advantages of straight salary plan

-26,000\\ In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. 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. 4. \end{array} Formal recognition programs have a better chance of success if sales managers do all of the following Salaried workers who earn more than $23,660 per year are considered exempt under the Fair Labor Standards Act (FLSA). On the other hand, under the straight commission method, salesmens rewards are matched with their efforts. +1,500\\ Contractors can determine their own fees, working hours, employees, etc. 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. A change from straight commission to straight salary. Which of the following is not an advantage of combination plans? Long ago, we wrote about the importance of a compensation plan in an organization. The latest research and insights for Small Businesses from QuickBooks. Is good for a financially weak company. How to start and run a successful e-commerce business. Similar to hourly employees, workers who are paid with this type of compensation are usually governed by the FLSAs nonexempt requirements and earn overtime. Based on this information, which salesperson compensation plan would work best? View the full answer. No bonuses, no commissions, and few, if any, sales incentives. Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). Estimate the percentage of NCAA games in which the winning team By accessing and using this page you agree to the Terms and Conditions. Bal.1.2.3.4.5.6.7.Bal.AssetsCash+Supplies+Land30,0004,00075,000+35,00026,00015,000+15,000+1,5002,0007,2003,00014,8002,50090,000==Liabilities+OwnersEquityAccountsMurrayKiser,MurrayKiser,FeesPayable+CapitalDrawing+EarnedExpenses8,000101,00035,00026,000+1,5002,0007,2003,0002,300101,0002,00035,00029,000\begin{array}{lccl} . Dana Sparks has been a professional writer since 1990. On the other hard, straight commission method does not give the management sufficient control over the salesmen. Good salespeople can continue to receive residual commission ever after they leave the company through negotiation. 2. Which of the following is an advantage of a straight-commission compensation plan? You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. Your positive feeling towards inclusion at work should be synced with your actions on making a change. 1. In many companies, basics plus bonus-based compensation plans are used as a way to motivate employees. \begin{array} {rcrcrcrcr} 2. The most serious disadvantage of a straight-salary compensation plan is. 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. An employee who works only on salary has little external motivation to go above and beyond. b. Ages of 50 airplane passengers (xmin=12,xmax=85)\left(x_{\min }=12, x_{\max }=85\right)(xmin=12,xmax=85). It is easy to calculate. Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. Accordingly, the information provided should not be relied upon as a substitute for independent research. It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. Which one of the following statements regarding global compensation is false? Finding what compensation plan works best for the company, involves accessing its strengths and weaknesses, making a decision based on the long-term goals, and carefully negotiating the contract with the employee in a way that it works best for the company and its needs. Salespeople are usually paid on a straight salary compensation, in which there is no opportunity to earn incentives. For example, if you work 42.5 hours in a week, you earn 40 hours of pay at your hourly base rate and 2.5 hours at 1.5 times your hourly base rate. The advantages of straight salary compensation include which of the following? 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. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. Salary programs are most appropriate when it is difficult to relate the efforts of individual salespeople to the size or timing of a sale. 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). But straight commission method distinguishes between efficient and inefficient salesmen. It has lower turnover rates. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability. &&\textbf{\textsf{Assets}}\\ 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. $$ With ambitious expansion plans, BIA has decided it needs a second service hub on the continent, to complement its large Heathrow (London) repair facility. Its common for remote employees to revolve their entire life aro HR-related shows on Netflix are a great way to unwind and reflect on all that goes on in the workplace. This type of plan is often found in multi-level marketing (MLM) companies. Advantages of straight-salary compensation plans include all of the following except. In this, salespeople continue to receive a commission as long as their accounts are generating revenue for the employer. In territory value compensation (TVC), payment is calculated based on the territory volume at the end of a period. On the other hand, when you pay commission, you pay when an employee does something to cause your business to see a profit. a supportive sales management leadership style. A straight salary plan can be advantageous in certain situations. 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. 10. 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. \hline 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. Increase sales and revenues. The most commonly used definitions of motivation include these three dimensions: Use the table below. 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. This compensation type tends to attract fewer people since there is no secure base pay. With this type of structure, you'd pay your sales people a straightalbeit competitivesalary like all of your other employees, and nothing else. 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. If an employee makes no sales during a month, he doesnt get paid. Another disadvantage is that hourly employees often have fewer benefits than salaried employees and are sometimes required to contribute more toward their health insurance premiums. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. 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. Per the IRS definition, the contractor is in control of how the work gets done, so there is a lot of freedom. more points. Operating costs are minimized during slack selling periods. According to your text, what would you do next? Prepare an analysis to determine which plan will result in the highest earnings per share of common stock. \text{Oklahoma State} & \text{72} & \text{Texas} & \text{66} & \text{6}\\ Cost of Administration: The cost of administration of straight salary plan is less than that of straight commission plan. The board of directors of this family-owned company believes that Park N Fly could earn an additional $1.5 million income before interest and taxes by expanding into new markets. 7. A straight salary can greatly benefit someone who is transferring to a new territory. A salaried compensation plan can help promote a sense of teamwork needed to close these more complex transactions. Some terms may not be used. The tools and resources you need to take your business to the next level. not, explain. These plans often include a straight salary income for training periods or during low seasons. If a salesperson earns more commissions than he was paid, he keeps the extra money. How much you spend on salaries often has little to do with your profits. Travel and entertainment costs are a relatively insignificant portion of a salesperson's compensation package. Selling situations that require salespeople to perform special services for customers are more likely to be performed when salespeople are on salary. 8. the following except. 7. This type of compensation refers to a set hourly amount without additional performance-based income. On the other hand, TVC can lead to hostility between employees if they dont feel the workload or efforts of all representatives are balanced. 12. Applicable laws may vary by state or locality. 11. Tax and bookkeeping basics you need to run and grow your business. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. . \end{array} A sample of 10 NCAA college basketball game scores provided the following data (USA Salaried employees receive an equal portion of their annual compensation every week. . And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. 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. Whos using straight salary compensation? Intuit Inc. does not have any responsibility for updating or revising any information presented herein. These can range from monetary benefits (like extrapaid time off, holiday pay, and parental leave) to lifestyle benefits (like flexible working hours,the ability to work from home, a pet-friendly working environment, etc.). All of the following are typical reimbursable expense items except. 5. Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. Changing from a straight salary plan to a combination salary plus commission plan provides a number of benefits. &&&&&&&& -26,000\\ Which of the following conditions would indicate to the sales manager that the proportion of the A regular and stable income can do much to develop a loyal and well-satisfied salesman. \\ The company sets a minimum and maximum range that can increase, decrease or remain the same, depending on the workers performance. Advantages. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. \\ Readers should verify statements before relying on them. $$ Your earning potential is unlimited. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. This requires very clearly defined territory outlines and territories that produce enough income to support competitive wages. Many appreciate the fallback stability of the base salary paired with performance incentives. You have a meeting with her to outline the drawback(s) of this type of plan . \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 Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. The advantages of straight salary compensation include which of the following? ___________ rewards are those that are given in return for acceptable performance or effort. Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. This form of nonfinancial reward is generally considered to be more desirable to younger salespeople 2. It does not provide any incentive for hard work. These have a significantly higher (pre-tax) contribution limit than company IRAs. +35,000\\ We provide third-party links as a convenience and for informational purposes only. For each frequency distribution, suggest "nice" bins. Advantages of straight salary. It could reduce retention and increase turnover. Person A receives a salary of $80,000. Although quite popular, salary compensation plans have some disadvantages. 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. Companies that pay their employees using PMR-based compensation will want to offer additional benefits to make up for their potentially low liquidity. \text{Bal.} All of the above. \begin{array} {rcrcr} 8. is considered a serious offense, which, if detected, often leads to termination of employment. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. Get help with QuickBooks. On a straight salary, they will be paid this regardless of how many deals they close. Your salespeople are paid on commission. However, the$5 million that the business needs for growth cannot be raised within the family. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. 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. Are benefits included in the definition? Some of this is likely due to a generational shift in what employees are really looking for. You have a meeting with her to outline the drawback(s) of this type of plan. Factors that might affect commission rates include the difficulty of the sale, education and training required, costs associated with the geographical location, work environment, the process of approaching clients, and bonus structures (if applicable). Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. 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 primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. Some of these jobs also have flexible schedules, which can be beneficial to employees. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. 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. 4. A job like this is more likely to have flexible working hours or the ability to work from home. \end{matrix} Which of the following is not a form of nonfinancial compensation? 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 the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. As defined by the IRS, independent contractors are people who are in an independent trade, business, or profession in which they offer their services to the general public. Employees and independent contractors are mutually exclusive, as a person is either one or the other. 6. Because her income is stable, planning and managing her personal finances is easier.

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