\text{Purdue} & \text{76} & \text{Michigan State} & \text{70} & \text{6}\\ 9. \textbf{\textsf{Payable}} \hspace{4pt} &\bm{+} & \textbf{\textsf{Capital}}\hspace{17pt} & \bm{-} & \textbf{\textsf{Drawing}} \hspace{15pt} & \bm{+} & \textbf{\textsf{Earned}} & \bm{-} & \textbf{\textsf{Expenses}}\\ \\ Save my name, email, and website in this browser for the next time I comment. Which of the following is/are most likely to be among them? But straight commission method is based on the sales effected by the salesmen and not on the time spent on the job. Salesmen have the greatest. On the other hard, straight commission method does not give the management sufficient control over the salesmen. What are the most popular types of compensation packages? Design the plan centrally and dictate to local countries. 5. Employees are guaranteed to receive at least base salary to pay the bills, even during a time period when their sales are low. Is it just monetary? Each time a commission check is cut you have the satisfaction of knowing that it's due to something positive. 4. So, it can be easily understood by all salesmen. Is good for a financially weak company. Part B: As a retail sales manager of a large superstore, one of your responsibilities is to train the newly hired employees. It could reduce retention and increase turnover. 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 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. Increase sales and revenues. At the end of the pay period, this prepayment is drawn from how much the salesperson earned in commissions. Due to the complexity of the plan and its many compliance issues, few companies offer equity or stock in the short-term. How much do employees cost beyond their standard wages? In a profit margin/revenue-based (PMR) plan, employees are compensated based on the profitability of the company. 5. advantages and disadvantages of straight salary and straight commission It can also be beneficial if a firm is entering a new market or location. Sales Management Ch 12 Flashcards | Quizlet Based on this information, which salesperson compensation plan would work best? Person A pays over $18,000 in tax and receives a net income of around $62,000. Companies are increasing incentives for foreign-based employment. 8,000 && 101,000\\ . Your boss thinks you should implement a salary plus commission plan with an incentive ceiling. By accessing and using this page you agree to the Terms and Conditions. As an hourly employee, once you work over 40 hours in a week, your employer must pay you time and a half for these hours. nonfinancial reward: The Million Dollar Roundtable designation in the insurance industry is an example of this type of This form of nonfinancial reward is generally considered to be more desirable to younger salespeople And while some competition in the workplace is good, this kind of motivation to not only succeed but to survive can sometimes breed distrust and a lack of camaraderie. manner. Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust Among the drawback(s) you will discuss include: You have read a "want ad" in the latest edition of Marketing News. Although quite popular, salary compensation plans have some disadvantages. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. Tips may be considered part of the employees wages, but the employer must pay no less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the hourly minimum wage. \hline Lavish formal recognition programs can provide all of the following benefits to a salesforce except. To implement a new or modified reward system, sales managers should do all of the following except. What is salary pay? Straight salary plans often do not provide strong incentive for extra effort. Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________. Straight Salary Compensation. If he earns less in commissions, he must pay the remainder back to the company. the working capital requirements are lessened with the straight-salary compensation plan. 6. Copyright 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. The tools and resources you need to run your business successfully. Straight Salary Plan - Meaning & Definition | MBA Skool Your paycheck is based on a specific percentage of the sales that you are able to generate. When the sales effected by the individual salesman cannot be isolated (i.e., when the sales are made collectively by two or more salesmen). If you choose this plan, you'll pay your reps using a mix of base salary and performance-based rewards. https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. What was the difference between the day's high and low for one share of Southern Copper? Are they just trying to pay their way through college? The directors are considering three financing plans. Pros and Cons of Different Types of Sales Compensation Plans that they offer little financial incentive to perform past a merely acceptable level. They should be made during recessionary periods. i) Beneficial for industries which prohibits direct sales. And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. 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. Different companies offer different compensation plans to their sales representatives- the straight salary plan being one of the simplest. Each increase and decrease in owners equity, except transaction (5)\left(5\right)(5), affects net income. 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. Incentives to Salesmen: Straight salary method does not provide any incentive to the salesmen to do hard work. 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. WinningTeamArizonaDukeFloridaStateKansasKentuckyLouisvilleOklahomaStatePurdueStanfordWisconsinPoints90857578716572767776LosingTeamOregonGeorgetownWakeForestColoradoNotreDameTennesseeTexasMichiganStateSouthernCalIllinoisPoints66667057636266706756WinningMargin241952183661020. This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. , a pet-friendly working environment, etc.). Transcribed image text: QUESTION 17 An advantage of using a straight salary plan to compensate sales employees is that employees can be paid for performing only sales effort. Compensation rewards might include all of the following except. a supportive sales management leadership style. The advantages of straight salary compensation include which of the following? You have a meeting with her to outline the drawback(s) of this type of plan . 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. Benefits of salary plus commission compensation, Disadvantages of salary plus commission compensation, This type of compensation refers to a set hourly amount without additional performance-based income. Employers are often hesitant to use this type of compensation, as payroll expenses can be high or unpredictable. So, it does not encourage salesmen to do hard work. When more than one individual works together to make a sale, the selling process is described as: You have just been promoted to the position of sales manager. scores more than 90 points. From a payroll standpoint, this type of compensation is harder to administer. However, a straight salary plan also has its own advantages. 