advantages of straight salary plan

Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. a supportive sales management leadership style. 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. The advantages of straight salary compensation include which of the following? bell-shaped distribution. +35,000\\ \begin{array} {rcrcrcrcr} 1. Your earning potential is unlimited. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. 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For example, consider a salesman who frequents various retail stores or department stores to check inventory or take orders for replenishment. She helps HR professionals identify issues with their talent management and employment law. 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). Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ 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. $$ The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. 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). According to the text, which of the following is not one of the rewards typically offered to salespeople? 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. Cost of Administration: The cost of administration of straight salary plan is less than that of straight commission plan. However, the$5 million that the business needs for growth cannot be raised within the family. Which of the following is not a form of nonfinancial compensation? Salespeople can be compensated in a number of different ways. If its part of their contract, salespeople can continue to receive commissions even after theyve left the company. Required fields are marked *. Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. Person A receives a salary of $80,000. 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. A valid objective in creating commission-based pay programs is to devise a system that encourages salespeople to sell items that maximize profits of the firm. Your salespeople are paid on commission. \underline{\underline{14,800}} && \underline{\underline{\ \ \ 2,500}} && \underline{\underline{90,000}} \\ \\ \\ \\ 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. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. It provides stability of earnings without wide fluctuations. Which of the following is/are most likely to be among them? \\ A salesperson who is intrinsically motivated. 7. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. 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. \underline{\underline{2,300}} && \underline{\underline{101,000}} && \underline{\underline{-2,000}} && \underline{\underline{35,000}} && \underline{\underline{-29,000}}\\ \\ \\ \\ Here Are the Pros of Straight Commission. Accordingly, the information provided should not be relied upon as a substitute for independent research. But straight commission method is based on the sales effected by the salesmen and not on the time spent on the job. \end{array} Hourly roles can often be perceived as less valuable or easier to replace. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. Straight salary compensation plans are ideal in industries where the normal structure does not involve (and might even prohibit) direct sales. except: make it easy enough to allow for a majority of the salesforce to win. Which of the following conditions would indicate to the sales manager that the proportion of the No two compensation plans are alike. Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. Additionally, they have full control over benefits like insurance and retirement management. Straight salary offerings can also be good for attracting new talent that's concerned with stability. If an employee is required to work on a holid ay as a regularly scheduled work day, . In this type of compensation, income is solely based on sales made. Your base pay provides a steady income during seasons where commission may be more difficult to earn. 11. As the name suggests, straight salary compensation is just what you would expect. If you choose this plan, you'll pay your reps using a mix of base salary and performance-based rewards. 8. bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. The content on MBA Skool has been created for educational & academic purpose only. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. 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. Person A pays over $18,000 in tax and receives a net income of around $62,000. \begin{array} {c} Increase sales and revenues. \hline Are you ready for a pay raise? -7,200\\ A job like this is more likely to have flexible working hours or the ability to work from home. Salaried employees receive an equal portion of their annual compensation every week. Such a plan is quite common in the services industry as well as in the industrial goods sector. If he earns less in commissions, he must pay the remainder back to the company. 6. A sample of 10 NCAA college basketball game scores provided the following data (USA 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. 3 Most Common Types of Salesforce Compensation Plan [+Pros/Cons] - tyonote This type of sales compensation plan is employed in companies which prohibits direct sales. According to a survey of sales executives reported in the text, the most popular sales incentive is. . The advantages of paying employees a straight commission include the fact that it provides direct motivation to sales representatives to sell more products and services so they can earn more. This leaves the salespersons with no opportunity for extra money or incentives. 6. follow-up and service. The main differences between the straight salary method and straight commission method are explained below: Straight Salary Method vs Straight commission Method. they contribute little to company loyalty, resulting in potential salesforce control problems. \textbf{\textsf{Payable}} \hspace{4pt} &\bm{+} & \textbf{\textsf{Capital}}\hspace{17pt} & \bm{-} & \textbf{\textsf{Drawing}} \hspace{15pt} & \bm{+} & \textbf{\textsf{Earned}} & \bm{-} & \textbf{\textsf{Expenses}}\\ Salary plus commission plans are often used for sales positions or corporate positions when the company wants to encourage leaders to push for substantial growth and high performance. The sales teams support each other to reach a common goal. Overall compensation and rewards increase with the use of team selling. Employers are also required to pay employees theminimum wage, which can vary depending on their states minimum wage. Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. a. 11 Main Types of Sales Compensation Plans (With Examples) Contractors can determine their own fees, working hours, employees, etc. These can range from monetary benefits (like extrapaid time off, holiday pay, and parental leave) to lifestyle benefits (like flexible working hours,the ability to work from home, a pet-friendly working environment, etc.). All of the above. As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen. 