If theyve just started a family, they may be looking for benefits like parental leave and the chance to work from home. The tools and resources you need to take your business to the next level. As the remuneration of the salesmen under this method does not depend upon the volume of sales made by them, the salesmen will not be reckless in increasing their sales by selling to every customer on credit. That means, there will not be much bad debts. Such a plan is quite common in the services industry as well as in the industrial goods sector. \text{Bal. Provide equal pay to all employees at the same level. ____________ is the easiest plan to administer and budget for. \end{array} This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. Sales Costs: Under the straight salary method, sales costs are not matched with the sales. 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. Get help with QuickBooks. In designing plans one must balance the goals of the firm, as well as the needs of the sales force and customers. as well as U.S. securities. \\ When there are considerable seasonal variations in the sales made by the salesmen. Some terms may not be used. Changing from a straight salary plan to a combination salary plus commission plan provides a number of benefits. Benefits or Advantages A regular income gives the salesman a good degree of security. Profit margin is one of the most popular types of compensation used by start-up companies. \end{array} 4. The Management Dictionary covers over 2000 business concepts from 5 categories. Using the mean and standard deviation found in part (a), Topical articles and news from top pros and Intuit product experts. But under the straight commission method, sales costs are matched with sales. 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. \begin{array} {c} Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. 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. You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. | Priyansha tweets at. 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. Another advantage of this pay structure is that it helps in attracting more talent . In some organizations, selling is a collaborative effort. Chris Joseph writes for websites and online publications, covering business and technology. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). -15,000 &&&& +15,000\\ 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. It assures a steady minimum income to the salesmen. -26,000\\ This offers the security of a salary with the greater earning potential of commission. \text{Purdue} & \text{76} & \text{Michigan State} & \text{70} & \text{6}\\ 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. 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 Which of the following statements regarding changes in the reward system is false? In this type of compensation, income is solely based on sales made. \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 The least valued nonfinancial reward by salespeople, other than those nearing retirement, is, According to the text, controls typically used by companies to ensure judicious spending by the You also decide to pay your salespeople with the most common type of compensation plan among companies. You think you have finally selected a compensation method and wage level that meets your boss's requirements. Salaried workers who earn more than $23,660 per year are considered exempt under the Fair Labor Standards Act (FLSA). Which one of the following statements regarding global compensation is false? . No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. 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. Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. Straight Salary Straight salary sales compensation plans aren't very common, but they do have a place in some organizations. Starting salaries often begin far enough above hourly rates to be able to afford a down payment on a house or car. \text{Winning Team} & \text{Points} & \text{Losing Team} & \text{Points} & \text{Winning Margin}\\ 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. \underline{\underline{2,300}} && \underline{\underline{101,000}} && \underline{\underline{-2,000}} && \underline{\underline{35,000}} && \underline{\underline{-29,000}}\\ \\ \\ \\ The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. It is a very useful system of remunerating newly-appointed salesmen who are new to the job. 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. Employees are guaranteed to receive at least base salary to pay the bills, even during a time period when their sales are low. This can either be done through direct contact with t Are you ready for a pay raise? . 6. 7. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. They should be made during recessionary periods. 3. These can range from monetary benefits (like extra. 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. 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. The importance of the salesperson's personal skills in making sales is slight. 3. Which of the following statements regarding sales contests is true? Katey Maddux is a paddle boarder, music lover, Zumba instructor, and Founder and CEO of. However, the$5 million that the business needs for growth cannot be raised within the family. tend to produce too many salesforce objectives which are of the crisis-resolution variety. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. He holds a Bachelor of Science in marketing from York College of Pennsylvania. