Selling situations that require salespeople to perform special services for customers are more likely to be performed when salespeople are on salary. 11. 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. Whos using straight salary compensation? \end{array} 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." \bm{=}\\ \bm{=} \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ Working as a contractor definitely has its benefits. Talent poaching occurs when an employee is recruited away from one company by another. 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. Accounting and bookkeeping basics you need to run and grow your business. Recommend a plan to the board of directors. The earnings of a person who is working as an independent contractor are subject to self-employment tax.. A straight salary plan can be advantageous in certain situations. Terms and conditions, features, support, pricing, and service options subject to change without notice. a. It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. Straight salary compensation is typically used in industries where: Missionary selling (i.e. \textbf{\textsf{Cash}} & \bm{+} & \textbf{\textsf{Supplies}} & \bm{+} & \textbf{\textsf{Land}}\\ A change from straight commission to straight salary. 9. 3. It provides stability of earnings without wide fluctuations. The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ Advantages of Straight Salary Method 1. However, a straight salary plan also has its own advantages. 2. A salesperson who is intrinsically motivated. Contractors are required to find health insurance and retirement plans on their own. __________ 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. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. Straight Salary Compensation. Minimum Income: Straight salary method assures a minimum income to the salesmen. 2. TheDepartment of Laborhas very specific requirements for classifying and paying employees. Employees are guaranteed to receive at least base salary to pay the bills, even during a time period when their sales are low. In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. Provide equal pay to all employees at the same level. O True O False. In a profit margin/revenue-based (PMR) plan, employees are compensated based on the profitability of the company. You are the sales manager of a large, multi-product company. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. Straight salary plans are not popular with salespeople because: They don't provide strong incentives for extra effort. nonfinancial reward: All of the following are steps suggested for facilitating a sense of accomplishment in the salesforce \end{array} \\ -15,000 &&&& +15,000\\ There may be multiple rates of bonuses and commission, and payroll managers must have a system in place to keep track of everything. Take a reactive approach to seeking out motivational problems and sources of frustration in the salesforce. This is a primary method for compensating independent sales agents. But straight commission method provides sufficient incentive to the salesmen to do hard work. salesperson's total pay that is salary should be relatively low? With ambitious expansion plans, BIA has decided it needs a second service hub on the continent, to complement its large Heathrow (London) repair facility. &&&& -2,000\\ 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). \text{Florida State} & \text{75} & \text{Wake Forest} & \text{70} & \text{5}\\ The company sets a minimum and maximum range that can increase, decrease or remain the same, depending on the workers performance. Advantages of straight-salary compensation plans include all of the following except. 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. Such a plan is quite common in the services industry as well as in the industrial goods sector. 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. Q&A With Jane 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 importance of the salesperson's personal skills in making sales is slight. Straight salary method promotes team-spirit and cooperation among the salesmen in the case of joint sales. If your family does not have a complete home inventory, encourage your parents or other adults with whom you live to create one. A straight salary plan can be advantageous in certain situations. Whos using straight salary plus commission compensation? They should be made during recessionary periods. Laws differ by state, so do your research before making any decisions. For each frequency distribution, suggest "nice" bins. ___________ rewards are those that are given in return for acceptable performance or effort. System is easy to understand and compute. Person A receives a salary of $80,000. 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). Additionally, they have full control over benefits like insurance and retirement management. . Did your choice agree with Sturges' Rule? a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. Everything you need to start accepting payments for your business. What change in the firm's salesforce reward system might be in response to customer's needs? Your paycheck is based on a specific percentage of the sales that you are able to generate. Based on this information, which salesperson compensation plan would work best? A common salary-to-commission ratio is 60:40 (60 percent fixed / 40 percent variable). Employers have to think about who their target employee is and what that employee is looking for. 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. While in certain compensation plans, the salespersons receive benefits on accomplishment for specific tasks (e.g. It has been reviewed & published by the MBA Skool Team. Hourly plus commission compensation does have its disadvantages as well. For more information on your states minimum wage requirements, read up on minimum wage requirements or visit the Department of Labors website. 5. It can also be beneficial if a firm is entering a new market or location. In this sense, compensation is a counterbalance. Guaranteed income With a salary plus commission plan, you still earn a base salary regardless of how many products you sell. Under Straight salary method, a salesman is paid remuneration on time basis. A regular and stable income can do much to develop a loyal and well-satisfied salesman. \text{ } & \text{ } & \text{52-Week} & \text{52-Week} & \text{ } & \text{ } & \text{Sales} & \text{ } & \text{ }\\ Part B: As a retail sales manager of a large superstore, one of your responsibilities is to train the newly hired employees. If the nonselling administrative duties of the salesperson are of major importance, this compensation issue a press release detailing the company's changes. Quizzes test your expertise in business and Skill tests evaluate your management traits. In many companies, basics plus bonus-based compensation plans are used as a way to motivate employees. The latest product innovations and business insights from QuickBooks. Which of the following conditions would indicate to the sales manager that the proportion of the -7,200\\ 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. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. So, it can be easily understood by all salesmen. 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? She helps HR professionals identify issues with their talent management and employment law. Operating costs are minimized during slack selling periods. the requirement that expenses be charged and the bills sent directly to the company for payment by the accounting department. WinningTeamPointsLosingTeamPointsWinningMarginArizona90Oregon6624Duke85Georgetown6619FloridaState75WakeForest705Kansas78Colorado5721Kentucky71NotreDame638Louisville65Tennessee623OklahomaState72Texas666Purdue76MichiganState706Stanford77SouthernCal6710Wisconsin76Illinois5620\begin{matrix} The salesperson experiences a high level of security with a salaried sales position. determine the relative amounts to be paid in salary, commission, and bonus. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. 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. Its critical for employers to keep this in mind when deciding between different types of compensation packages.