costing little and reinforcing desirable behavior immediately after it occurs. It is often used in direct sales industries and multi-level marketing (MLM) firms that work with independent contractors. 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. plan is recommended: Advantages of straight-salary compensation plans include all of the following except. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. The importance of the salesperson's personal skills in making sales is slight. 2. a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. 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). Although quite popular, salary compensation plans have some disadvantages. 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. A straight salary plan can be advantageous in certain situations. 3. After initial investigations by Holmes Miller, head of the Operations Department, BIA has narrowed the list to 9 cities. ii) There will be no surprise of payroll expenses. Salesmen have the greatest. On a straight salary, they will be paid this regardless of how many deals they close. 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. Everything you need to start accepting payments for your business. \hline\\ \end{array} Salaried employees receive an equal portion of their annual compensation every week. Advantages of Straight Salary Method 1. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. If theyve just started a family, they may be looking for benefits like parental leave and the chance to work from home. The advantages of straight salary compensation include which of the following? 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. 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. As a staff reporter, she has written hundreds of newspaper and magazine articles, and she is also the author of two published novels. Required fields are marked *. \\ A major objective of a well-designed compensation package is to: 1. Additional information and exceptions may apply. Which of the following is not a guideline for optimizing the use of sales contests? Save my name, email, and website in this browser for the next time I comment. && +1,500\\ The salesperson experiences a high level of security with a salaried sales position. Your email address will not be published. Your earning potential is unlimited. \text{Bal. &&&& -2,000\\ This type of compensation is well-suited for employees who work in a team-based culture. If your family does not have a complete home inventory, encourage your parents or other adults with whom you live to create one. \text{Florida State} & \text{75} & \text{Wake Forest} & \text{70} & \text{5}\\ 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________. The amount of mental and physical effort put forth by the salesperson is referring to, The salesperson's choice to expend effort over a period of time, especially when faced with adverse, The motivation task is incomplete unless salespeople's efforts are. Straight salary method of remuneration is simple. 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 |. as well as U.S. securities. Today, January 26, 2004). The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. Employees who prefer to set their own schedules or be their own boss often thrive in commission-only environments. b. Ages of 50 airplane passengers (xmin=12,xmax=85)\left(x_{\min }=12, x_{\max }=85\right)(xmin=12,xmax=85). Employees who like working in sales but also in a team environment will be attracted to such compensation, as it takes the pressure off the individuals performance. She helps HR professionals identify issues with their talent management and employment law. &&&&&& 35,000\\ \\ 40 Questions to Ask Before You Accept A Job Offer. than to older salespeople: When a sales manager assures salespeople that they fulfill a critical role in revenue production and other Get help with QuickBooks. If the nonselling administrative duties of the salesperson are of major importance, this compensation 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. 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 In this situation, employers have to pay overtime, despite the employee being salaried. they contribute little to company loyalty, resulting in potential salesforce control problems. It has lower turnover rates. +35,000\\ Although most compensation plans are incentivized, the straight salary plan is a method of compensation in which the salespersons receive a straight-forward fixed salary with no commissions. Summary financial data for February are presented in equation form as follows. 10. All of the above. A straight salary plan can be advantageous in certain situations. You have a meeting with her to outline the drawback(s) of this type of plan . Because her income is stable, planning and managing her personal finances is easier. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. Straight salary compensation is typically used in industries where: Missionary selling (i.e. 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. Hourly roles can often be perceived as less valuable or easier to replace. Salaried workers who earn more than $23,660 per year are considered exempt under the Fair Labor Standards Act (FLSA). Sadly, employers are usually reluctant to offer a residual commission deal to employees. But straight commission method does not assure any minimum income to the salesmen. . The tools and resources you need to take your business to the next level. 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. Which of the following is not one of the desired outcomes of an optimal reward system? So, it does not encourage salesmen to do hard work. \text{Kentucky} & \text{71} & \text{Notre Dame} & \text{63} & \text{8}\\ So what is compensation? Weve picked the most common and most rewarding forms of compensation plans and highlighted their benefits and downsides, so you can decide which one works best for your business needs. \underline{\underline{14,800}} && \underline{\underline{\ \ \ 2,500}} && \underline{\underline{90,000}} \\ \\ \\ \\ Disadvantages of straight salary compensation Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees don't see opportunities to increase their pay. Provide a mix of both compensation and noncompensation rewards comparable to other firms. 