The nine different types of compensation packages include: This type of compensation refers to a set annual amount, divided by the years pay periods to get a pay rate weekly, every two weeks, or monthly. 6. The introduction of HR technology has revolutionized the way HR departments operate. | Priyansha tweets at. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. Basis: Straight salary method is based on the time spent on the job, and not on the volume of sales effected by the salesmen. Under this plan, companies compensate its employees entirely on the profits made by the business. How much you spend on salaries often has little to do with your profits. This system safeguards the interests of the consumers also. This form of commission rate may actually result in overselling and higher selling costs to the company: When it is difficult for the salesperson to secure the first order from the customer, but reorders are 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. The ATO considers this $80,000 taxable income. Jobs report: Are small business wages keeping up with inflation? What is important here is building a close relationship with the retailer and satisfying the customers needs. From a morale perspective, they can be more satisfied with their work-life balance since no one is dictating it. 8. Which of the following is not an advantage of combination plans? Incentives to Salesmen: Straight salary method does not provide any incentive to the salesmen to do hard work. While in certain compensation plans, the salespersons receive benefits on accomplishment for specific tasks (e.g. Contractors can determine their own fees, working hours, employees, etc. https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. 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. You think you have finally selected a compensation method and wage level that meets your boss's requirements. TheDepartment of Laborhas very specific requirements for classifying and paying employees. Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. 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). 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. 2. Person B works for an NFP and is part of a salary packaging program. \end{array} Tips may be considered part of the employees wages, but the employer must pay no less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the hourly minimum wage. Let's explain the benefits with a clear example of an unpackaged salary versus an FBT exempt salary package. 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. This offers the security of a salary with the greater earning potential of commission. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. Fixed salary paid to salesman at at the end of every month, irrespective of the sales made by him during the month is called Straight Salary. 7. The advantages of straight salary compensation include which of the following? \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ 4. Although many customers expect after-sale service on repair parts and delivery, compensation programs based on straight salary are not likely to encourage these important follow-up activities. However, successful salespeople tend to make a lot of money with commission than with a salary plus commission job. not, explain. salesperson's total pay that is salary should be relatively high? salesperson's total pay that is salary should be relatively low? Under this method, there is no direct relationship between sales revenue and selling costs. finds the job to be inherently rewarding. On the other hand, TVC can lead to hostility between employees if they dont feel the workload or efforts of all representatives are balanced. except. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. Whos using straight salary compensation? All of the above. 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. 2. Its critical for employers to keep this in mind when deciding between different types of compensation packages. 4. Offers considerable incentive for the salespeople. 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. There are many people who would simply prefer to work with the relative security of a salary position. 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. What is salary pay? The importance of the salesperson's personal skills in making sales is considerable. By clicking Submit, you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement. that they offer little financial incentive to perform past a merely acceptable level. This is one of the most reliable types of compensation plans. Everything you need to know about managing and retaining employees. . Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. 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. 5. is considered a serious offense, which, if detected, often leads to termination of employment. No bonuses, no commissions, and few, if any, sales incentives. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ With ambitious expansion plans, BIA has decided it needs a second service hub on the continent, to complement its large Heathrow (London) repair facility. So, it does not encourage salesmen to do hard work. He holds a Bachelor of Science in marketing from York College of Pennsylvania. 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. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ Review the example home inventory shown before. 2. 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. Which of the following statements regarding changes in the reward system is false? Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. salesforce include all of the following except. When the salesmen are new to the job (i.e., for remunerating the newly appointed salesmen.). Those who sell below $35,000 will not receive commissions. 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. A regular and stable income can do much to develop a loyal and well-satisfied salesman. O True O False. $$ 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. In some organizations, selling is a collaborative effort. Are you ready for a pay raise? 