Salesmen have the greatest. Under this method, there is no direct relationship between sales revenue and selling costs. Readers should verify statements before relying on them. Under Straight salary method, a salesman is paid remuneration on time basis. \text{Kansas} & \text{78} & \text{Colorado} & \text{57} & \text{21}\\ Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. 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. In this type of compensation, income is solely based on sales made. Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). salesforce include all of the following except. Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. If your family does not have a complete home inventory, encourage your parents or other adults with whom you live to create one. One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint. Once the person has established himself in the area, the company can switch to performance-based salary. 1. Offer your support. System is easy to understand and compute. costing little and reinforcing desirable behavior immediately after it occurs. Advantages of straight-salary compensation plans include all of the following except. He holds a Bachelor of Science in marketing from York College of Pennsylvania. When determining the financial compensation mix, the sales manager must. not, explain. Business is going well for Park N Fly , the company that operates remote parking lots near major airports. View the full answer. Solved QUESTION 17 An advantage of using a straight salary - Chegg The workplace catchphrase you need to know. By accessing and using this page you agree to the Terms and Conditions. 1. 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. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Straight Salary Method of Remuneration | Meaning | Suitability | Merits Straight salary plan can help promote a sense of equality among sales people who work as teams or small groups, for everyone is paid equally and the contribution of each team member is also expected to be equal. 7. 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. This type of compensation plan puts less pressure on individuals and fosters team-building. pharmaceutical sales) is the most common type of sales process used. Because they are self-employed, contractors are eligible for SEP IRAs. 8. 4. &&&&&&&& -26,000\\ Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. 6 Different Types of Compensation Plans and Benefits - The HR Digest Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. To implement a new or modified reward system, sales managers should do all of the following except. Each is then rated on 12 factors, as shown in the table below. Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. \bm{=}\\ \bm{=} \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ \\ Different companies offer different compensation plans to their sales representatives- the straight salary plan being one of the simplest. \text{T} & \text{AT&T} & \text{37.50} & \text{30.97} & \text{37.12} & \text{-0.01} & \text{22,009,008} & \text{37.50} & \text{37.06}\\ \hline Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. The advantages of straight salary compensation include which of the following? The importance of matching the abilities and needs of sales recruits to the ____ cannot be overstated. In this, salespeople continue to receive a commission as long as their accounts are generating revenue for the employer. Subscribe to our newsletter and stay updated on the latest HR news and trends. If you choose this plan, you'll pay your reps using a mix of base salary and performance-based rewards. 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. 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. What change in the firm's salesforce reward system might be in response to customer's needs? Contractors are required to find health insurance and retirement plans on their own. The advantages of straight salary compensation include which of the following? Tax and bookkeeping basics you need to run and grow your business. For post-Depression-era baby boomers, the security of a steady salary is important. 4. Straight salary compensation is typically used in industries where: Missionary selling (i.e. 11. The sales numbers are added up and all commissions are split equally among all sales professionals. the working capital requirements are lessened with the straight-salary compensation plan. \hline 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." Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. The goal of the compensation package is to reward employees for their efforts without putting the firm's profitability in jeopardy. 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At the end of the pay period, this prepayment is drawn from how much the salesperson earned in commissions. When there are considerable seasonal variations in the sales made by the salesmen. 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. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. Your earning potential is unlimited. Prepare an analysis to determine which plan will result in the highest earnings per share of common stock. Katey Maddux is a paddle boarder, music lover, Zumba instructor, and Founder and CEO ofMillennial Accounting, LLC in Miami, Florida. Base salary + sales commission-based pay. a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. The reward system practiced by the majority of consumer and industrial firms is, Industries that have traditionally used a straight-commission-based compensation pay plan include all of than to older salespeople: When a sales manager assures salespeople that they fulfill a critical role in revenue production and other After initial investigations by Holmes Miller, head of the Operations Department, BIA has narrowed the list to 9 cities. Many appreciate the fallback stability of the base salary paired with performance incentives. You are the sales manager of a large, multi-product company. There are many people who would simply prefer to work with the relative security of a salary position. If an employee is required to work on a holid ay as a regularly scheduled work day, . Which of the following is not a guideline recommended in the management of motivation? Salespeople can be compensated in a number of different ways. If the nonselling administrative duties of the salesperson are of major importance, this compensation Advantages. However, successful salespeople tend to make a lot of money with commission than with a salary plus commission job. The tools and resources you need to take your business to the next level. scores more than 90 points. This compensation category also includes restaurant employees paid mostly in tips. In many companies, basics plus bonus-based compensation plans are used as a way to motivate employees. 