1. Base salary + sales commission-based pay. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. ii) There will be no surprise of payroll expenses. The different types of compensation include . PDF FRINGE BENEFITS AND SALARY PLAN (Exhibit A to Resolution No. 21052 As &&\textbf{\textsf{Assets}}\\ \begin{array}{l} Employers are also required to pay employees theminimum wage, which can vary depending on their states minimum wage. It tends to only attract less experienced staff who want a "safe" pay structure. provide salespeople with trips and other rewards. Another disadvantage is the lack of benefits. 7. Quizzes test your expertise in business and Skill tests evaluate your management traits. Such a plan is quite common in the services industry as well as in the industrial goods sector. Person B works for an NFP and is part of a salary packaging program. If an employee is required to work on a holid ay as a regularly scheduled work day, . While there are no real downsides to this type of plan, organizations should be mindful of several things: This requires a solution that benefits both employee and employer. Commission-only compensation can be valuable for employers because top performers get the most money. If a salesperson earns more commissions than he was paid, he keeps the extra money. This is a very broad category of compensation. 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). 1. As a business owner it can be a challenge to figure out how to compensate employees. , holiday pay, and parental leave) to lifestyle benefits (like flexible working hours. 3. Guaranteed income With a salary plus commission plan, you still earn a base salary regardless of how many products you sell. They may have less vacation time or even zero paid vacation time. Does not provide security, so the reps will work harder. PMR-based compensation often encourages loyalty among employees, but it will also require long-term incentives to retain talent. \\ Which of the following accurately describe per diem expense plans? No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customers particular situation. You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. Jobs report: Are small business wages keeping up with inflation? Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Whos using straight salary plus commission compensation? One advantage of hourly pay is your eligibility for overtime. b. Ages of 50 airplane passengers (xmin=12,xmax=85)\left(x_{\min }=12, x_{\max }=85\right)(xmin=12,xmax=85). Advantages of straight salary. 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). $$ By clicking Submit, you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement. 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. Everything you need to prepare for and have a successful holiday season. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.a. A fixed dollar amount is paid for each day or week in the field. 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. Salary plus Commission This is one of the most reliable types of compensation plans. channeled in directions consistent with the overall strategic role of the salesforce within the firm. Which of the following is not an advantage of combination plans? , which can vary depending on their states minimum wage. Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. 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. Expert Answer. One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ 2. He holds a Bachelor of Science in marketing from York College of Pennsylvania. Celebrating the stories and successes of real small business owners. Many appreciate the fallback stability of the base salary paired with performance incentives. The advantages of paying employees a straight commission include the fact that it provides direct motivation to sales representatives to sell more products and services so they can earn more. Which of the following is not a form of nonfinancial compensation? 6. Hence, this concludes the definition of Straight Salary Plan along with its overview. In most companies, the base pay is determined by the workers job title and job role. A change from straight commission to straight salary. For employers, hourly employees can be a good option for work that fluctuates seasonally. Provide equal pay to all employees at the same level. Being Paid on Salary: Pros and Cons | Indeed.com Your ultimate goal is to control selling expense and provide extra rewards for added results. they contribute little to company loyalty, resulting in potential salesforce control problems. Which of the following is not an advantage of the . \text{Kansas} & \text{78} & \text{Colorado} & \text{57} & \text{21}\\ The net result of setting limits on sales expenses is that salespeople spend their valuable time juggling expenses from one category to another or from one time period to another to make sure they cover their costs. bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. &&&&&& 35,000\\ \\ Browse the definition and meaning of more similar terms. Benefit packages amount to a negligible portion of the cost of keeping a salesperson in the field. Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. \\ Your email address will not be published. Straight Salary Method of Remuneration | Meaning | Suitability | Merits Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. Its critical for employers to keep this in mind when deciding between different types of compensation packages. Find articles, video tutorials, and more. 11. The Advantages of a Straight Salary Plan for Salespeople ___________ rewards are those that are given in return for acceptable performance or effort. What is Sales Compensation? Importance, Types & Uses - Marketing91 estimate the percentage of all NCAA games in which the winning team scores 84 or 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. Match the terms with the definitions. Hourly plus commission compensation does have its disadvantages as well. 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. . Advantages of salary plus commission The benefits of a salary plus commission plan include: 1. 4. 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). They don't want to worry about the inconsistencies associated with a commission-based pay. Business is going well for Park N Fly , the company that operates remote parking lots near major airports. But under the straight commission method, sales costs are matched with sales. 7. A job like this is more likely to have flexible working hours or the ability to work from home. Dana Sparks has been a professional writer since 1990. In fields that typically involve commissions, the outside sales exemption and the retail sales exemption may also apply. The salespersons perfect plan, a residual commission compensation (RCC) plan pays employees a commission as long as the accounts are producing revenue. The tools and resources you need to get your new business idea off the ground. 