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. -7,200\\ 10. Information Technology Project Management: Providing Measurable Organizational Value, Service Management: Operations, Strategy, and Information Technology, John David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine, Chapter 10 - Motivating and Satisfying Employ. 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. It is often used in direct sales industries and multi-level marketing (MLM) firms that work with independent contractors. Some of this is likely due to a generational shift in what employees are really looking for. Employers are also required to pay employees the. Additionally, they have full control over benefits like insurance and retirement management. Because so many hourly employees work in entry-level positions, education requirements are usually lower than those of salaried positions, which adds to this assumption. their compensation plans to recognize team performance? 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. Straight salary plans often do not provide strong incentive for extra effort. Your paycheck is based on a specific percentage of the sales that you are able to generate. It is easy to calculate. Which of the following is not a guideline for optimizing the use of sales contests? The Management Dictionary covers over 2000 business concepts from 5 categories. How much investment capital should you accept? \\ Selling situations that require salespeople to perform special services for customers are more likely to be performed when salespeople are on salary. The most common exemptions are executive, administrative, and professional exemptions. 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. \hline\\ The only downside with territory volume compensation plan is that it can lead to hostility between co-workers if certain members feel that effort isnt equally divided. According to your text, what would you do next? 2. determine the relative amounts to be paid in salary, commission, and bonus. 6. 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. \begin{array}{|l|l|c|c|c|c|c|c|c|} \hline An advantage of the straight salary plan for compensating salespeople is that it: Provides a direct relationship between sales and expenses. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Which of the following is/are most likely to be among them? It can also be beneficial if a firm is entering a new market or location. Sparks holds a Bachelor of Arts in business. As a sales manager, you liked the advantages that salary plus bonus plans offer yet you were very concerned about some of the following serious problems associated with it: You have decided to change your commission structure to enhance market penetration. So, it can be easily understood by all salesmen. 1. \text{Kentucky} & \text{71} & \text{Notre Dame} & \text{63} & \text{8}\\ You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. The tools and resources you need to take your business to the next level. Disadvantages of straight salary compensation Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees don't see opportunities to increase their pay. In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. As a result, salaried workers often dont track hours worked. Estimate the percentage of NCAA games in which the winning team Further, the straight commission motivates poor performers to become more productive since it rewards good performers (Johnston and Marshall, p. 329). The major drawback to salary plus commission plans is that they are more expensive and more costly to administer. According to the text, which of the following is not one of the rewards typically offered to salespeople? The workplace catchphrase you need to know. Contractors are required to find health insurance and retirement plans on their own. As the Vice President of Sales for a new startup company, you decide to hire and train your own field sales force. Design the plan centrally and dictate to local countries. In this type of compensation, income is solely based on sales made. But straight commission method does not assure any minimum income to the salesmen. Companies are increasing incentives for foreign-based employment. a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. Is your team struggling with burnout and a lack of fulfillment at work? But straight commission method distinguishes between efficient and inefficient salesmen. \\ In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). ii) There will be no surprise of payroll expenses. Some terms may not be used. 2. Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. PMR is common in sales and is good for startups with low liquidity. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. An in-depth guide for business owners, Financial statements: What business owners should know, Small business grants: 20+ grants and resources to fund your future without debt, How to choose the best payment method for small businesses. The tools and resources you need to get your new business idea off the ground. There is no additional performance or sales-based income added to the employees compensation. The most commonly used definitions of motivation include these three dimensions: Use the table below. 1. they contribute little to company loyalty, resulting in potential salesforce control problems. You also decide to pay your salespeople with the most common type of compensation plan among companies. Which of the following is not an advantage of the . Business is going well for Park N Fly , the company that operates remote parking lots near major airports. 