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. So, it can be easily understood by all salesmen. In designing plans one must balance the goals of the firm, as well as the needs of the sales force and customers. As a result, salaried workers often dont track hours worked. The major disadvantage is that the salespersons may not feel motivated and would only complete the minimum requirements. When the sales effected by the individual salesman cannot be isolated (i.e., when the sales are made collectively by two or more salesmen). -7,200\\ 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. It is a very useful system of remunerating newly-appointed salesmen who are new to the job. Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________. The company sets a minimum and maximum range that can increase, decrease or remain the same, depending on the workers performance. We provide third-party links as a convenience and for informational purposes only. "USA Today": Finding What Motivates Your Employees. Bal.1.2.3.4.5.6.7.Bal.Cash30,000+35,00026,00015,0002,0007,20014,800+AssetsSupplies4,000+1,5003,0002,500+Land75,000+15,00090,000==LiabilitiesAccountsPayable8,000+1,5007,2002,300++MurrayKiser,Capital101,000101,000OwnersEquityMurrayKiser,Drawing2,0002,000+FeesEarned35,00035,000Expenses26,0003,00029,000. A salaried compensation plan can help promote a sense of teamwork needed to close these more complex transactions. 5. Increase sales and revenues. Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired. According to the text, which of the following is not one of the rewards typically offered to salespeople? 6. Jobs report: Are small business wages keeping up with inflation? This requires very clearly defined territory outlines and territories that produce enough income to support competitive wages. We dont want you to miss anything. The Advantages & Disadvantages of Salary | Work - Chron.com How to find funding and capital for your new or growing business. You have a meeting with her to outline the drawback(s) of this type of plan . Disadvantages of straight salary compensation. Intuit, QuickBooks, QB, TurboTax, Mint, Credit Karma, and Mailchimp are registered trademarks of Intuit Inc. Salaried employees receive an equal portion of their annual compensation every week. estimate the percentage of all NCAA games in which the winning team scores 84 or Some terms may not be used. Your email address will not be published. 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). Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees dont see opportunities to increase their pay. ii) There will be no surprise of payroll expenses. When the salesmen are new to the job (i.e., for remunerating the newly appointed salesmen.). Due to the complexity and compliance issues involved, very few companies offer equity or stock. The importance of the salesperson's personal skills in making sales is slight. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability. PDF FRINGE BENEFITS AND SALARY PLAN (Exhibit A to Resolution No. 21052 As \text{Oklahoma State} & \text{72} & \text{Texas} & \text{66} & \text{6}\\ It assures a steady minimum income to the salesmen. Pros and Cons of Different Types of Sales Compensation Plans Incentives are often seen as effective triggers when the objective is to improve the top line i.e. Hence, this concludes the definition of Straight Salary Plan along with its overview. This compensation type tends to attract fewer people since there is no secure base pay. 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. compensation plans are used as a way to motivate employees. In this plan, you will pay a straight salary to your employees and no commission, no bonus, and no incentives. Commission-only compensation can be valuable for employers because top performers get the most money. Plan B is to issue 100,000 shares of common stock. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. This $35,000 level is called: Your customer's buying cycle is approximately 2 years and your reps need to invest significant amounts of time understanding their customers. In fields that typically involve commissions, the outside sales exemption and the retail sales exemption may also apply. Which of the following is an advantage of a straight-commission compensation plan? 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. They may have less vacation time or even zero paid vacation time. Your email address will not be published. 1. This means you can always keep earning more money if you're willing to put in some extra hours of work. Straight Salary Plan - Meaning & Definition | MBA Skool 40 Questions to Ask Before You Accept A Job Offer. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). Salaried workers who earn more than $23,660 per year are considered exempt under the Fair Labor Standards Act (FLSA). According to your text, what would you do next? The straight salary plan is one of the simplest compensation plans that companies offer to their employees, particularly sales representatives. manner. Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. Each line designated by a number indicates the effect of a transaction on the equation. Employees who prefer to set their own schedules or be their own boss often thrive in commission-only environments. In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. Wage caps are used by some firms to prevent salespeople from making too much money. Murray Kiser operates his own catering service. This is a primary method for compensating independent sales agents. Under this plan, companies compensate its employees entirely on the profits made by the business. \end{array} MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. Employees like it because it rewards those who work hard. Benefit packages amount to a negligible portion of the cost of keeping a salesperson in the field. Does not provide security, so the reps will work harder. Find articles, video tutorials, and more. Provide equal pay to all employees at the same level. \begin{array}{|l|l|c|c|c|c|c|c|c|} \hline 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. __________ 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. bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. But straight commission method is based on the sales effected by the salesmen and not on the time spent on the job. Your positive feeling towards inclusion at work should be synced with your actions on making a change. 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. , a pet-friendly working environment, etc.). It provides stability of earnings without wide fluctuations. If so, an hourly rate with a flexible schedule could be more attractive. \text{Bal. This type of compensation refers to a set hourly amount without additional performance-based income. This type of sales compensation plan is employed in companies which prohibits direct sales. 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. follow-up and service. Of course, there are exceptions to every rule. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. As a business owner it can be a challenge to figure out how to compensate employees. 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. PMR-based compensation often encourages loyalty among employees, but it will also require long-term incentives to retain talent. 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. Salespeople should compete in teams with each member of the team making a contribution to the group's total goal. 5. 2. +35,000\\ more points. You have a meeting with her to outline the drawback(s) of this type of plan. In this sense, compensation is a counterbalance. Once you own property, you should take steps to protect it from loss, theft, and damage. Compensation rewards might 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). \hline In a profit margin/revenue-based (PMR) plan, employees are compensated based on the profitability of the company. Although quite popular, salary compensation plans have some disadvantages. 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. 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). Which, if any, of the following sources available will help you in your task? Incentives to Salesmen: Straight salary method does not provide any incentive to the salesmen to do hard work. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. 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. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. 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 It has been reviewed & published by the MBA Skool Team. She loves training, creating processes, and introducing her clientele to new apps and technology. Intuit accepts no responsibility for the accuracy, legality, or content on these sites. Motivated salespeople may search for this type of income, knowing that if they work really hard early on, they can work less later and still make the same income. 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. 12. A commission plus bonus plan is particularly suited to a company that uses brokers or independent sales reps. Companies wanting to exert some longer term behavioral control using incentives should make sure that the incentive component is between 15 and 30 percent of total compensation. Finding balance and setting boundaries at work. Celebrating the stories and successes of real small business owners. \begin{array}{l} 2. 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. &&&& -2,000\\ The tools and resources you need to manage your mid-sized business. Everything you need to know about managing and retaining employees. You think you have finally selected a compensation method and wage level that meets your boss's requirements. The straight salary plan proves advantageous to both the salesperson and the management. 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. 7. This is a very important distinction, as it determines who pays the taxes (the worker, not the employer) and to what standard an employer is held. Millennial Accounting primarily serves two nichesreal estate and property managementand is on a mission to serve, inspire, educate, and problem-solve. Sales contests will continue to be an important tool for achieving expedient results. Straight Salary Method of Remuneration | Meaning | Suitability | Merits | Demerits, Salesmanship | Meaning | Features | Objectives, Arguments in favor of Social Responsibility of Business, Business Enterprise Meaning | Public | Private | Joint, 10 Most Important functions of a Group Leader, Factors to be Considered in Planning Factory Building, Reasons for Governments Intervention in Private Business, Factors Influencing Salesmen Remuneration Plan, Organizational Factors Responsible for Resistance to Change, Avoidable and Unavoidable causes of Labour Turnover, 5 Important Classification of Business Environment, Under what circumstances a Pvt company be, Purchase Department | Purchase Officer | Qualification, 7 Arguments against Social Responsibilities of Business, Accountlearning | Contents for Management Studies |. \text{Louisville} & \text{65} & \text{Tennessee} & \text{62} & \text{3}\\ These plans often include a straight salary income for training periods or during low seasons. \hline\\ plan is recommended: Advantages of straight-salary compensation plans include all of the following except. provide salespeople with trips and other rewards. This leaves the salespersons with no opportunity for extra money or incentives. Is good for a financially weak company. Sales Management Ch 12 Flashcards | Quizlet