What is the amount of net increase in owners equity during the month? As a result, salaried workers often dont track hours worked. How much investment capital should you accept? It does not provide any incentive for hard work. as well as U.S. securities. And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. costing little and reinforcing desirable behavior immediately after it occurs. Sparks holds a Bachelor of Arts in business. 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{array} This type of sales compensation plan is employed in companies which prohibits direct sales. To ensure proper classification, employers should begin with the assumption that their commissioned employees are nonexempt, and then review the potential exemptions to determine whether they apply. This form of nonfinancial reward is generally considered to be more desirable to younger salespeople The advantages of straight salary compensation include which of the following? Part B: As a retail sales manager of a large superstore, one of your responsibilities is to train the newly hired employees. \bm{=}\\ \bm{=} \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ 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. So what is compensation? \textbf{\textsf{Liabilities}} & \bm{+} &&&\textbf{\textsf{Owner's Equity}}\\ 8,000 && 101,000\\ Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. \\ Some of this is likely due to a generational shift in what employees are really looking for. Your paycheck is based on a specific percentage of the sales that you are able to generate. If your family does not have a complete home inventory, encourage your parents or other adults with whom you live to create one. The salesperson experiences a high level of security with a salaried sales position. 2. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. \begin{array}{|l|l|c|c|c|c|c|c|c|} \hline You also decide to pay your salespeople with the most common type of compensation plan among companies. The tools and resources you need to manage your mid-sized business. The ideal compensation plan motivates salespeople to achieve their own and the company's objectives. With some compensation plans, they can earn additional incentive pay in the form of commissions or bonuses that a company offers in an attempt to motivate them. When the work done by the salesmen cannot be measured satisfactorily. Salaried employees receive an equal portion of their annual compensation every week. 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. This type of compensation is well-suited for employees who work in a team-based culture. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability. It has lower turnover rates. 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. Advantages of straight-salary compensation plans include all of the following except. The importance of the salesperson's personal skills in making sales is considerable. \text{Stanford} & \text{77} & \text{Southern Cal} & \text{67} & \text{10}\\ \text{Symbol} & \text{Stock} & \text{High} & \text{Low} & \text{Last} & \text{Change} & \text{Volume} & \text{High} & \text{Low}\\ \hline Profit margin/revenue-based compensation, Whos using profit margin/revenue-based compensation, Benefits of profit margin/revenue-based compensation, Disadvantages of profit margin/revenue-based compensation, Whos using residual commission compensation, Benefits of residual commission compensation, Disadvantages of residual commission compensation, Pros and cons of salaried versus hourly compensation, Pros of hourly compensation for employees, The freedom to change work schedules in accordance with other schedules, The opportunity to work more hours to make more money, Its often easier to get a new job if the current one isnt a good fit, Cons of hourly compensation for employees, Pros of hourly compensation for employers, Employers can increase or decrease hours based on heavy or slow seasons, Depending on how many employees are on the payroll, employers may not be required to provide benefits, including health insurance or, Cons of hourly compensation for employers, Payroll can be more complex and difficult to calculate if using multiple rates, Increased training and hiring expenses (as a result of high turnover), Pros of salary compensation for employees, Consistent hours and income create more security, Cons of salary compensation for employees, If working for a straight salary, better performance doesnt constitute higher pay, Switching between jobs can be more difficult, as theres often a more intense hiring process, Pros of salary compensation for employers, Salaried employees can be more loyal than hourly employees, Often a higher level of talent or education, Cons of salary compensation for employers, Payroll expenses are fixed, even if profitability decreases, It can be more expensive to attract top talent, Why employee classification is so important. Which of the following is/are most likely to be among them? Part B: As a retail sales manager of a large superstore, one of your responsibilities is to train the newly hired employees. the requirement that expenses be charged and the bills sent directly to the company for payment by the accounting department. Estimate the percentage of NCAA games in which the winning team 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. 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. This form of commission rate may actually result in overselling and higher selling costs to the company: When it is difficult for the salesperson to secure the first order from the customer, but reorders are 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. -7,200\\ TheDepartment of Laborhas very specific requirements for classifying and paying employees. 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. except. Long ago, we wrote about the importance of a compensation plan in an organization. The tools and resources you need to take your business to the next level. How to Pay Your Sales Force - Harvard Business Review Additional information and exceptions may apply. 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. Dana Sparks has been a professional writer since 1990. When determining the financial compensation mix, the sales manager must. So, it can be easily understood by all salesmen. This system safeguards the interests of the consumers also. total sales. scores more than 90 points. 4. Which of the following is not mentioned in the text as a challenge to sales managers attempting to adjust . Companies with employees who work in teams, spend a lot of time on projects, or whose performance is difficult to measure might also be better suited for straight salary compensation. The location selection is critical, and with the potential for 4,000 new skilled blue-collar jobs on the line, virtually every city in western Europe is actively bidding for BIA's business. 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). Employees who prefer to set their own schedules or be their own boss often thrive in commission-only environments. 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. 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. The tools and resources you need to run your business successfully. A salaried compensation plan can help promote a sense of teamwork needed to close these more complex transactions. The importance of the salesperson's personal skills in making sales is slight. Helps management to control salespeople's activities. Your base pay provides a steady income during seasons where commission may be more difficult to earn. For more information on your states minimum wage requirements, read up on minimum wage requirements or visit the Department of Labors website. 