100% (2 ratings) FALSE because straight salary can make all sales reps equivalent individuals, which is best when th . Because there is no incentive to push products, the salesperson can be more concerned with meeting the needs of the customer and building a long-term relationship, which is important in a situation in which repeat visits are part of the job. Salary programs are most appropriate when it is difficult to relate the efforts of individual salespeople to the size or timing of a sale. 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). System is easy to understand and compute. It provides stability of earnings without wide fluctuations. It is not clear that offering unlimited opportunities to earn higher pay will always be an effective method for continued salesperson motivation. However, the$5 million that the business needs for growth cannot be raised within the family. Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). 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. &&&&&& 35,000\\ \\ For each frequency distribution, suggest "nice" bins. , a pet-friendly working environment, etc.). Your boss thinks you should implement a salary plus commission plan with an incentive ceiling. It helps the firm to direct the activities and efforts of the salesmen towards the cultivation of markets (i.e., creation of new customers), undertaking of window display, store demonstration, etc. the following except. It could reduce retention and increase turnover. Starting salaries often begin far enough above hourly rates to be able to afford a down payment on a house or car. This is a very important distinction, as it determines who pays the taxes (the worker, not the employer) and to what standard an employer is held. 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. Paycheck calculator for hourly and salary employees. There may be multiple rates of bonuses and commission, and payroll managers must have a system in place to keep track of everything. Employers have to think about who their target employee is and what that employee is looking for. Advantages of salary plus commission The benefits of a salary plus commission plan include: 1. Summary financial data for February are presented in equation form as follows. Which of the following statements regarding sales contests is true? 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). Based on this information, which salesperson compensation plan would work best? If he earns less in commissions, he must pay the remainder back to the company. Circumstances: Straight salary method can be used under any circumstances, whereas straight commission method can be used only in cases where the sales made by the salesmen can be measured. 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. Salespeople should compete in teams with each member of the team making a contribution to the group's total goal. This type of compensation is well-suited for employees who work in a team-based culture. Another advantage of this pay structure is that it helps in attracting more talent . Profit margin is one of the most popular types of compensation used by start-up companies. Salespeople are usually paid on a straight salary compensation, in which there is no opportunity to earn incentives. Which of the following accurately describe per diem expense plans? As a business owner it can be a challenge to figure out how to compensate employees. 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. Operating costs are minimized during slack selling periods. Which of the following is not a factor to be considered when developing a commission-only plan? 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. Tax basics you need to stay compliant and run your business. Disadvantages of straight salary compensation. \text{Kansas} & \text{78} & \text{Colorado} & \text{57} & \text{21}\\ 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. Tax and bookkeeping basics you need to run and grow your business. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. The companys income tax rate is 35%. Another disadvantage is the lack of benefits. An incentive pay cannot work in such a case. Under this system, rewards are not matched with efforts. \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 Uniqlos Bold Move: Addressing Employee Burnout with a 40% Pay Increase, From Boring to Bravo: How to Revamp Your Employee Newsletter and Keep Your Team Interested, From Genius to Digital Nomad: A Look at the Evolution of Creative Job Titles, A Stroke of Luck: Kentucky Woman Wins $175,000 in Office Christmas Party Lottery, HR Technology Trends: Leveraging Technology to Streamline HR Operations, HR Compliance: Staying Compliant with Changing Labor Laws and Regulations, Managing Remote Teams: Best Practices for Leading a Distributed Workforce, Organizational Change Management: Navigating Change with Effective Change Management Strategies, Virtual Happy Hours: Building Team Camaraderie While Working Remotely, Workforce Planning: Anticipating Future Skill Needs and Building a Talent Pipeline, Unlocking the Power of LinkedIn: How to Leverage its Features for a Successful Job Search, Ditch the Monday Morning Commute: How Remote Work Can Benefit Your Employees and Business, Building a Strong Company Culture and Attracting Talent, Leading the Charge for Inclusive and Sustainable Hospitality, Championing Diversity and Inclusion at Bank of America. a supportive sales management leadership style. 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. Everything you need to prepare for and have a successful holiday season. This compensation category also includes restaurant employees paid mostly in tips. \end{array} 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. international stocks and bonds Person A pays over $18,000 in tax and receives a net income of around $62,000. For employers, hourly employees can be a good option for work that fluctuates seasonally. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. 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. __ A mutual fund that purchases \\ Readers should verify statements before relying on them. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm.