The most commonly used definitions of motivation include these three dimensions: Use the table below. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. 1. Which one of the following statements regarding global compensation is false? Quizzes test your expertise in business and Skill tests evaluate your management traits. -26,000\\ 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. \text{Oklahoma State} & \text{72} & \text{Texas} & \text{66} & \text{6}\\ \text{T} & \text{AT&T} & \text{37.50} & \text{30.97} & \text{37.12} & \text{-0.01} & \text{22,009,008} & \text{37.50} & \text{37.06}\\ \hline 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. If so, an hourly rate with a flexible schedule could be more attractive. \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 Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. It is a very useful system of remunerating newly-appointed salesmen who are new to the job. Incentives are often seen as effective triggers when the objective is to improve the top line i.e. Some of this is likely due to a generational shift in what employees are really looking for. Which of the following is not true regarding the design of a global salesforce compensation system? Sales contests will continue to be an important tool for achieving expedient results. The key to this type of plan is to offer enough stability that employees feel satisfied and secure but to pair that salary with a commission that motivates stellar performance. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. It provides stability of earnings without wide fluctuations. Take a reactive approach to seeking out motivational problems and sources of frustration in the salesforce. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. estimate the percentage of all NCAA games in which the winning team scores 84 or Profit margin/revenue-based compensation, Whos using profit margin/revenue-based compensation, Benefits of profit margin/revenue-based compensation, Disadvantages of profit margin/revenue-based compensation, Whos using residual commission compensation, Benefits of residual commission compensation, Disadvantages of residual commission compensation, Pros and cons of salaried versus hourly compensation, Pros of hourly compensation for employees, The freedom to change work schedules in accordance with other schedules, The opportunity to work more hours to make more money, Its often easier to get a new job if the current one isnt a good fit, Cons of hourly compensation for employees, Pros of hourly compensation for employers, Employers can increase or decrease hours based on heavy or slow seasons, Depending on how many employees are on the payroll, employers may not be required to provide benefits, including health insurance or, Cons of hourly compensation for employers, Payroll can be more complex and difficult to calculate if using multiple rates, Increased training and hiring expenses (as a result of high turnover), Pros of salary compensation for employees, Consistent hours and income create more security, Cons of salary compensation for employees, If working for a straight salary, better performance doesnt constitute higher pay, Switching between jobs can be more difficult, as theres often a more intense hiring process, Pros of salary compensation for employers, Salaried employees can be more loyal than hourly employees, Often a higher level of talent or education, Cons of salary compensation for employers, Payroll expenses are fixed, even if profitability decreases, It can be more expensive to attract top talent, Why employee classification is so important. In this situation, employees only receive their bonus if the district, division, or even continent hits its sales goals. Further, the straight commission motivates poor performers to become more productive since it rewards good performers (Johnston and Marshall, p. 329). In this plan, you will pay a straight salary to your employees and no commission, no bonus, and no incentives. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. __________ 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. By creating a feeling of security in the minds of the salesmen, it maintains high morale among the sales force. 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. Overall compensation and rewards increase with the use of team selling. This type of sales compensation plan is employed in companies which prohibits direct sales. A straight salary can greatly benefit someone who is transferring to a new territory. 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. Leadership Insights Your base pay provides a steady income during seasons where commission may be more difficult to earn. Whos using straight hourly compensation? , LLC in Miami, Florida. Provide equal pay to all employees at the same level. \hline\\ Those who sell below $35,000 will not receive commissions. 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. 2. According to the Customer-Product Matrix, sales positions that focus primarily on new business development require a greater proportion of salary than incentive. When there are considerable seasonal variations in the sales made by the salesmen. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. \begin{array}{l} Good salespeople can continue to receive residual commission ever after they leave the company through negotiation. There are many people who would simply prefer to work with the relative security of a salary position. Compare the advantages and disadvantages of straight salary and They may have less vacation time or even zero paid vacation time. The latest product innovations and business insights from QuickBooks. a. salesperson's total pay that is salary should be relatively low? 5. \\ Required fields are marked *. &&&&&& 35,000\\ \\ Straight salary plans are not popular with salespeople because: They don't provide strong incentives for extra effort. 2. 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. &&\textbf{\textsf{Assets}}\\ This compensation category also includes restaurant employees paid mostly in tips. Relevant resources to help start, run, and grow your business. Here Are the Pros of Straight Commission. The importance of the salesperson's personal skills in making sales is slight. So, it can be easily understood by all salesmen. While in certain compensation plans, the salespersons receive benefits on accomplishment for specific tasks (e.g. Hourly roles can often be perceived as less valuable or easier to replace. Sadly, employers are usually reluctant to offer a residual commission deal to employees. 2. Subscribe to our newsletter and stay updated on the latest HR news and trends. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. Sales Costs: Under the straight salary method, sales costs are not matched with the sales. In this sense, compensation is a counterbalance. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. He holds a Bachelor of Science in marketing from York College of Pennsylvania. In fields that typically involve commissions, the outside sales exemption and the retail sales exemption may also apply. Which of the following is not one of the desired outcomes of an optimal reward system? Which of the following statements regarding changes in the reward system is false? Employees who prefer to set their own schedules or be their own boss often thrive in commission-only environments. Using the mean and standard deviation found in part (a), In commission only jobs, companies offer a safety net in the form of draw against commission. The company pays its salespeople a set amount known as a pre-determined draw at the beginning of each pay period. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. On the other hand, under the straight commission method, salesmens rewards are matched with their efforts. View the full answer. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. $$ Assume that the points scored by the winning teams for all NCAA games follow a Based on this information, which salesperson compensation plan would work best? Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. 4. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. issue a press release detailing the company's changes. $$ A straight salary plan can be advantageous in certain situations. 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. \text{Bal.} 8. The most serious disadvantage of a straight-salary compensation plan is. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. The tools and resources you need to run your business successfully. 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. 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). Which of the following is not a form of nonfinancial compensation? On a straight salary, they will be paid this regardless of how many deals they close. Another disadvantage is the lack of benefits. \textbf{\textsf{Liabilities}} & \bm{+} &&&\textbf{\textsf{Owner's Equity}}\\ 11. Some of these jobs also have flexible schedules, which can be beneficial to employees. Ultimately, you have to determine the method of pay that your company can best manage and to weigh the advantages and disadvantages of offering a fixed salary. 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. Total sales for the territory are then split among the sales reps in that territory. On the other hand, when you pay commission, you pay when an employee does something to cause your business to see a profit. Tax basics you need to stay compliant and run your business. For each frequency distribution, suggest "nice" bins. \text{Wisconsin} & \text{76} & \text{Illinois} & \text{56} & \text{20}\\ You also decide to pay your salespeople with the most common type of compensation plan among companies. According to your text, which benefit is offered by the greatest percentage of companies? However, the$5 million that the business needs for growth cannot be raised within the family. Base salary + sales commission-based pay. What is the amount of net increase in owners equity during the month? Compensation usually takes the form of monetary payment exchanged for time, labor and expertise. A major objective of a well-designed compensation package is to: 1. Straight Salary Method of Remuneration | Meaning | Suitability | Merits | Demerits, Salesmanship | Meaning | Features | Objectives, Arguments in favor of Social Responsibility of Business, Business Enterprise Meaning | Public | Private | Joint, 10 Most Important functions of a Group Leader, Factors to be Considered in Planning Factory Building, Reasons for Governments Intervention in Private Business, Factors Influencing Salesmen Remuneration Plan, Organizational Factors Responsible for Resistance to Change, Avoidable and Unavoidable causes of Labour Turnover, 5 Important Classification of Business Environment, Under what circumstances a Pvt company be, Purchase Department | Purchase Officer | Qualification, 7 Arguments against Social Responsibilities of Business, Accountlearning | Contents for Management Studies |. MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. This type of compensation plan puts less pressure on individuals and fosters team-building. \end{array} Companies looking for long-term growth as opposed to short-term sales may opt for this type of compensation as well. 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. ___________ rewards are those that are given in return for acceptable performance or effort. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. The main differences between the straight salary method and straight commission method are explained below: Straight Salary Method vs Straight commission Method. Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). No two compensation plans are alike. bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. 7. Employers have to think about who their target employee is and what that employee is looking for. For post-Depression-era baby boomers, the security of a steady salary is important. 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 Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. Formal recognition programs have a better chance of success if sales managers do all of the following Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. tend to produce too many salesforce objectives which are of the crisis-resolution variety. The Advantages & Disadvantages of Salary - Career Trend advantages and disadvantages of straight salary and straight commission Many appreciate the fallback stability of the base salary paired with performance incentives. Find articles, video tutorials, and more. Such a plan is quite common in the services industry as well as in the industrial goods sector. 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. How to Pay Your Sales Force - Harvard Business Review It does not distinguish between efficient and inefficient salesmen, as the same remuneration is paid to both efficient and inefficient salesmen. This offers the security of a salary with the greater earning potential of commission. For employers who dont want to pay employees after they leave, this type of compensation can incentivize employees to stay at the company. Finding balance and setting boundaries at work. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. 7. 3 Most Common Types of Salesforce Compensation Plan [+Pros/Cons] - tyonote TVC is most often used in team-based corporate cultures. 