One advantage of hourly pay is your eligibility for overtime. Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. Advantages. Increase sales and revenues. Straight salary compensation is typically used in industries where: Missionary selling (i.e. As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen. An employee who works only on salary has little external motivation to go above and beyond. To implement a new or modified reward system, sales managers should do all of the following except. the requirement that expenses be charged and the bills sent directly to the company for payment by the accounting department. The importance of matching the abilities and needs of sales recruits to the ____ cannot be overstated. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ Required fields are marked *. How to start and run a successful e-commerce business. Which, if any, of the following sources available will help you in your task? 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Profit margin is one of the most popular types of compensation used by start-up companies. 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 |. Employers have to think about who their target employee is and what that employee is looking for. This compensation category also includes restaurant employees paid mostly in tips. One of your first tasks is to evaluate the level of compensation for your sales force. So what is compensation? Hence, this concludes the definition of Straight Salary Plan along with its overview. Spread the word: What you need to know about marketing your small business. as well as U.S. securities. && +1,500\\ Advantages of salary plus commission The benefits of a salary plus commission plan include: 1. Sales contests will continue to be an important tool for achieving expedient results. One regulation is employers are required topay overtimeat 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). , LLC in Miami, Florida. 3. For each frequency distribution, suggest "nice" bins. \end{array} 5. It assures a steady minimum income to the salesmen. \text{Bal.} They receive fixed sums of money at regular intervals (usually each month). He holds a Bachelor of Science in marketing from York College of Pennsylvania. How much investment capital should you accept? Payroll essentials you need to run your business. A job like this is more likely to have flexible working hours or the ability to work from home. \text{Oklahoma State} & \text{72} & \text{Texas} & \text{66} & \text{6}\\ The advantages of straight salary compensation include which of the following? \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ \begin{array} {rcrcrcrcr} 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. 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). It gives greater control to the management over the salesmen by means of withholding increments, effecting a transfer, etc. Long ago, we wrote about the importance of a compensation plan in an organization. If the nonselling administrative duties of the salesperson are of major importance, this compensation determine the relative amounts to be paid in salary, commission, and bonus. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. Straight salary method promotes team-spirit and cooperation among the salesmen in the case of joint sales. It assures a steady minimum income to the salesmen. 12. \\ 5. provide salespeople with trips and other rewards. Which of the following conditions would indicate to the sales manager that the proportion of the Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Hourly roles can often be perceived as less valuable or easier to replace. Straight Salary Straight salary sales compensation plans aren't very common, but they do have a place in some organizations. Dana Sparks has been a professional writer since 1990. Some people won't work for anything other than a fixed salary. 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. In most companies, the bonus is usually tied to a budgetor other target that has little significance to the employee. Although quite popular, salary compensation plans have some disadvantages. international stocks and bonds Your base pay provides a steady income during seasons where commission may be more difficult to earn. For example, an employee who is going to make the same amount of money whether he sells one refrigerator or 100 is more likely to become complacent. Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. Copyright 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. The main differences between the straight salary method and straight commission method are explained below: Straight Salary Method vs Straight commission Method. \end{array} Murray Kiser operates his own catering service. Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. As a staff reporter, she has written hundreds of newspaper and magazine articles, and she is also the author of two published novels. The advantages of straight salary compensation include which of the following? Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. You think you have finally selected a compensation method and wage level that meets your boss's requirements. 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. It provides stability of earnings without wide fluctuations. Which of the following is not a form of nonfinancial compensation? 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. Due to the complexity and compliance issues involved, very few companies offer equity or stock. Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. -26,000\\ What is salary pay? When the salesmen are required to perform some other functions in addition to selling. One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. What is the amount of net increase in owners equity during the month? Purely paid-by-commission plans can create an unfriendly, competitive environment within teams. Offer your support. It does not provide any incentive for hard work. 1. \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ Under this system, rewards are not matched with efforts. Which of the following is not a guideline for optimizing the use of sales contests? \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 Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. A commission plus bonus plan is particularly suited to a company that uses brokers or independent sales reps. Companies wanting to exert some longer term behavioral control using incentives should make sure that the incentive component is between 15 and 30 percent of total compensation. Additionally, they have full control over benefits like insurance and retirement management. It is often used in direct sales industries and multi-level marketing (MLM) firms that work with independent contractors. bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. 