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. Paycheck calculator for hourly and salary employees. MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. WinningTeamArizonaDukeFloridaStateKansasKentuckyLouisvilleOklahomaStatePurdueStanfordWisconsinPoints90857578716572767776LosingTeamOregonGeorgetownWakeForestColoradoNotreDameTennesseeTexasMichiganStateSouthernCalIllinoisPoints66667057636266706756WinningMargin241952183661020. b. Ages of 50 airplane passengers (xmin=12,xmax=85)\left(x_{\min }=12, x_{\max }=85\right)(xmin=12,xmax=85). Contractors are required to find health insurance and retirement plans on their own. For example, since the pay of salaried salespeople is not directly related to performance, some of them may not make all of their calls or give the firm "a full day's work for a day's pay." 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. An employee who agrees to this type of compensation will receive a base salary along with an additional bonus if performance hits or exceeds earning goals. The companys income tax rate is 35%. TheDepartment of Laborhas very specific requirements for classifying and paying employees. Finding balance and setting boundaries at work. &&&& -2,000\\ For example, consider a salesman who frequents various retail stores or department stores to check inventory or take orders for replenishment. 5. Is good for a financially weak company. Transcribed image text: QUESTION 17 An advantage of using a straight salary plan to compensate sales employees is that employees can be paid for performing only sales effort. Hourly plus commission compensation does have its disadvantages as well. Employees may be confused as to how pay is calculated, so transparency is important. 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. With this type of structure, you'd pay your sales people a straightalbeit competitivesalary like all of your other employees, and nothing else. Management can direct Salesforceinto various activities more easily. 12. Summary financial data for February are presented in equation form as follows. 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. \end{array} Intuit accepts no responsibility for the accuracy, legality, or content on these sites. This is a primary method for compensating independent sales agents. -2,000\\ Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. Operating costs are minimized during slack selling periods. Offers considerable incentive for the salespeople. The advantages of straight salary compensation include which of the following? Sales contests will continue to be an important tool for achieving expedient results. \\ Hence, this concludes the definition of Straight Salary Plan along with its overview. 8,000 && 101,000\\ O True O False. The most serious disadvantage of a straight-salary compensation plan is. A salesperson who is intrinsically motivated. However, a straight salary plan also has its own advantages. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. 6. 2. Straight salary plans often do not provide strong incentive for extra effort. 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. Give your reasons. It assures a steady minimum income to the salesmen. the following except. When more than one individual works together to make a sale, the selling process is described as: You have just been promoted to the position of sales manager. The goal of the compensation package is to reward employees for their efforts without putting the firm's profitability in jeopardy. According to the Customer-Product Matrix, sales positions which focus primarily on New Business Development require a greater proportion of __________ in the compensation plan than those sales jobs in the lower left-hand quadrant (Account Management). As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen. Salespeople can be compensated in a number of different ways. 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. It is not clear that offering unlimited opportunities to earn higher pay will always be an effective method for continued salesperson motivation. 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. except: make it easy enough to allow for a majority of the salesforce to win. Unlike a heavily commission-based position in which income relies on sales volume, the salesperson earns the same amount of compensation regardless of how much she sells. 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. 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. Purely paid-by-commission plans can create an unfriendly, competitive environment within teams. Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. So what is compensation? Straight salary offerings can also be good for attracting new talent that's concerned with stability. On the other hand, when you pay commission, you pay when an employee does something to cause your business to see a profit. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. In many companies, basics plus bonus-based compensation plans are used as a way to motivate employees. Let's explain the benefits with a clear example of an unpackaged salary versus an FBT exempt salary package. You have a meeting with her to outline the drawback(s) of this type of plan. 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. estimate the percentage of all NCAA games in which the winning team scores 84 or Your paycheck is based on a specific percentage of the sales that you are able to generate. Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust You now require the sales force to sell $35,000 worth of product each month to make a commission. Which of the following is not a factor to be considered when developing a commission-only plan? Nevertheless, salary compensation plans are appropriate in a number of situations. To ensure proper classification, employers should begin with the assumption that their commissioned employees are nonexempt, and then review the potential exemptions to determine whether they apply. 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. Currently editor at The HR Digest Magazine. Offer your support. Part B: As a retail sales manager of a large superstore, one of your responsibilities is to train the newly hired employees.