advantages of straight salary plan advantages of straight salary plan

&&&& -2,000\\ If theyve just started a family, they may be looking for benefits like parental leave and the chance to work from home. \text{JPM} & \text{JP Morgan Chase & Co.} & \text{70.61} & \text{57.07} & \text{57.45} & \text{$+1.11$} & \text{20,987,678} & \text{58.11} & \text{57.14}\\ \hline ___________ rewards are those that are given in return for acceptable performance or effort. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. Good salespeople can continue to receive residual commission ever after they leave the company through negotiation. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. 3. Salesperson compensation has been an issued marked by trial and error to discover the right formula. . Under this plan, companies compensate its employees entirely on the profits made by the business. The hourly rate can be less than the required minimum wage. \end{array} Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. Basis: Straight salary method is based on the time spent on the job, and not on the volume of sales effected by the salesmen. Because so many hourly employees work in entry-level positions, education requirements are usually lower than those of salaried positions, which adds to this assumption. This type of compensation plan puts less pressure on individuals and fosters team-building. If an employee makes no sales during a month, he doesnt get paid. Straight salary compensation is typically used in industries where: Missionary selling (i.e. \text{Kentucky} & \text{71} & \text{Notre Dame} & \text{63} & \text{8}\\ The advantages of straight salary compensation include which of the following? It gives greater control to the management over the salesmen by means of withholding increments, effecting a transfer, etc. In this type of compensation, income is solely based on sales made. But straight commission method distinguishes between efficient and inefficient salesmen. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. \\ The remaining 25% of the sick leave payout +35,000\\ 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. 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. Compensation rewards might include all of the following except. && +1,500\\ Your email address will not be published. One of your first tasks is to evaluate the level of compensation for your sales force. 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. These have a significantly higher (pre-tax) contribution limit than company IRAs. Profit margin is one of the most popular types of compensation used by start-up companies. Overall compensation and rewards increase with the use of team selling. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. \end{array} As the name suggests, straight salary compensation is just what you would expect. The straight salary plan is one of the simplest compensation plans that companies offer to their employees, particularly sales representatives. For post-Depression-era baby boomers, the security of a steady salary is important. A fixed dollar amount is paid for each day or week in the field. What change in the firm's salesforce reward system might be in response to customer's needs? Employees who are self-motivated and hardworking are attracted to this type of work because theres typically no upper limit to the amount in tips or commission they can take home. Employees may be confused as to how pay is calculated, so transparency is important. except. Straight salary method of remuneration is simple. 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. 30,000 && 4,000 && 75,000\\ Design the plan centrally and dictate to local countries. Topical articles and news from top pros and Intuit product experts. PMR is common in sales and is good for startups with low liquidity. Service focus: Such a plan works well for sales positions where pushing a product may not be necessary and customer service is of utmost importance. Employees are guaranteed to receive at least base salary to pay the bills, even during a time period when their sales are low. \text{ESI} & \text{ITT Ed Services} & \text{7.95} & \text{1.93} & \text{2.95} & \text{-0.03} & \text{140,466} & \text{3.11} & \text{2.92}\\ \hline Helps management to control salespeople's activities. So, it can be easily understood by all salesmen. \hline\\ 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. Recommend a plan to the board of directors. Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). Straight salary offerings can also be good for attracting new talent thats concerned with stability. a large company purchases products from a company and ships them to its affiliates in several cities, with the selling firm's salespeople in these cities required to provide Hence, this concludes the definition of Straight Salary Plan along with its overview. And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. \underline{\underline{14,800}} && \underline{\underline{\ \ \ 2,500}} && \underline{\underline{90,000}} \\ \\ \\ \\ Find articles, video tutorials, and more. 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. \hline\\ 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). https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. Operating costs are minimized during slack selling periods. Information Technology Project Management: Providing Measurable Organizational Value, Service Management: Operations, Strategy, and Information Technology, John David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine, Chapter 10 - Motivating and Satisfying Employ. However, a straight salary plan also has its own advantages. 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. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. Sadly, employers are usually reluctant to offer a residual commission deal to employees. For example, consider a salesman who frequents various retail stores or department stores to check inventory or take orders for replenishment. Plan A is to borrow at 6%. 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. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. Salary programs are most appropriate when it is difficult to relate the efforts of individual salespeople to the size or timing of a sale. Accounting and bookkeeping basics you need to run and grow your business. But straight commission method does not assure any minimum income to the salesmen. 9. bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. 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. 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). 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. Murray Kiser operates his own catering service. Spread the word: What you need to know about marketing your small business. Once the person has established himself in the area, the company can switch to performance-based salary. &&\textbf{\textsf{Assets}}\\ \textbf{\textsf{Cash}} & \bm{+} & \textbf{\textsf{Supplies}} & \bm{+} & \textbf{\textsf{Land}}\\ salesperson's total pay that is salary should be relatively low? as well as U.S. securities. Benefit packages amount to a negligible portion of the cost of keeping a salesperson in the field. One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. they contribute little to company loyalty, resulting in potential salesforce control problems. 3. Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform. Whos using straight salary plus commission compensation? 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). 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. However, the$5 million that the business needs for growth cannot be raised within the family. In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. Employees earning salary plus commission will have higher income tax rates than a self-employed agent. It does not distinguish between efficient and inefficient salesmen, as the same remuneration is paid to both efficient and inefficient salesmen. Commission-only compensation can be valuable for employers because top performers get the most money. Here Are the Pros of Straight Commission. \text{Symbol} & \text{Stock} & \text{High} & \text{Low} & \text{Last} & \text{Change} & \text{Volume} & \text{High} & \text{Low}\\ \hline \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ We dont want you to miss anything. \begin{array}{|l|l|c|c|c|c|c|c|c|} \hline 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 However, a straight salary plan also has its own advantages. This can lead to high turnover, a need for more recruitment resources, and higher training costsall of which cuts into potential bottom-line savings. 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. 3. If he earns less in commissions, he must pay the remainder back to the company. The directors, who strongly wish to retain family control of the company, must consider issuing securities to outsiders. Which of the following is not an advantage of the . If so, an hourly rate with a flexible schedule could be more attractive. 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). Celebrating the stories and successes of real small business owners. 1. Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. This system safeguards the interests of the consumers also. Business is going well for Park N Fly , the company that operates remote parking lots near major airports. Although quite popular, salary compensation plans have some disadvantages. \begin{array} {c} This form of nonfinancial reward is generally considered to be more desirable to younger salespeople Required fields are marked *. A large direct sales company such as Avon would most likely compensate their salespeople in this scores more than 90 points. No bonuses, no commissions, and few, if any, sales incentives. The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. Each line designated by a number indicates the effect of a transaction on the equation. 4. 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. TheDepartment of Laborhas very specific requirements for classifying and paying employees. 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. Many appreciate the fallback stability of the base salary paired with performance incentives. The directors are considering three financing plans. 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. The company sets a minimum and maximum range that can increase, decrease or remain the same, depending on the workers performance. A salesperson who is intrinsically motivated. Today, January 26, 2004). However, successful salespeople tend to make a lot of money with commission than with a salary plus commission job. On the other hand, when you pay commission, you pay when an employee does something to cause your business to see a profit. A sample of 10 NCAA college basketball game scores provided the following data (USA For employers who dont want to pay employees after they leave, this type of compensation can incentivize employees to stay at the company. ii) There will be no surprise of payroll expenses. | Priyansha tweets at. 8. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). She helps HR professionals identify issues with their talent management and employment law. 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. Of course, there are exceptions to every rule. It tends to only attract less experienced staff who want a "safe" pay structure. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. Is good for a financially weak company. A straight salary can greatly benefit someone who is transferring to a new territory. 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. 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. 4. issue a press release detailing the company's changes. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. O True O False. Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. 2. 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. 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. A straight salary plan can be advantageous in certain situations. No two compensation plans are alike. Some people won't work for anything other than a fixed salary. Which of the following statements regarding changes in the reward system is false? 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