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. Which of the following conditions would indicate to the sales manager that the proportion of the You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. \text{ } & \text{ } & \text{52-Week} & \text{52-Week} & \text{ } & \text{ } & \text{Sales} & \text{ } & \text{ }\\ Defined by the FLSA, tipped employees are those who receive more than $30 per month in tips. 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). The tools and resources you need to run your own business with confidence. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ You gain authority, prestige and responsibility. In case the salesperson shows high sales performance, the firm increases its salary. When the salesmen are required to perform some other functions in addition to selling. How to find funding and capital for your new or growing business. Talent poaching occurs when an employee is recruited away from one company by another. No two compensation plans are alike. Companies often feel they can justify a lower salary or rate if they include a more robust benefits package. . 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. Per the IRS website, the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. tend to produce too many salesforce objectives which are of the crisis-resolution variety. Which, if any, of the following sources available will help you in your task? a. Operating costs are minimized during slack selling periods. 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). __ A mutual fund that purchases This article has been researched & authored by the Business Concepts Team. 100% (2 ratings) FALSE because straight salary can make all sales reps equivalent individuals, which is best when th . This type of environment tends to foster a sense of camaraderie and can be good for company culture and morale if done well. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. As a staff reporter, she has written hundreds of newspaper and magazine articles, and she is also the author of two published novels. The latest product innovations and business insights from QuickBooks. Design the plan centrally and dictate to local countries. This offers the security of a salary with the greater earning potential of commission. 5. The Advantages & Disadvantages of Salary | Work - Chron.com A straight salary can greatly benefit someone who is transferring to a new territory. && +1,500\\ 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. Tax and bookkeeping basics you need to run and grow your business. Sales Management Insight: Sales Commission Plans. channeled in directions consistent with the overall strategic role of the salesforce within the firm. 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} 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 Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. 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. Leadership Insights On the other hand, under the straight commission method, salesmens rewards are matched with their efforts. 4. 3. Based on this analysis you know that a larger percentage of the salesperson's pay should be _____________ as compared to ______________ for the best results. By creating a feeling of security in the minds of the salesmen, it maintains high morale among the sales force. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Your earning potential is unlimited. What change in the firm's salesforce reward system might be in response to customer's needs? \begin{array} {rcrcr} They may have less vacation time or even zero paid vacation time. 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. The primary benefit of salary-plus-commission plans is they allow the compensation program to be tailored to the needs of a particular firm. This type of compensation plan is every salespersons dream. Salesperson compensation has been an issued marked by trial and error to discover the right formula. \begin{array} {rcrcrcrcr} 6 Different Types of Compensation Plans and Benefits - The HR Digest Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. \begin{array}{l} Because her income is stable, planning and managing her personal finances is easier. Differences between Straight Salary and Straight Commission Method Grant cites a Stanford and Kellogg study that found when a group of people only shared their email and names during negotiations, they struck up agreements 40 percent of the time. 5 Different Types of Sales Compensation Plans Basis: Straight salary method is based on the time spent on the job, and not on the volume of sales effected by the salesmen. Although quite popular, salary compensation plans have some disadvantages. You now require the sales force to sell $35,000 worth of product each month to make a commission. Solved QUESTION 17 An advantage of using a straight salary - Chegg Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. Prepare an analysis to determine which plan will result in the highest earnings per share of common stock. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. Its worth noting that inconsistent working hours can also hurt employees who may be counting on a consistent income. In this situation, employees only receive their bonus if the district, division, or even continent hits its sales goals. From a morale perspective, they can be more satisfied with their work-life balance since no one is dictating it. Employees who like to work on teams and dont want their compensation to be judged on individual performance may be attracted to this kind of plan as well. But under the straight commission method, sales costs are matched with sales. Expert Answer. Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. Straight salary method of remuneration is simple. But straight commission method does not assure any minimum income to the salesmen. Take a reactive approach to seeking out motivational problems and sources of frustration in the salesforce. There are many people who would simply prefer to work with the relative security of a salary position. The sales teams support each other to reach a common goal. It assures a steady minimum income to the salesmen. Compensation rewards might include all of the following except. It is often used in direct sales industries and multi-level marketing (MLM) firms that work with independent contractors. Certain selling opportunities require collaborative efforts and an incentive-based system may not be suitable because it might be difficult to determine different individuals level of contribution. One advantage of hourly pay is your eligibility for overtime. salesperson's total pay that is salary should be relatively low? Jobs report: Are small business wages keeping up with inflation? MKGT 637 Chapter 8 Flashcards | Quizlet $$ 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. The directors are considering three financing plans. not, explain. You think you have finally selected a compensation method and wage level that meets your boss's requirements. This type of compensation refers to a set hourly amount without additional performance-based income. Sales Commission & Compensation Plans: The Key to a Star - Pipedrive It has been reviewed & published by the MBA Skool Team. Straight salary offerings can also be good for attracting new talent thats concerned with stability. \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ If so, an hourly rate with a flexible schedule could be more attractive. PMR is common in sales and is good for startups with low liquidity. Cost of Administration: The cost of administration of straight salary plan is less than that of straight commission plan. It does not distinguish between efficient and inefficient salesmen, as the same remuneration is paid to both efficient and inefficient salesmen. Perhaps the most serious shortcoming of straight-commission plans is that. Which of the following statements regarding changes in the reward system is false?
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