The advantages of straight salary compensation include which of the following? __________ 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. 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. This is a primary method for compensating independent sales agents. You also decide to pay your salespeople with the most common type of compensation plan among companies. Those who sell below $35,000 will not receive commissions. a. Your base pay provides a steady income during seasons where commission may be more difficult to earn. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Benefits or Advantages A regular income gives the salesman a good degree of security. 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. Accordingly, the information provided should not be relied upon as a substitute for independent research. Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees dont see opportunities to increase their pay. 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. \end{array} Compare the advantages and disadvantages of straight salary and Assume that the points scored by the winning teams for all NCAA games follow a One of your first tasks is to evaluate the level of compensation for your sales force. What change in the firm's salesforce reward system might be in response to customer's needs? \text{Winning Team} & \text{Points} & \text{Losing Team} & \text{Points} & \text{Winning Margin}\\ A common salary-to-commission ratio is 60:40 (60 percent fixed / 40 percent variable). In your job analysis of the salesperson's activities, you discover that a significant level of activity of a successful salesperson includes taking orders for inventory replenishment, equipment installation and maintenance, and shelf-management programs. Long ago, we wrote about the importance of a compensation plan in an organization. When the work done by the salesmen cannot be measured satisfactorily. The main differences between the straight salary method and straight commission method are explained below: Straight Salary Method vs Straight commission Method. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. It could reduce retention and increase turnover. Murray Kiser operates his own catering service. 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. 4. 5 Different Types of Sales Compensation Plans Straight Salary Plan - Meaning & Definition | MBA Skool 1. Your positive feeling towards inclusion at work should be synced with your actions on making a change. 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. except. Your salespeople are paid on commission. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. An advantage of the straight salary plan for compensating salespeople is that it: Provides a direct relationship between sales and expenses. Wage caps are used by some firms to prevent salespeople from making too much money. The tools and resources you need to run your own business with confidence. Applicable laws may vary by state or locality. 6. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability. Review the example home inventory shown before. -26,000\\ 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). \text{Kansas} & \text{78} & \text{Colorado} & \text{57} & \text{21}\\ Business is going well for Park N Fly , the company that operates remote parking lots near major airports. Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust Salesmen have the greatest. 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. Guaranteed income With a salary plus commission plan, you still earn a base salary regardless of how many products you sell. Your earning potential is unlimited. The sales teams support each other to reach a common goal. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. , a pet-friendly working environment, etc.). 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. Readers should verify statements before relying on them. On the other hand, TVC can lead to hostility between employees if they dont feel the workload or efforts of all representatives are balanced. The Pros and Cons of Different Sales Compensation Plans 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. The goal of the compensation package is to reward employees for their efforts without putting the firm's profitability in jeopardy. But straight commission method distinguishes between efficient and inefficient salesmen. 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. 8,000 && 101,000\\ Disadvantages of straight hourly compensation, Whos using hourly plus commission compensation, Benefits of hourly plus commission compensation, Disadvantages of hourly plus commission compensation, Disadvantages of commission-only compensation, Whos using territory volume compensation, Benefits of territory volume compensation, Disadvantages of territory volume compensation, 7. the following except. \text{Wisconsin} & \text{76} & \text{Illinois} & \text{56} & \text{20}\\ 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. pharmaceutical sales) is the most common type of sales process used. \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 Jobs report: Are small business wages keeping up with inflation? Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. \hline Employees like it because it rewards those who work hard. Find articles, video tutorials, and more. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. The most commonly used definitions of motivation include these three dimensions: Use the table below. \text{Oklahoma State} & \text{72} & \text{Texas} & \text{66} & \text{6}\\ Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. Using the mean and standard deviation found in part (a), Because her income is stable, planning and managing her personal finances is easier. But when that same group opened up about things that weren't essential to the negotiation, 59 percent were able to strike a deal. Copyright 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. 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. Get help with QuickBooks. All of the following are typical reimbursable expense items except. The different types of compensation include . 4. WinningTeamPointsLosingTeamPointsWinningMarginArizona90Oregon6624Duke85Georgetown6619FloridaState75WakeForest705Kansas78Colorado5721Kentucky71NotreDame638Louisville65Tennessee623OklahomaState72Texas666Purdue76MichiganState706Stanford77SouthernCal6710Wisconsin76Illinois5620\begin{matrix} 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). The ATO considers this $80,000 taxable income. international stocks and bonds the working capital requirements are lessened with the straight-salary compensation plan. The straight salary plan is one of the simplest compensation plans that companies offer to their employees, particularly sales representatives. Because they are self-employed, contractors are eligible for SEP IRAs. When it comes to employee compensation, there isnt a one-size-fits-all solution. \textbf{\textsf{Cash}} & \bm{+} & \textbf{\textsf{Supplies}} & \bm{+} & \textbf{\textsf{Land}}\\ Accounting and bookkeeping basics you need to run and grow your business. Whos using straight salary plus commission compensation? One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. A sample of 10 NCAA college basketball game scores provided the following data (USA 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. 2. Are you ready for a pay raise? While in certain compensation plans, the salespersons receive benefits on accomplishment for specific tasks (e.g. 3. 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? Expert Answer. A straight salary can greatly benefit someone who is transferring to a new territory. Give your reasons. This leaves the salespersons with no opportunity for extra money or incentives. plan is recommended: Advantages of straight-salary compensation plans include all of the following except. It is a highly attractive model, especially to start-ups who are seeking to penetrate a specific territory. 2. Which of the following is not an advantage of the . A large direct sales company such as Avon would most likely compensate their salespeople in this The sales numbers are added up and all commissions are split equally among all sales professionals.