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} As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen. 7. MKGT 637 Chapter 8 Flashcards | Quizlet 30,000 && 4,000 && 75,000\\ This requires very clearly defined territory outlines and territories that produce enough income to support competitive wages. Selling situations that require salespeople to perform special services for customers are more likely to be performed when salespeople are on salary. Employees who are eager and top-performing are often attracted to this type of commission, however, since they know they can survive solely on their skills and experience. "USA Today": Finding What Motivates Your Employees. How to find funding and capital for your new or growing business. international stocks and bonds The only downside with territory volume compensation plan is that it can lead to hostility between co-workers if certain members feel that effort isnt equally divided. Payroll essentials you need to run your business. On a straight salary, they will be paid this regardless of how many deals they close. 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. Basis: Straight salary method is based on the time spent on the job, and not on the volume of sales effected by the salesmen. An employee who works only on salary has little external motivation to go above and beyond. Some of these jobs also have flexible schedules, which can be beneficial to employees. \underline{\underline{2,300}} && \underline{\underline{101,000}} && \underline{\underline{-2,000}} && \underline{\underline{35,000}} && \underline{\underline{-29,000}}\\ \\ \\ \\ The compensation is usually calculated by finding out territory volume. Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. Your salespeople are paid on commission. except. Solved An advantage of the straight salary plan for | Chegg.com Example: Each rep in your company earns a straight salary of $75,000 a year, or $1,440 a week (gross). Although many customers expect after-sale service on repair parts and delivery, compensation programs based on straight salary are not likely to encourage these important follow-up activities. Can I Get Fired For Leaving A WhatsApp Group? A salesperson who is intrinsically motivated. 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. 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. Advantages. In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Salaried employees receive an equal portion of their annual compensation every week. In most companies, the bonus is usually tied to a budgetor other target that has little significance to the employee. This article has been researched & authored by the Business Concepts Team. But straight commission method distinguishes between efficient and inefficient salesmen. Sadly, employers are usually reluctant to offer a residual commission deal to employees. In this situation, employees only receive their bonus if the district, division, or even continent hits its sales goals. Offers considerable incentive for the salespeople. Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform. Laws differ by state, so do your research before making any decisions. Additionally, they have full control over benefits like insurance and retirement management. The straight salary plan proves advantageous to both the salesperson and the management. Everything You Need to Know About Employee Compensation Plans Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. \end{matrix} This type of plan is often found in multi-level marketing (MLM) companies. 2. Murray Kiser operates his own catering service. Which, if any, of the following sources available will help you in your task? Required fields are marked *. This compensation category also includes restaurant employees paid mostly in tips. The companys income tax rate is 35%. Long ago, we wrote about the importance of a compensation plan in an organization. This type of compensation plan is every salespersons dream. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. All of the following are typical reimbursable expense items except. The tools and resources you need to take your business to the next level. Because they are self-employed, contractors are eligible for SEP IRAs. a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. A straight salary can greatly benefit someone who is transferring to a new territory. 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." The most commonly used definitions of motivation include these three dimensions: Use the table below. Some terms may not be used. plan is recommended: Advantages of straight-salary compensation plans include all of the following except. As a result, she avoids the high degree of stress and uncertainty that comes with pay-for-performance compensation. If theyve just started a family, they may be looking for benefits like parental leave and the chance to work from home. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. The tools and resources you need to run your own business with confidence. 5. \\ Each is then rated on 12 factors, as shown in the table below. A straight salary plan can be advantageous in certain situations. The remaining 25% of the sick leave payout -26,000\\ Plan A is to borrow at 6%. except: make it easy enough to allow for a majority of the salesforce to win. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. \text{Symbol} & \text{Stock} & \text{High} & \text{Low} & \text{Last} & \text{Change} & \text{Volume} & \text{High} & \text{Low}\\ \hline Of course, there are exceptions to every rule. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the companys growth. Summary financial data for February are presented in equation form as follows. It looks like its raining raises in corporate Japan as more and more companies are following in the footsteps of Uniqlo and announci Human Resources (HR) departments have evolved significantly over the past few years. For employers who dont want to pay employees after they leave, this type of compensation can incentivize employees to stay at the company. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. Help Miller rank the top three cities that BIA should consider as its new site for servicing aircraft. 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. Today, January 26, 2004). The compensation plan in which virtually every type of sales activity is rewarded, is called a: Your boss thinks you should implement a salary plus commission plan with an incentive ceiling. According to your text, which benefit is offered by the greatest percentage of companies? 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. Startup companies using profit margin/revenue based compensation plan can also incorporate long-term incentives such as stock to build loyalty and a valuable sales base. Which of the following statements about a straight salary compensation plan is true: A major limitation of straight salary compensation plans is that financial rewards are not directly tied to any specific aspect of job performance.