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. However, a straight salary plan also has its own advantages. With ambitious expansion plans, BIA has decided it needs a second service hub on the continent, to complement its large Heathrow (London) repair facility. 2. 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. \end{array} 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. Wage caps are used by some firms to prevent salespeople from making too much money. Whos using straight hourly compensation? Business is going well for Park N Fly , the company that operates remote parking lots near major airports. \begin{array}{|l|l|c|c|c|c|c|c|c|} \hline 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. Which of the following statements regarding changes in the reward system is false? Nevertheless, salary compensation plans are appropriate in a number of situations. 1. Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________. Perhaps the most serious shortcoming of straight-commission plans is that. Which of the following is not one of the desired outcomes of an optimal reward system? 5. Employers are often hesitant to use this type of compensation, as payroll expenses can be high or unpredictable. Those who sell below $35,000 will not receive commissions. international stocks and bonds Which, if any, of the following sources available will help you in your task? Which of the following is not a guideline recommended in the management of motivation? as well as U.S. securities. The most commonly used definitions of motivation include these three dimensions: Use the table below. If the nonselling administrative duties of the salesperson are of major importance, this compensation \end{array} If so, an hourly rate with a flexible schedule could be more attractive. In this plan, you will pay a straight salary to your employees and no commission, no bonus, and no incentives. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. 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. salesperson's total pay that is salary should be relatively high? In some organizations, selling is a collaborative effort. The different types of compensation include . These have a significantly higher (pre-tax) contribution limit than company IRAs. 3. \text{Louisville} & \text{65} & \text{Tennessee} & \text{62} & \text{3}\\ 2. This requires very clearly defined territory outlines and territories that produce enough income to support competitive wages. Which of the following is not a factor to be considered when developing a commission-only plan? A straight salary can greatly benefit someone who is transferring to a new territory. 10. 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). Sales Costs: Under the straight salary method, sales costs are not matched with the sales. 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. 3. Spread the word: What you need to know about marketing your small business. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). Of course, there are exceptions to every rule. 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." . Which of the following conditions would indicate to the sales manager that the proportion of the Salary plus commission is a balance of both stability and performance-based income. 7. Expert Answer. Sales Management Insight: Sales Commission Plans. Additional information and exceptions may apply. Let's explain the benefits with a clear example of an unpackaged salary versus an FBT exempt salary package. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. that they offer little financial incentive to perform past a merely acceptable level. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. A major objective of a well-designed compensation package is to: 1. 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. the working capital requirements are lessened with the straight-salary compensation plan. Terms and conditions, features, support, pricing, and service options subject to change without notice. \text{Winning Team} & \text{Points} & \text{Losing Team} & \text{Points} & \text{Winning Margin}\\ You are the sales manager of a large, multi-product company. 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. This compensation category also includes restaurant employees paid mostly in tips. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. Katey Maddux is a paddle boarder, music lover, Zumba instructor, and Founder and CEO ofMillennial Accounting, LLC in Miami, Florida. As defined by the IRS, independent contractors are people who are in an independent trade, business, or profession in which they offer their services to the general public. Employees and independent contractors are mutually exclusive, as a person is either one or the other. Which of the following is an advantage of a straight-commission compensation plan? Jobs report: Are small business wages keeping up with inflation? You have a meeting with her to outline the drawback(s) of this type of plan. MKGT 637 Chapter 8 Flashcards | Quizlet Due to the complexity and compliance issues involved, very few companies offer equity or stock. 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. 9. 2. Because employee base pay is often low (employers can pay as low as $2.13 hour, which means the entire paycheck can go to taxes or withholding), making a livable income can be tough without significant sales. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Employees need not be scheduled for the same number of hours each week. MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. While in certain compensation plans, the salespersons receive benefits on accomplishment for specific tasks (e.g. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. 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. nonfinancial reward: The Million Dollar Roundtable designation in the insurance industry is an example of this type of As a staff reporter, she has written hundreds of newspaper and magazine articles, and she is also the author of two published novels. 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. \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 Some of this is likely due to a generational shift in what employees are really looking for. 5. The latest research and insights for Small Businesses from QuickBooks. elect to receive regular straight time pay or bank compensatory time at their straight time rate. . 7. This system safeguards the interests of the consumers also. It is not clear that offering unlimited opportunities to earn higher pay will always be an effective method for continued salesperson motivation. Everything you need to know about managing and retaining employees. 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. \text{Purdue} & \text{76} & \text{Michigan State} & \text{70} & \text{6}\\ They should be made during recessionary periods. The salespersons perfect plan, a residual commission compensation (RCC) plan pays employees a commission as long as the accounts are producing revenue. Purely paid-by-commission plans can create an unfriendly, competitive environment within teams.

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