The earnings of a person who is working as an independent contractor are subject to self-employment tax.. &&&&&&&& -26,000\\ So, it can be easily understood by all salesmen. Compensation usually takes the form of monetary payment exchanged for time, labor and expertise. The sales teams support each other to reach a common goal. +35,000\\ Your positive feeling towards inclusion at work should be synced with your actions on making a change. 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. Straight Salary Compensation. An employee who agrees to this type of compensation will receive a base salary along with an additional bonus if performance hits or exceeds earning goals. Once you own property, you should take steps to protect it from loss, theft, and damage. The introduction of HR technology has revolutionized the way HR departments operate. Copyright 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform. . Advantages to Salesperson: The salesperson feels free from financial uncertainties because of stable income inflow. This is a primary method for compensating independent sales agents. \textbf{\textsf{Cash}} & \bm{+} & \textbf{\textsf{Supplies}} & \bm{+} & \textbf{\textsf{Land}}\\ The advantages of straight salary compensation include which of the following? 6. 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). Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are. Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. Under Straight salary method, a salesman is paid remuneration on time basis. 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. To implement a new or modified reward system, sales managers should do all of the following except. \\ 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). Hourly roles can often be perceived as less valuable or easier to replace. \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees dont see opportunities to increase their pay. Straight salary compensation is typically used in industries where: Missionary selling (i.e. The nine different types of compensation packages include: This type of compensation refers to a set annual amount, divided by the years pay periods to get a pay rate weekly, every two weeks, or monthly. Salary plus commission is a balance of both stability and performance-based income. Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. It is easy to calculate. 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. It assures a steady minimum income to the salesmen. costing little and reinforcing desirable behavior immediately after it occurs. Fixed salary paid to salesman at at the end of every month, irrespective of the sales made by him during the month is called Straight Salary. Find articles, video tutorials, and more. ___________ rewards are those that are given in return for acceptable performance or effort. As the name suggests, straight salary compensation is just what you would expect. Companies looking for long-term growth as opposed to short-term sales may opt for this type of compensation as well. If he earns less in commissions, he must pay the remainder back to the company. 3. From a payroll standpoint, this type of compensation is harder to administer. The remaining 25% of the sick leave payout In some organizations, selling is a collaborative effort. Under this method, there is no direct relationship between sales revenue and selling costs. It helps the firm to direct the activities and efforts of the salesmen towards the cultivation of markets (i.e., creation of new customers), undertaking of window display, store demonstration, etc. a supportive sales management leadership style. Straight salary offerings can also be good for attracting new talent that's concerned with stability. 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. 11. 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. 5. In case the salesperson shows high sales performance, the firm increases its salary. salesforce include all of the following except. provide salespeople with trips and other rewards. According to the text, which of the following is not one of the rewards typically offered to salespeople? As salesmens remuneration is not related to the volume of sales made by them, this method imposes a serious burden on the earnings of the firm in terms of sales. Straight salary plans often do not provide strong incentive for extra effort. How to start a business: A practical 22-step guide to success, How to write a business plan in 10 steps + free template, What is cash flow? When the salesmen are required to create markets for a product. Formal recognition programs have a better chance of success if sales managers do all of the following Get help with QuickBooks. As the Vice President of Sales for a new startup company, you decide to hire and train your own field sales force. Under this system, rewards are not matched with efforts. They want to know precisely how much money they're going to make each month and to feel as though that income is dependable. Theres something for every HR professional, whether youR Today, creating a sense of purpose is more critical than ever, and we provide employees the means to be successful and feel valued through empowerment, development, feedb HR Drift Which, if any, of the following sources available will help you in your task? Perhaps the most serious shortcoming of straight-commission plans is that. 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. 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. Similar to hourly employees, workers who are paid with this type of compensation are usually governed by the FLSAs nonexempt requirements and earn overtime. Your salespeople are paid on commission. Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. This type of compensation plan puts less pressure on individuals and fosters team-building. \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 compensation plans are used as a way to motivate employees. 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. Employers are often hesitant to use this type of compensation, as payroll expenses can be high or unpredictable. Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired. We provide third-party links as a convenience and for informational purposes only. Each time a commission check is cut you have the satisfaction of knowing that it's due to something positive. For post-Depression-era baby boomers, the security of a steady salary is important. \text{ESI} & \text{ITT Ed Services} & \text{7.95} & \text{1.93} & \text{2.95} & \text{-0.03} & \text{140,466} & \text{3.11} & \text{2.92}\\ \hline Due to the complexity and compliance issues involved, very few companies offer equity or stock. Jobs report: Are small business wages keeping up with inflation? Is it just monetary? Hourly plus commission compensation does have its disadvantages as well. Salesperson compensation has been an issued marked by trial and error to discover the right formula. There may be multiple rates of bonuses and commission, and payroll managers must have a system in place to keep track of everything. Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. Usually, the type of compensation plan an organization chooses, and the type that an individual accepts, depends on the market conditions and the goals of those involved. 