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. The earnings of a person who is working as an independent contractor are subject to self-employment tax.. Plan A is to borrow at 6%. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. Is it just monetary? Salary plus commission is a balance of both stability and performance-based income. Such a plan is quite common in the services industry as well as in the industrial goods sector. \end{matrix} When the salesmen are new to the job (i.e., for remunerating the newly appointed salesmen.). The economy has entered a period of recession, and even the Administration's economists predict that it will remain so for at least three more quarters. Building an effective sales force compensation plan boils down to: When establishing goals for the compensation plan, a sales manager must consider: Competitive compensation packages in the marketplace. Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust It could reduce retention and increase turnover. If an employee makes no sales during a month, he doesnt get paid. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Which of the following is not a factor to be considered when developing a commission-only plan? You gain authority, prestige and responsibility. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. This type of compensation plan is every salespersons dream. As the name suggests, straight salary compensation is just what you would expect. The salesperson experiences a high level of security with a salaried sales position. Defined by the FLSA, tipped employees are those who receive more than $30 per month in tips. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. than to older salespeople: When a sales manager assures salespeople that they fulfill a critical role in revenue production and other Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. What is important here is building a close relationship with the retailer and satisfying the customers needs. Selling situations that require salespeople to perform special services for customers are more likely to be performed when salespeople are on salary. Your earning potential is unlimited. A per diem expense plan pays the salesperson for all reported expenses. All of the following are typical reimbursable expense items except. Are you ready for a pay raise? The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. How to find funding and capital for your new or growing business. Among the drawback(s) you will discuss include: You have read a "want ad" in the latest edition of Marketing News. The tools and resources you need to run your business successfully. 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. 5. 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. She loves training, creating processes, and introducing her clientele to new apps and technology. 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. 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. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. Quizzes test your expertise in business and Skill tests evaluate your management traits. The directors are considering three financing plans. 5. In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. Advantages of straight salary. }\\ Provide equal pay to all employees at the same level. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. In this sense, compensation is a counterbalance. Employers are also required to pay employees theminimum wage, which can vary depending on their states minimum wage. Recommend a plan to the board of directors. \end{array} Based on this information, which salesperson compensation plan would work best? Bal.1.2.3.4.5.6.7.Bal.Cash30,000+35,00026,00015,0002,0007,20014,800+AssetsSupplies4,000+1,5003,0002,500+Land75,000+15,00090,000==LiabilitiesAccountsPayable8,000+1,5007,2002,300++MurrayKiser,Capital101,000101,000OwnersEquityMurrayKiser,Drawing2,0002,000+FeesEarned35,00035,000Expenses26,0003,00029,000. ii) There will be no surprise of payroll expenses. Its worth noting that inconsistent working hours can also hurt employees who may be counting on a consistent income. Employees who prefer to set their own schedules or be their own boss often thrive in commission-only environments. i) Beneficial for industries which prohibits direct sales. If so, an hourly rate with a flexible schedule could be more attractive. 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. 4. Companies are increasing incentives for foreign-based employment. 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. \hline\\ The major drawback to salary plus commission plans is that they are more expensive and more costly to administer. When the work done by the salesmen cannot be measured satisfactorily. There is no additional performance or sales-based income added to the employees compensation. On a straight salary, they will be paid this regardless of how many deals they close. As a business owner it can be a challenge to figure out how to compensate employees. Service focus: Such a plan works well for sales positions where pushing a product may not be necessary and customer service is of utmost importance. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. 6. The company uses a combination of brokers and independent sales reps. What kind of a compensation program would they most likely to use for their salespeople? Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform. Some of these jobs also have flexible schedules, which can be beneficial to employees. Business is going well for Park N Fly , the company that operates remote parking lots near major airports. Working as a contractor definitely has its benefits. In this plan, you will pay a straight salary to your employees and no commission, no bonus, and no incentives. How much you spend on salaries often has little to do with your profits.
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