advantages of straight salary plan11 Mar advantages of straight salary plan
According to your text, what would you do next? From big jobs to small tasks, we've got your business covered. Salesmen have the greatest. \text{Kentucky} & \text{71} & \text{Notre Dame} & \text{63} & \text{8}\\ Advantages. Some people won't work for anything other than a fixed salary. This type of compensation refers to a set hourly amount without additional performance-based income. \textbf{\textsf{Liabilities}} & \bm{+} &&&\textbf{\textsf{Owner's Equity}}\\ not, explain. The latest product innovations and business insights from QuickBooks. One regulation is employers are required to, at 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). \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ has very specific requirements for classifying and paying employees. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. Laws differ by state, so do your research before making any decisions. In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. 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. Person A receives a salary of $80,000. 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. direct salespeople's behavior toward the attainment of organizational objectives. Further, the straight commission motivates poor performers to become more productive since it rewards good performers (Johnston and Marshall, p. 329). Your base pay provides a steady income during seasons where commission may be more difficult to earn. Review the example home inventory shown before. Design the plan centrally and dictate to local countries. Incentives to Salesmen: Straight salary method does not provide any incentive to the salesmen to do hard work. }\\ Person A pays over $18,000 in tax and receives a net income of around $62,000. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. In most companies, the bonus is usually tied to a budgetor other target that has little significance to the employee. The major drawback to salary plus commission plans is that they are more expensive and more costly to administer. \text{Symbol} & \text{Stock} & \text{High} & \text{Low} & \text{Last} & \text{Change} & \text{Volume} & \text{High} & \text{Low}\\ \hline A straight salary can greatly benefit someone who is transferring to a new territory. Which of the following statements regarding changes in the reward system is false? Advantages of Straight Salary Method 1. follow-up and service. Advantages to Salesperson: The salesperson feels free from financial uncertainties because of stable income inflow. For employers, hourly employees can be a good option for work that fluctuates seasonally. 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. i) Beneficial for industries which prohibits direct sales. Employees may be confused as to how pay is calculated, so transparency is important. 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. If he earns less in commissions, he must pay the remainder back to the company. This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. 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. Straight salary compensation is typically used in industries where: Missionary selling (i.e. It could reduce retention and increase turnover. \\ The sales numbers are added up and all commissions are split equally among all sales professionals. Straight salary offerings can also be good for attracting new talent thats concerned with stability. It assures a steady minimum income to the salesmen. 3. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. This form of nonfinancial reward is generally considered to be more desirable to younger salespeople 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. 2. 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. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. 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 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? Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired. Motivated salespeople may search for this type of income, knowing that if they work really hard early on, they can work less later and still make the same income. According to your text, which benefit is offered by the greatest percentage of companies? According to the Customer-Product Matrix, sales positions that focus primarily on new business development require a greater proportion of salary than incentive. \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}}\\ This offers the security of a salary with the greater earning potential of commission. Such a plan is quite common in the services industry as well as in the industrial goods sector. Under a straight commission plan, sales managers usually have less control over their reps. With regard to compensation programs, most firms just use a draw against commission. \\ Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. 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. As the name suggests, straight salary compensation is just what you would expect. pharmaceutical sales) is the most common type of sales process used. . that they offer little financial incentive to perform past a merely acceptable level. A per diem expense plan pays the salesperson for all reported expenses. Once you own property, you should take steps to protect it from loss, theft, and damage. Each is then rated on 12 factors, as shown in the table below. b. Ages of 50 airplane passengers (xmin=12,xmax=85)\left(x_{\min }=12, x_{\max }=85\right)(xmin=12,xmax=85). Straight salary might not be tempting to top-performing sales reps who want to make as much money as they can through hard work and dedication. 4. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. What was the difference between the day's high and low for one share of Southern Copper? 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. bell-shaped distribution. 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. This compensation type tends to attract fewer people since there is no secure base pay. Many millennials, however, are more focused on work-life balance and lifestyle plans, valuing more vacation or the freedom to work from home. \\ \text{Purdue} & \text{76} & \text{Michigan State} & \text{70} & \text{6}\\ The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. With this type of structure, you'd pay your sales people a straightalbeit competitivesalary like all of your other employees, and nothing else. 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. 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. These can range from monetary benefits (like extra. How to find funding and capital for your new or growing 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. The different types of compensation include . Sadly, employers are usually reluctant to offer a residual commission deal to employees. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. Contractors are required to find health insurance and retirement plans on their own. The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. 6. 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. In this sense, compensation is a counterbalance. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. If theyve just started a family, they may be looking for benefits like parental leave and the chance to work from home. 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. If an employee is required to work on a holid ay as a regularly scheduled work day, . Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. This $35,000 level is called: Your customer's buying cycle is approximately 2 years and your reps need to invest significant amounts of time understanding their customers. Explore the trend of creative job titles in the job market and how they are reshaping the way we view and define roles in the workforce. O True O False. Sales Costs: Under the straight salary method, sales costs are not matched with the sales. 6. An advantage of the straight salary plan for compensating salespeople is that it: Provides a direct relationship between sales and expenses. It can also be beneficial if a firm is entering a new market or location. How to start and run a successful e-commerce business. Each line designated by a number indicates the effect of a transaction on the equation. salesforce include all of the following except. Finding balance and setting boundaries at work. What is salary pay? You have a meeting with her to outline the drawback(s) of this type of plan. In order to "weather the storm," the best course of action among those presented below is to: Raise commission rates on higher margin products in all regions in order to boost sales. The major disadvantage is that the salespersons may not feel motivated and would only complete the minimum requirements. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. 8. Which of the following conditions would indicate to the sales manager that the proportion of the 2. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. \textbf{\textsf{Cash}} & \bm{+} & \textbf{\textsf{Supplies}} & \bm{+} & \textbf{\textsf{Land}}\\ A straight salary can also benefit an experienced salesperson who is transferring to a new territory where the company and its products may be completely unknown. Salesperson compensation has been an issued marked by trial and error to discover the right formula. As a result, salaried workers often dont track hours worked. they contribute little to company loyalty, resulting in potential salesforce control problems. You now require the sales force to sell $35,000 worth of product each month to make a commission. Compensation usually takes the form of monetary payment exchanged for time, labor and expertise. As an hourly employee, once you work over 40 hours in a week, your employer must pay you time and a half for these hours. 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. Perhaps the most serious shortcoming of straight-commission plans is that. 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. However, successful salespeople tend to make a lot of money with commission than with a salary plus commission job. When the salesmen are new to the job (i.e., for remunerating the newly appointed salesmen.). is considered a serious offense, which, if detected, often leads to termination of employment. Which of the following conditions would indicate to the sales manager that the proportion of the \end{array} Based on this information, which salesperson compensation plan would work best? finds the job to be inherently rewarding. A salaried compensation plan can help promote a sense of teamwork needed to close these more complex transactions. Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees dont see opportunities to increase their pay. 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. \hline\\ Topical articles and news from top pros and Intuit product experts. We provide third-party links as a convenience and for informational purposes only. Are benefits included in the definition? 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. An incentive pay cannot work in such a case. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. Total sales for the territory are then split among the sales reps in that territory. By clicking Submit, you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement. Fresh business resources are headed your way! For example, consider a salesman who frequents various retail stores or department stores to check inventory or take orders for replenishment. \\ 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. John David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine, Operations Management: Sustainability and Supply Chain Management, Service Management: Operations, Strategy, and Information Technology, Information Technology Project Management: Providing Measurable Organizational Value, Opportunity / Chance / Possibility / Occasion. Katey Maddux is a paddle boarder, music lover, Zumba instructor, and Founder and CEO ofMillennial Accounting, LLC in Miami, Florida. Once the person has established himself in the area, the company can switch to performance-based salary. They may have less vacation time or even zero paid vacation time. 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. 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The tools and resources you need to run your business successfully. \begin{array} {rcrcr} Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. On the other hand, under the straight commission method, salesmens rewards are matched with their efforts. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. 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. Which of the following is not true regarding the design of a global salesforce compensation system? Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. 2. Its worth noting that inconsistent working hours can also hurt employees who may be counting on a consistent income. Straight salary plans often do not provide strong incentive for extra effort. The ATO considers this $80,000 taxable income. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________. 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). By creating a feeling of security in the minds of the salesmen, it maintains high morale among the sales force. When the salesmen are required to perform some other functions in addition to selling. It is usually easy to design pay plans that fully meet the goals and needs of the firm, customers, and salespeople. 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.
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