Another advantage of this pay structure is that it helps in attracting more talent . \end{array} 5. 100% (2 ratings) FALSE because straight salary can make all sales reps equivalent individuals, which is best when th . From big jobs to small tasks, we've got your business covered. that they offer little financial incentive to perform past a merely acceptable level. Employers are also required to pay employees the. Another disadvantage is the lack of benefits. Focus on Service A straight salary can work well for sales positions for which a high focus on service is required, such as a salesperson who calls on retail stores on a regular basis to take orders and stock merchandise. Starting salaries often begin far enough above hourly rates to be able to afford a down payment on a house or car. What was the difference between the day's high and low for one share of Southern Copper? b. Ages of 50 airplane passengers (xmin=12,xmax=85)\left(x_{\min }=12, x_{\max }=85\right)(xmin=12,xmax=85). Any re-adjustments in sales territories or management policies can be easily carried out under this system without much resistance from the salesmen, as the salesmen will be paid the same remuneration, irrespective of sales territories. In designing plans one must balance the goals of the firm, as well as the needs of the sales force and customers. But straight commission method is based on the sales effected by the salesmen and not on the time spent on the job. While there are no real downsides to this type of plan, organizations should be mindful of several things: This requires a solution that benefits both employee and employer. Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. For you as a business owner, paying fixed salaries allows you to precisely know how much you're going to pay out each month in labor costs and to budget accordingly. A regular and stable income can do much to develop a loyal and well-satisfied salesman. The remaining 25% of the sick leave payout Which of the following is not a guideline recommended in the management of motivation? Payroll essentials you need to run your business. One regulation is employers are required to, at a rate of time and a half if an employee works over 40 hours in one week (this is a U.S. standard and differs by country). The different types of compensation include . This article has been researched & authored by the Business Concepts Team. Assume that the points scored by the winning teams for all NCAA games follow a So, it can be easily understood by all salesmen. Required fields are marked *. Recommend a plan to the board of directors. Accounting and bookkeeping basics you need to run and grow your business. Each line designated by a number indicates the effect of a transaction on the equation. Operating costs are minimized during slack selling periods. How to find funding and capital for your new or growing business. , a pet-friendly working environment, etc.). direct salespeople's behavior toward the attainment of organizational objectives. bell-shaped distribution. Plan A is to borrow at 6%. How much investment capital should you accept? It has lower turnover rates. Intuit, QuickBooks, QB, TurboTax, Mint, Credit Karma, and Mailchimp are registered trademarks of Intuit Inc. Salespeople are usually paid on a straight salary compensation, in which there is no opportunity to earn incentives. If so, an hourly rate with a flexible schedule could be more attractive. In this, salespeople continue to receive a commission as long as their accounts are generating revenue for the employer. Hourly plus commission compensation does have its disadvantages as well. Increment is given annually as per the scale of pay, and after a certain number of years of service, salesman is promoted to a higher scale of pay. Basis: Straight salary method is based on the time spent on the job, and not on the volume of sales effected by the salesmen. For example, if you work 42.5 hours in a week, you earn 40 hours of pay at your hourly base rate and 2.5 hours at 1.5 times your hourly base rate. Benefits of salary plus commission compensation, Disadvantages of salary plus commission compensation, This type of compensation refers to a set hourly amount without additional performance-based income. \text{Winning Team} & \text{Points} & \text{Losing Team} & \text{Points} & \text{Winning Margin}\\ How much you spend on salaries often has little to do with your profits. elect to receive regular straight time pay or bank compensatory time at their straight time rate. Happy hours are a great way to connect with colleagues, share experiences, and have some fun together. Your base pay provides a steady income during seasons where commission may be more difficult to earn. follow-up and service. Although quite popular, salary compensation plans have some disadvantages. 6. Similar to straight salary, this compensation structure offers employees a guaranteed base income annually, but also offers performance-based income in addition, unlike straight salary. \end{array} All of the following are typical reimbursable expense items except. Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. Contractors are required to find health insurance and retirement plans on their own. Which of the following is not an advantage of the . In this sense, compensation is a counterbalance. The workplace catchphrase you need to know. 6. You gain authority, prestige and responsibility. more points. \text{SCCO} & \text{Southern Copper} & \text{29.53} & \text{19.90} & \text{22.06} & \text{-1.79} & \text{1,823,761} & \text{22.07} & \text{22.07}\\ \hline