nonfinancial reward: The Million Dollar Roundtable designation in the insurance industry is an example of this type of And while some competition in the workplace is good, this kind of motivation to not only succeed but to survive can sometimes breed distrust and a lack of camaraderie. Straight salary method promotes team-spirit and cooperation among the salesmen in the case of joint sales. &&&& -2,000\\ One thing to keep in mind: If the commission rates are too low, they may seem disingenuous and could decrease morale or cause bitterness among employees. Sparks holds a Bachelor of Arts in business. Perhaps the most serious shortcoming of straight-commission plans is that. A valid objective in creating commission-based pay programs is to devise a system that encourages salespeople to sell items that maximize profits of the firm. manner. Sales Costs: Under the straight salary method, sales costs are not matched with the sales. By accessing and using this page you agree to the Terms and Conditions. When the salesmen are required to perform some other functions in addition to selling. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ It is a highly attractive model, especially to start-ups who are seeking to penetrate a specific territory. Help Miller rank the top three cities that BIA should consider as its new site for servicing aircraft. \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 channeled in directions consistent with the overall strategic role of the salesforce within the firm. Wage caps are used by some firms to prevent salespeople from making too much money. Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. 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. than to older salespeople: When a sales manager assures salespeople that they fulfill a critical role in revenue production and other direct salespeople's behavior toward the attainment of organizational objectives. 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. Provide equal pay to all employees at the same level. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. The goal of the compensation package is to reward employees for their efforts without putting the firm's profitability in jeopardy. Salespeople can be compensated in a number of different ways. Employees are guaranteed to receive at least base salary to pay the bills, even during a time period when their sales are low. Give your reasons. follow-up and service. This can either be done through direct contact with t Are you ready for a pay raise? The advantages of straight salary compensation include which of the following? Straight salary method of remuneration is simple. 8. The importance of the salesperson's personal skills in making sales is slight. If you choose this plan, you'll pay your reps using a mix of base salary and performance-based rewards. These can range from monetary benefits (like extrapaid time off, holiday pay, and parental leave) to lifestyle benefits (like flexible working hours,the ability to work from home, a pet-friendly working environment, etc.). It is easy to calculate. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. 7. 3. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. 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 This type of sales compensation plan is employed in companies which prohibits direct sales. \begin{array}{l} The importance of matching the abilities and needs of sales recruits to the ____ cannot be overstated. \\ Straight salary compensation plans are ideal in industries where the normal structure does not involve (and might even prohibit) direct sales. For more information on your states minimum wage requirements, read up on minimum wage requirements or visit the Department of Labors website. Your email address will not be published. Finding what compensation plan works best for the company, involves accessing its strengths and weaknesses, making a decision based on the long-term goals, and carefully negotiating the contract with the employee in a way that it works best for the company and its needs. \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ When the salesmen are required to create markets for a product. Is it just monetary? Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. 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. 6. Which of the following is not true regarding the design of a global salesforce compensation system? more points. Tax and bookkeeping basics you need to run and grow your business. 2. The latest product innovations and business insights from QuickBooks. Which of the following is not an advantage of combination plans? Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. Commission for independent sales reps can range from 5% to 40%, with the average ranging from 20% to 30% of gross margins or 7% to 15% of gross sales. This requires very clearly defined territory outlines and territories that produce enough income to support competitive wages. Your paycheck is based on a specific percentage of the sales that you are able to generate. The most commonly used definitions of motivation include these three dimensions: Use the table below. You have a meeting with her to outline the drawback(s) of this type of plan. 11. Salesperson compensation has been an issued marked by trial and error to discover the right formula. i) Beneficial for industries which prohibits direct sales. According to the Customer-Product Matrix, sales positions which focus primarily on New Business Development require a greater proportion of __________ in the compensation plan than those sales jobs in the lower left-hand quadrant (Account Management). As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen. the requirement that expenses be charged and the bills sent directly to the company for payment by the accounting department. Straight salary refers to the basic salaries and wage given to the worker. No two compensation plans are alike. Due to the complexity and compliance issues involved, very few companies offer equity or stock. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. \end{array} Disadvantages of straight hourly compensation, Whos using hourly plus commission compensation, Benefits of hourly plus commission compensation, Disadvantages of hourly plus commission compensation, Disadvantages of commission-only compensation, Whos using territory volume compensation, Benefits of territory volume compensation, Disadvantages of territory volume compensation, 7. Once the person has established himself in the area, the company can switch to performance-based salary. Motivated salespeople may search for this type of income, knowing that if they work really hard early on, they can work less later and still make the same income. Many appreciate the fallback stability of the base salary paired with performance incentives. Such a plan is quite common in the services industry as well as in the industrial goods sector. Which of the following is an advantage of a straight-commission compensation plan? 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. \text{JPM} & \text{JP Morgan Chase & Co.} & \text{70.61} & \text{57.07} & \text{57.45} & \text{$+1.11$} & \text{20,987,678} & \text{58.11} & \text{57.14}\\ \hline The advantages of straight salary compensation include which of the following? is considered a serious offense, which, if detected, often leads to termination of employment. To implement a new or modified reward system, sales managers should do all of the following except. With ambitious expansion plans, BIA has decided it needs a second service hub on the continent, to complement its large Heathrow (London) repair facility. 30,000 && 4,000 && 75,000\\ Terms and conditions, features, support, pricing, and service options subject to change without notice. Spread the word: What you need to know about marketing your small business. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability. Because her income is stable, planning and managing her personal finances is easier. A fixed dollar amount is paid for each day or week in the field. A salesperson who is intrinsically motivated. Straight salary method of remuneration is simple. 1. A straight salary plan can be advantageous in certain situations. You think you have finally selected a compensation method and wage level that meets your boss's requirements. Your salespeople are paid on commission. Salaried workers who earn more than $23,660 per year are considered exempt under the Fair Labor Standards Act (FLSA). Per the IRS definition, the contractor is in control of how the work gets done, so there is a lot of freedom. Today, January 26, 2004). 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If an employee makes no sales during a month, he doesnt get paid. Differences between Straight Salary and Straight Commission Method, Business Environment Analysis | Objectives & Process, 5 Important Classification of Business Environment, Localisation of Industries | Meaning, Advantages, Disadvantages, Storage and Warehousing | Meaning, Functions, Advantages, Kinds, Sole Trader Business | Advantages | Disadvantages | Suitability, How do Business Diversification affect performance of, Job Evaluation | Meaning & Definition |, Supervision | Definition | Functions of supervisor, Sole Trader Business | Meaning | Definition, Primary functions of Commercial banks in accepting, RBI | Origin | Objectives | Organization, Concepts of Job Analysis | Meaning, Procedure,, Arguments in favor of Social Responsibility of, Accountlearning | Contents for Management Studies |. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. Summary financial data for February are presented in equation form as follows. 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. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. They should be made during recessionary periods.
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