Employees may be confused as to how pay is calculated, so transparency is important. 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. \begin{array} {rcrcr} The advantages of straight salary compensation include which of the following? In fields that typically involve commissions, the outside sales exemption and the retail sales exemption may also apply. 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. As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen. 7. Companies looking for long-term growth as opposed to short-term sales may opt for this type of compensation as well. This leaves the salespersons with no opportunity for extra money or incentives. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. If a salesperson earns more commissions than he was paid, he keeps the extra money. \end{array} has very specific requirements for classifying and paying employees. 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). Employers have to think about who their target employee is and what that employee is looking for. A fixed dollar amount is paid for each day or week in the field. This can lead to high turnover, a need for more recruitment resources, and higher training costsall of which cuts into potential bottom-line savings. finds the job to be inherently rewarding. Accordingly, the information provided should not be relied upon as a substitute for independent research. For example, consider a salesman who frequents various retail stores or department stores to check inventory or take orders for replenishment. Currently editor at The HR Digest Magazine. You think you have finally selected a compensation method and wage level that meets your boss's requirements. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. . It assures a steady minimum income to the salesmen. What is the amount of net increase in owners equity during the month? , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. Salespeople can be compensated in a number of different ways. \\ 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. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. \begin{array}{l} . It is not clear that offering unlimited opportunities to earn higher pay will always be an effective method for continued salesperson motivation. This type of compensation is often used for entry-level jobs or employees working in restaurants, retail, or the service industry, usually in non-management roles. After initial investigations by Holmes Miller, head of the Operations Department, BIA has narrowed the list to 9 cities. https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. A major objective of a well-designed compensation package is to: 1. Each line designated by a number indicates the effect of a transaction on the equation. Another disadvantage is that hourly employees often have fewer benefits than salaried employees and are sometimes required to contribute more toward their health insurance premiums. Bal.1.2.3.4.5.6.7.Bal.AssetsCash+Supplies+Land30,0004,00075,000+35,00026,00015,000+15,000+1,5002,0007,2003,00014,8002,50090,000==Liabilities+OwnersEquityAccountsMurrayKiser,MurrayKiser,FeesPayable+CapitalDrawing+EarnedExpenses8,000101,00035,00026,000+1,5002,0007,2003,0002,300101,0002,00035,00029,000\begin{array}{lccl} Management can direct Salesforceinto various activities more easily. TheDepartment of Laborhas very specific requirements for classifying and paying employees. Straight salary might not be tempting to top-performing sales reps who want to make as much money as they can through hard work and dedication. Review the example home inventory shown before. 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. 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. According to your text, what would you do next? that they offer little financial incentive to perform past a merely acceptable level. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. Everything you need to prepare for and have a successful holiday season. As a result, salaried workers often dont track hours worked. Contractors are required to find health insurance and retirement plans on their own. Are you ready for a pay raise? When the sales effected by the individual salesman cannot be isolated (i.e., when the sales are made collectively by two or more salesmen). It has lower turnover rates. 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. As the Vice President of Sales for a new startup company, you decide to hire and train your own field sales force. The advantages of straight salary compensation include which of the following? The amount of mental and physical effort put forth by the salesperson is referring to, The salesperson's choice to expend effort over a period of time, especially when faced with adverse, The motivation task is incomplete unless salespeople's efforts are. O True O False. There is no additional performance or sales-based income added to the employees compensation. Which of the following accurately describe per diem expense plans? This is one of the most reliable types of compensation plans. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. determine the relative amounts to be paid in salary, commission, and bonus. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. Based on this information, which salesperson compensation plan would work best? A straight salary plan can be advantageous in certain situations. You are the sales manager of a large, multi-product company. This is a very broad category of compensation. 2. Can I Get Fired For Leaving A WhatsApp Group? The importance of matching the abilities and needs of sales recruits to the ____ cannot be overstated. Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees dont see opportunities to increase their pay. You have a meeting with her to outline the drawback(s) of this type of plan. \text{Duke} & \text{85} & \text{Georgetown} & \text{66} & \text{19}\\ Working as a contractor definitely has its benefits. Take a reactive approach to seeking out motivational problems and sources of frustration in the salesforce. An advantage of the straight salary plan for compensating salespeople is that it: Provides a direct relationship between sales and expenses. nonfinancial reward: The Million Dollar Roundtable designation in the insurance industry is an example of this type of Is it just monetary? In most companies, the base pay is determined by the workers job title and job role. Which of the following is not true regarding the design of a global salesforce compensation system? Prepare an analysis to determine which plan will result in the highest earnings per share of common stock. It does not distinguish between efficient and inefficient salesmen, as the same remuneration is paid to both efficient and inefficient salesmen. Subscribe to our newsletter and stay updated on the latest HR news and trends. Did your choice agree with Sturges' Rule? __________ tends to help give the sales force the needed push to sell complex products or services and can be used to redirect salesperson efforts toward specific product lines; under this plan administrative costs tend to be high. . It tends to only attract less experienced staff who want a "safe" pay structure. Straight salary plans are not popular with salespeople because: They don't provide strong incentives for extra effort. scores more than 90 points. \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ \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 As the name suggests, straight salary compensation is just what you would expect. Straight Salary Straight salary sales compensation plans aren't very common, but they do have a place in some organizations. 5. not, explain. \underline{\underline{2,300}} && \underline{\underline{101,000}} && \underline{\underline{-2,000}} && \underline{\underline{35,000}} && \underline{\underline{-29,000}}\\ \\ \\ \\ the working capital requirements are lessened with the straight-salary compensation plan. }\\ Using the mean and standard deviation found in part (a), Per the IRS definition, the contractor is in control of how the work gets done, so there is a lot of freedom. Startup companies using profit margin/revenue based compensation plan can also incorporate long-term incentives such as stock to build loyalty and a valuable sales base. Accounting and bookkeeping basics you need to run and grow your business. Plan C is to issue 100,000 shares of nonvoting, $3.75 preferred stock ($3.75 is the annual dividend paid on each share of preferred stock). \hline\\ Your email address will not be published. All of the following are typical reimbursable expense items except. 5. Whos using straight hourly compensation? 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. Advantages of straight-salary compensation plans include all of the following except. 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. All of the above. 6. , which can vary depending on their states minimum wage. The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. \textbf{\textsf{Liabilities}} & \bm{+} &&&\textbf{\textsf{Owner's Equity}}\\ Payroll essentials you need to run your business. This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. A good salary plus commission plan will motivate employees to higher sales and performance while giving them the peace of mind of regular, stable income. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ Such a plan is quite common in the services industry as well as in the industrial goods sector. 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? costing little and reinforcing desirable behavior immediately after it occurs. From big jobs to small tasks, we've got your business covered. 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. Your salespeople are paid on commission. Contractors can determine their own fees, working hours, employees, etc. 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 For employers, hourly employees can be a good option for work that fluctuates seasonally. The importance of the salesperson's personal skills in making sales is slight. estimate the percentage of all NCAA games in which the winning team scores 84 or What change in the firm's salesforce reward system might be in response to customer's needs? You now require the sales force to sell $35,000 worth of product each month to make a commission. Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. The reward system practiced by the majority of consumer and industrial firms is, Industries that have traditionally used a straight-commission-based compensation pay plan include all of 2. Topical articles and news from top pros and Intuit product experts. \end{array} But straight commission method provides sufficient incentive to the salesmen to do hard work. A job like this is more likely to have flexible working hours or the ability to work from home. Employees who like to work on teams and dont want their compensation to be judged on individual performance may be attracted to this kind of plan as well. But straight commission method distinguishes between efficient and inefficient salesmen. If so, an hourly rate with a flexible schedule could be more attractive. Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. Based on this analysis you know that a larger percentage of the salesperson's pay should be _____________ as compared to ______________ for the best results. Which of the following is not an advantage of combination plans? Let's explain the benefits with a clear example of an unpackaged salary versus an FBT exempt salary package. Under this plan, companies compensate its employees entirely on the profits made by the business. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Companies that pay their employees using PMR-based compensation will want to offer additional benefits to make up for their potentially low liquidity. Its common for remote employees to revolve their entire life aro HR-related shows on Netflix are a great way to unwind and reflect on all that goes on in the workplace. 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. , a pet-friendly working environment, etc.). Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. 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. She loves training, creating processes, and introducing her clientele to new apps and technology. When the salesmen are new to the job (i.e., for remunerating the newly appointed salesmen.). . A change from straight commission to straight salary. 30,000 && 4,000 && 75,000\\ Operating costs are minimized during slack selling periods. This system safeguards the interests of the consumers also. Grant cites a Stanford and Kellogg study that found when a group of people only shared their email and names during negotiations, they struck up agreements 40 percent of the time. In this situation, employees only receive their bonus if the district, division, or even continent hits its sales goals. She loves training, creating processes, and introducing her clientele to new apps and technology. 4. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Find articles, video tutorials, and more. This form of nonfinancial reward is generally considered to be more desirable to younger salespeople 2. salesperson's total pay that is salary should be relatively low? ____________ is the easiest plan to administer and budget for. Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. This requires very clearly defined territory outlines and territories that produce enough income to support competitive wages. Some of this is likely due to a generational shift in what employees are really looking for. Which of the following is not a factor to be considered when developing a commission-only plan? 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). 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. The advantages of straight salary compensation include which of the following? 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. 12. Example: Each rep in your company earns a straight salary of $75,000 a year, or $1,440 a week (gross). 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. It looks like its raining raises in corporate Japan as more and more companies are following in the footsteps of Uniqlo and announci Human Resources (HR) departments have evolved significantly over the past few years. plan is recommended: Advantages of straight-salary compensation plans include all of the following except. How much you spend on salaries often has little to do with your profits. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. Usually, the type of compensation plan an organization chooses, and the type that an individual accepts, depends on the market conditions and the goals of those involved.

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