Companies are increasing incentives for foreign-based employment. \begin{array} {rcrcrcrcr} Person B works for an NFP and is part of a salary packaging program. In this situation, employees only receive their bonus if the district, division, or even continent hits its sales goals. Example: Each rep in your company earns a straight salary of $75,000 a year, or $1,440 a week (gross). Because they are self-employed, contractors are eligible for SEP IRAs. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. -15,000 &&&& +15,000\\ In your job analysis of the salesperson's activities, you discover that a significant level of activity of a successful salesperson includes taking orders for inventory replenishment, equipment installation and maintenance, and shelf-management programs. The tools and resources you need to get your new business idea off the ground. Another disadvantage is the lack of benefits. 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. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. Based on this analysis you know that a larger percentage of the salesperson's pay should be _____________ as compared to ______________ for the best results. 9. \text{Symbol} & \text{Stock} & \text{High} & \text{Low} & \text{Last} & \text{Change} & \text{Volume} & \text{High} & \text{Low}\\ \hline 5. Katey Maddux is a paddle boarder, music lover, Zumba instructor, and Founder and CEO ofMillennial Accounting, LLC in Miami, Florida. But straight commission method is based on the sales effected by the salesmen and not on the time spent on the job. This type of plan is often found in multi-level marketing (MLM) companies. nonfinancial reward: All of the following are steps suggested for facilitating a sense of accomplishment in the salesforce A per diem expense plan pays the salesperson for all reported expenses. Whos using straight hourly compensation? To implement a new or modified reward system, sales managers should do all of the following except. The remaining 25% of the sick leave payout Under Straight salary method, a salesman is paid remuneration on time basis. As a staff reporter, she has written hundreds of newspaper and magazine articles, and she is also the author of two published novels. Celebrating the stories and successes of real small business owners. According to a survey of sales executives reported in the text, the most popular sales incentive is. Paycheck calculator for hourly and salary employees. If he earns less in commissions, he must pay the remainder back to the company. Today, January 26, 2004). 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. Those who sell below $35,000 will not receive commissions. Additionally, they have full control over benefits like insurance and retirement management. A straight salary can greatly benefit someone who is transferring to a new territory. Based on this information, which salesperson compensation plan would work best? 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). So, it can be easily understood by all salesmen. estimate the percentage of all NCAA games in which the winning team scores 84 or Assume that the points scored by the winning teams for all NCAA games follow a It has lower turnover rates. the following except. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. \end{array} Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. A salesperson who is intrinsically motivated. A job like this is more likely to have flexible working hours or the ability to work from home. From big jobs to small tasks, we've got your business covered. It gives greater control to the management over the salesmen by means of withholding increments, effecting a transfer, etc. Are they just trying to pay their way through college? Such a plan is quite common in the services industry as well as in the industrial goods sector. Factors that might affect commission rates include the difficulty of the sale, education and training required, costs associated with the geographical location, work environment, the process of approaching clients, and bonus structures (if applicable). Straight salary refers to the basic salaries and wage given to the worker. You now require the sales force to sell $35,000 worth of product each month to make a commission. Employers have to think about who their target employee is and what that employee is looking for. An employee who works only on salary has little external motivation to go above and beyond. Straight salary method promotes team-spirit and cooperation among the salesmen in the case of joint sales. follow-up and service. The tools and resources you need to take your business to the next level. Which of the following conditions would indicate to the sales manager that the proportion of the What is the amount of net increase in owners equity during the month? \underline{\ \ \ \ \ \ \ \ \ \ \ \ }&& \underline{-3,000} && \underline{\ \ \ \ \ \ \ \ \ \ \ \ }\\ With this type of structure, you'd pay your sales people a straightalbeit competitivesalary like all of your other employees, and nothing else. Which of the following is an advantage of a straight-commission compensation plan? Intuit accepts no responsibility for the accuracy, legality, or content on these sites. , LLC in Miami, Florida. Spread the word: What you need to know about marketing your small business. So, it can be easily understood by all salesmen. the working capital requirements are lessened with the straight-salary compensation plan. 1. He holds a Bachelor of Science in marketing from York College of Pennsylvania. 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 pay plan is the: Combination plan (Base salary + performance based commission). Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired. What are the most popular types of compensation packages? && +1,500\\ Each is then rated on 12 factors, as shown in the table below. On a straight salary, they will be paid this regardless of how many deals they close. There may be multiple rates of bonuses and commission, and payroll managers must have a system in place to keep track of everything. Take a reactive approach to seeking out motivational problems and sources of frustration in the salesforce. 2. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. Which of the following is not true regarding the design of a global salesforce compensation system? How much do employees cost beyond their standard wages? They receive fixed sums of money at regular intervals (usually each month). \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 Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). They should be made during recessionary periods. they contribute little to company loyalty, resulting in potential salesforce control problems. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. Straight Salary Straight salary sales compensation plans aren't very common, but they do have a place in some organizations. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ \text{Wisconsin} & \text{76} & \text{Illinois} & \text{56} & \text{20}\\ If theyve just started a family, they may be looking for benefits like parental leave and the chance to work from home. \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 40 Questions to Ask Before You Accept A Job Offer. In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. salesperson's total pay that is salary should be relatively high? Long ago, we wrote about the importance of a compensation plan in an organization. Which of the following statements regarding changes in the reward system is false? The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. This means you can always keep earning more money if you're willing to put in some extra hours of work. Match the terms with the definitions. 5. Which of the following is/are most likely to be among them? It could be difficult to attract top performers who know they can make more in a job that rewards their work with a more commission-based pay structure. \begin{array} {c} But straight commission method distinguishes between efficient and inefficient salesmen. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. Employers are often hesitant to use this type of compensation, as payroll expenses can be high or unpredictable. 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. Salespeople can be compensated in a number of different ways. Advantages to Salesperson: The salesperson feels free from financial uncertainties because of stable income inflow. Salespeople should compete in teams with each member of the team making a contribution to the group's total goal. Even if the employee no longer does work on the account, so long as the account continues to perform, the employee will receive a cut of the profits. 3. Under this method, there is no direct relationship between sales revenue and selling costs. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. This offers the security of a salary with the greater earning potential of commission. The straight salary plan is one of the simplest compensation plans that companies offer to their employees, particularly sales representatives. The sales numbers are added up and all commissions are split equally among all sales professionals. Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. \end{array} This type of compensation is well-suited for employees who work in a team-based culture. Hourly roles can often be perceived as less valuable or easier to replace. 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. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. 4. You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. Which, if any, of the following sources available will help you in your task? One advantage of hourly pay is your eligibility for overtime. Which of the following statements regarding sales contests is true? Helps management to control salespeople's activities. 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. This system safeguards the interests of the consumers also. Last week's MPG for 35 student vehicles (xmin=9.4,xmax=38.7)\left(x_{\min }=9.4, x_{\max }=38.7\right)(xmin=9.4,xmax=38.7). The straight salary plan proves advantageous to both the salesperson and the management. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. Hence, this concludes the definition of Straight Salary Plan along with its overview. \text{ } & \text{ } & \text{52-Week} & \text{52-Week} & \text{ } & \text{ } & \text{Sales} & \text{ } & \text{ }\\ The different types of compensation include . Per the IRS definition, the contractor is in control of how the work gets done, so there is a lot of freedom. Salary plus commission is a balance of both stability and performance-based income. has very specific requirements for classifying and paying employees. The workplace catchphrase you need to know. Tax and bookkeeping basics you need to run and grow your business. Whos using straight salary plus commission compensation? The tools and resources you need to run your business successfully. The most common exemptions are executive, administrative, and professional exemptions. Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. The importance of the salesperson's personal skills in making sales is considerable. 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. A change from straight commission to straight salary. 4. Your earning potential is unlimited. Depending on a companys compensation strategy, there are both pros and cons for hourly versus salaried employees. . Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Offer your support. \text{Kansas} & \text{78} & \text{Colorado} & \text{57} & \text{21}\\ For a new salesperson, a salary provides a steady income during the training period when he is still learning the sales methods and products of the company. salesperson's total pay that is salary should be relatively low? issue a press release detailing the company's changes. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. Is good for a financially weak company. As salesmens remuneration is not related to the volume of sales made by them, this method imposes a serious burden on the earnings of the firm in terms of sales. According to your text, what would you do next? Tax basics you need to stay compliant and run your business. Salaried individuals who earn less than $23,660 per year often qualify for additional compensation, including overtime pay, per the FLSAs standard for non-exempt salaried employees. 6. 1. The advantages of straight salary compensation include which of the following? Are benefits included in the definition? d. Annual rates of return on 150 mutual funds (xmin=.023,xmax=.097)\left(x_{\min }=.023, x_{\max }=.097\right)(xmin=.023,xmax=.097). Business is going well for Park N Fly , the company that operates remote parking lots near major airports. total sales. international stocks and bonds \end{matrix} Is it just monetary? However, the$5 million that the business needs for growth cannot be raised within the family. 4. It is a very useful system of remunerating newly-appointed salesmen who are new to the job. 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. Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. Melissa Skaggs shares the buzz around The Hive, Straight salary|Salary plus commission|Hourly|Hourly plus commission |Commission-only|Territory volume|Profit margin/revenue-based|Residual commission|Contractor commission|Hourly vs Salary. 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. 7. 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). Similar to hourly employees, workers who are paid with this type of compensation are usually governed by the FLSAs nonexempt requirements and earn overtime. A regular and stable income can do much to develop a loyal and well-satisfied salesman. virtually automatic, this form of commission rate would be appropriate: An example of a selling situation requiring a commission split would be. Browse the definition and meaning of more similar terms. tend to produce too many salesforce objectives which are of the crisis-resolution variety. ii) There will be no surprise of payroll expenses. A straight salary can also benefit an experienced salesperson who is transferring to a new territory where the company and its products may be completely unknown. If a salesperson earns more commissions than he was paid, he keeps the extra money. For employers, hourly employees can be a good option for work that fluctuates seasonally. \end{array} One of the advantages of the gross margin commission plan is the firm and salesperson share the same pool of money so both are interested in maximizing that amount. 10. Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. , which can vary depending on their states minimum wage. 30,000 && 4,000 && 75,000\\ Help Miller rank the top three cities that BIA should consider as its new site for servicing aircraft. \hline Is your team struggling with burnout and a lack of fulfillment at work? One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. However, if the employees commissions, plus their hourly rate, are together less than the minimum wage, the employer is required to make up the difference. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Salary plus commission plans are often used for sales positions or corporate positions when the company wants to encourage leaders to push for substantial growth and high performance. But when that same group opened up about things that weren't essential to the negotiation, 59 percent were able to strike a deal. Which of the following is not an advantage of the commission compensation plan? Your email address will not be published. Straight salary plan can help promote a sense of equality among sales people who work as teams or small groups, for everyone is paid equally and the contribution of each team member is also expected to be equal. 2. Straight salary plans often do not provide strong incentive for extra effort. Whos using straight salary compensation? It has been reviewed & published by the MBA Skool Team. 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. Increase sales and revenues. Employees may be confused as to how pay is calculated, so transparency is important. Each increase and decrease in owners equity, except transaction (5)\left(5\right)(5), affects net income. At the end of the pay period, this prepayment is drawn from how much the salesperson earned in commissions. \end{array} It can also be beneficial if a firm is entering a new market or location. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. When the work done by the salesmen cannot be measured satisfactorily. Companies with employees who work in teams, spend a lot of time on projects, or whose performance is difficult to measure might also be better suited for straight salary compensation. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). Copyright 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Incentives are often seen as effective triggers when the objective is to improve the top line i.e. 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. Certain selling opportunities require collaborative efforts and an incentive-based system may not be suitable because it might be difficult to determine different individuals level of contribution. What is important here is building a close relationship with the retailer and satisfying the customers needs. In designing plans one must balance the goals of the firm, as well as the needs of the sales force and customers. The location selection is critical, and with the potential for 4,000 new skilled blue-collar jobs on the line, virtually every city in western Europe is actively bidding for BIA's business. Leadership Insights Required fields are marked *. When the sales effected by the individual salesman cannot be isolated (i.e., when the sales are made collectively by two or more 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. more points. \end{array} Formal recognition programs have a better chance of success if sales managers do all of the following Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. 11. For each frequency distribution, suggest "nice" bins. However, a straight salary plan also has its own advantages. A common salary-to-commission ratio is 60:40 (60 percent fixed / 40 percent variable). MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. For example, consider a salesman who frequents various retail stores or department stores to check inventory or take orders for replenishment. the working capital requirements are lessened with the straight-salary compensation plan. The goal of the compensation package is to reward employees for their efforts without putting the firm's profitability in jeopardy. Which one of the following statements regarding global compensation is false? The compensation plan in which virtually every type of sales activity is rewarded, is called a: Your boss thinks you should implement a salary plus commission plan with an incentive ceiling.

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