5. 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. 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. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. Additionally, they have full control over benefits like insurance and retirement management. 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 fields that typically involve commissions, the outside sales exemption and the retail sales exemption may also apply. except. The compensation is usually calculated by finding out territory volume. A salaried compensation plan can help promote a sense of teamwork needed to close these more complex transactions. Selling situations that require salespeople to perform special services for customers are more likely to be performed when salespeople are on salary. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. 6. Design the plan centrally and dictate to local countries. 8,000 && 101,000\\ &&&&&&&& -26,000\\ Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. Which of the following conditions would indicate to the sales manager that the proportion of the A fixed dollar amount is paid for each day or week in the field. 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). Good salespeople can continue to receive residual commission ever after they leave the company through negotiation. Advantages to Salesperson: The salesperson feels free from financial uncertainties because of stable income inflow. 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 ambitious expansion plans, BIA has decided it needs a second service hub on the continent, to complement its large Heathrow (London) repair facility. 4. Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust 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. Guaranteed income With a salary plus commission plan, you still earn a base salary regardless of how many products you sell. Certain selling opportunities require collaborative efforts and an incentive-based system may not be suitable because it might be difficult to determine different individuals level of contribution. The EU has made changes in airline regulation that dramatically affect major European carriers such as British International Air (BIA), KLM, Air France, Alitalia, and Swiss International Air. d. Annual rates of return on 150 mutual funds (xmin=.023,xmax=.097)\left(x_{\min }=.023, x_{\max }=.097\right)(xmin=.023,xmax=.097). Offers considerable incentive for the salespeople. Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. Your positive feeling towards inclusion at work should be synced with your actions on making a change. Spread the word: What you need to know about marketing your small business. 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. , a pet-friendly working environment, etc.). 9. This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. ____________ is the easiest plan to administer and budget for. A straight salary can greatly benefit someone who is transferring to a new territory. Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. The directors, who strongly wish to retain family control of the company, must consider issuing securities to outsiders. \end{array} 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. Its worth noting that inconsistent working hours can also hurt employees who may be counting on a consistent income. Management can direct Salesforceinto various activities more easily. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. But straight commission method provides sufficient incentive to the salesmen to do hard work. \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 Each line designated by a number indicates the effect of a transaction on the equation. Which of the following is not an advantage of the . Which of the following is not a factor to be considered when developing a commission-only plan? Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. \textbf{\textsf{Liabilities}} & \bm{+} &&&\textbf{\textsf{Owner's Equity}}\\ that they offer little financial incentive to perform past a merely acceptable level. 8. \\ \begin{array}{l} Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. In this plan, you will pay a straight salary to your employees and no commission, no bonus, and no incentives. 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). When there are considerable seasonal variations in the sales made by the salesmen. Hence, this concludes the definition of Straight Salary Plan along with its overview. \text{Arizona} & \text{90} & \text{Oregon} & \text{66} & \text{24}\\ Commission-only compensation can be valuable for employers because top performers get the most money. Everything you need to know about managing and retaining employees. An employee who works only on salary has little external motivation to go above and beyond. She loves training, creating processes, and introducing her clientele to new apps and technology. &&\textbf{\textsf{Assets}}\\ Advantages of straight-salary compensation plans include all of the following except. In territory value compensation (TVC), payment is calculated based on the territory volume at the end of a period. Relevant resources to help start, run, and grow your business. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. Disadvantages of straight salary compensation. Business is going well for Park N Fly , the company that operates remote parking lots near major airports. There is no additional performance or sales-based income added to the employees compensation. __________ 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. Does not provide security, so the reps will work harder. So, it can be easily understood by all salesmen.

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