9. Your email address will not be published. virtually automatic, this form of commission rate would be appropriate: An example of a selling situation requiring a commission split would be. Straight Salary Compensation. According to a survey of sales executives reported in the text, the most popular sales incentive is. 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. Contractors are required to find health insurance and retirement plans on their own. 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. But straight commission method does not assure any minimum income to the salesmen. 3. Is your team struggling with burnout and a lack of fulfillment at work? They don't want to worry about the inconsistencies associated with a commission-based pay. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. These have a significantly higher (pre-tax) contribution limit than company IRAs. The Science Behind Salary Negotiations: A Game Plan for Employers That She loves training, creating processes, and introducing her clientele to new apps and technology. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. \hline Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. bell-shaped distribution. Employers are also required to pay employees theminimum wage, which can vary depending on their states minimum wage. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. 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. So, it does not encourage salesmen to do hard work. It is critical that companies using this type of system have good metrics in place for tracking sales so they can fairly and accurately calculate commissions. PDF FRINGE BENEFITS AND SALARY PLAN (Exhibit A to Resolution No. 21052 As But straight commission method provides sufficient incentive to the salesmen to do hard work. Which of the following is/are most likely to be among them? Are they just trying to pay their way through college? . \begin{array} {c} \text{Symbol} & \text{Stock} & \text{High} & \text{Low} & \text{Last} & \text{Change} & \text{Volume} & \text{High} & \text{Low}\\ \hline Advantages And Disadvantages Of A Straight Commission __ A mutual fund that purchases more points. What are the most popular types of compensation packages? Straight salary method of remuneration Meaning, Suitability, Advantages, Disadvantages. 8,000 && 101,000\\ In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. 6. Recommend a plan to the board of directors. Straight salary method promotes team-spirit and cooperation among the salesmen in the case of joint sales. Straight salary method of remuneration is found suitable and is usually adopted under the following circumstances: 1. Employees are guaranteed to receive at least base salary to pay the bills, even during a time period when their sales are low. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). It has been reviewed & published by the MBA Skool Team. Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. The Pros and Cons of Different Sales Compensation Plans You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. 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. Under Straight salary method, a salesman is paid remuneration on time basis. Hourly plus commission compensation does have its disadvantages as well. 5. Intuit, QuickBooks, QB, TurboTax, Mint, Credit Karma, and Mailchimp are registered trademarks of Intuit Inc. The compensation is usually calculated by finding out territory volume. This type of compensation is well-suited for employees who work in a team-based culture. Terms and conditions, features, support, pricing, and service options subject to change without notice. It assures a steady minimum income to the salesmen. The directors, who strongly wish to retain family control of the company, must consider issuing securities to outsiders. In this type of compensation, income is solely based on sales made. international stocks and bonds Employers who pay by the hour should focus on increasing morale and showing employees they are valued in order to avoid turnover. With some compensation plans, they can earn additional incentive pay in the form of commissions or bonuses that a company offers in an attempt to motivate them. Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees dont see opportunities to increase their pay. Per the IRS website, the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. System is easy to understand and compute. Employees earning salary plus commission will have higher income tax rates than a self-employed agent. Each time a commission check is cut you have the satisfaction of knowing that it's due to something positive. 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). Nevertheless, salary compensation plans are appropriate in a number of situations. We dont want you to miss anything. 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. Increase sales and revenues. There may be multiple rates of bonuses and commission, and payroll managers must have a system in place to keep track of everything. 5. An incentive pay cannot work in such a case. Companies are increasing incentives for foreign-based employment. salesforce include all of the following except. As a business owner it can be a challenge to figure out how to compensate employees. 1. plan is recommended: Advantages of straight-salary compensation plans include all of the following except. 3. 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. What is Compensation? | Types of Pay | PayScale Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. Provide a mix of both compensation and noncompensation rewards comparable to other firms. This pay plan is the: Combination plan (Base salary + performance based commission). Similar to straight salary, this compensation structure offers employees a guaranteed base income annually, but also offers performance-based income in addition, unlike straight salary. a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. Perhaps the most serious shortcoming of straight-commission plans is that. Help Miller rank the top three cities that BIA should consider as its new site for servicing aircraft. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. 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. A regular and stable income can do much to develop a loyal and well-satisfied salesman. 2. In case the salesperson shows high sales performance, the firm increases its salary. Defined by the FLSA, tipped employees are those who receive more than $30 per month in tips. except. 2. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. One of your first tasks is to evaluate the level of compensation for your sales force.