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 Whos using straight salary plus commission compensation? Because her income is stable, planning and managing her personal finances is easier. If your family does not have a complete home inventory, encourage your parents or other adults with whom you live to create one. Based on this analysis you know that a larger percentage of the salesperson's pay should be _____________ as compared to ______________ for the best results. 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. You think you have finally selected a compensation method and wage level that meets your boss's requirements. 7. The salespersons perfect plan, a residual commission compensation (RCC) plan pays employees a commission as long as the accounts are producing revenue. Your email address will not be published. Total sales for the territory are then split among the sales reps in that territory. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. Which of the following conditions would indicate to the sales manager that the proportion of the No two compensation plans are alike. 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. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. 6. The advantages of straight salary compensation include which of the following? \end{array} bonuses for sales target achievement), in others salespersons receive commissions as a percentage of the sales they were involved in. Basis: Straight salary method is based on the time spent on the job, and not on the volume of sales effected by the salesmen. Under this plan, companies compensate its employees entirely on the profits made by the business. 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. 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 The importance of matching the abilities and needs of sales recruits to the ____ cannot be overstated. Everything you need to prepare for and have a successful holiday season. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. 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. 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} 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. Did your choice agree with Sturges' Rule? She loves training, creating processes, and introducing her clientele to new apps and technology. 6. But straight commission method distinguishes between efficient and inefficient salesmen. From a morale perspective, they can be more satisfied with their work-life balance since no one is dictating it. They receive fixed sums of money at regular intervals (usually each month). An employee who works only on salary has little external motivation to go above and beyond. According to your text, which benefit is offered by the greatest percentage of companies? The most serious disadvantage of a straight-salary compensation plan is. Salary plus Commission This is one of the most reliable types of compensation plans. 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. If its part of their contract, salespeople can continue to receive commissions even after theyve left the company. As it assures a certain minimum income (the living wage) to the salesmen regularly, it creates a feeling of security in the minds of the salesmen. For each frequency distribution, suggest "nice" bins. finds the job to be inherently rewarding. manner. PMR-based compensation often encourages loyalty among employees, but it will also require long-term incentives to retain talent. Sales force compensation should not only meet the goals of the firm, but should also communicate to the sales force what is important. , which can vary depending on their states minimum wage. Tax and bookkeeping basics you need to run and grow your business. The economy has entered a period of recession, and even the Administration's economists predict that it will remain so for at least three more quarters. The firm is looking for a Vice President for sales and promotion. 4. And because there is no financial security that kicks in if sales arent made, those who dont earn enough leave or burn out quickly. The salesperson experiences a high level of security with a salaried sales position. 5. Offers considerable incentive for the salespeople. Sadly, employers are usually reluctant to offer a residual commission deal to employees. Sparks holds a Bachelor of Arts in business. This can either be done through direct contact with t Are you ready for a pay raise? the working capital requirements are lessened with the straight-salary compensation plan. 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 get your new business idea off the ground. 4. Among the drawback(s) you will discuss include: You have read a "want ad" in the latest edition of Marketing News. not, explain. Since no one is taking out taxes for them, it is up to the contractor to budget and remit taxes quarterly to prevent a fine and a huge tax bill at year-end (April 15). 2. Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________. Design the plan centrally and dictate to local countries. Base salary + sales commission-based pay. By clicking Submit, you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement. In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). It is a highly attractive model, especially to start-ups who are seeking to penetrate a specific territory. Employers who pay by the hour should focus on increasing morale and showing employees they are valued in order to avoid turnover. a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. When the salesmen are required to perform some other functions in addition to selling. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. Fresh business resources are headed your way! Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Based on this information, which salesperson compensation plan would work best? Happy hours are a great way to connect with colleagues, share experiences, and have some fun together. 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. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ Straight salary method of remuneration Meaning, Suitability, Advantages, Disadvantages. \begin{array} {rcrcr} Some of this is likely due to a generational shift in what employees are really looking for. 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. Let's explain the benefits with a clear example of an unpackaged salary versus an FBT exempt salary package. 9. The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers. The major disadvantage is that the salespersons may not feel motivated and would only complete the minimum requirements. __ A mutual fund that purchases Which of the following is not a guideline recommended in the management of motivation? Recommend a plan to the board of directors. In my experience, both in the corporate (salary) and retail (hourly) space, an employee compensation plan encompasses salary orhourly payand any benefits added to the package. You are the sales manager of a large, multi-product company. Incentives are often seen as effective triggers when the objective is to improve the top line i.e. This leaves the salespersons with no opportunity for extra money or incentives. Which of the following is/are most likely to be among them? On the other hand, under the straight commission method, salesmens rewards are matched with their efforts. nonfinancial reward: All of the following are steps suggested for facilitating a sense of accomplishment in the salesforce Required fields are marked *. Salary plus commission plans are often used for sales positions or corporate positions when the company wants to encourage leaders to push for substantial growth and high performance. , a pet-friendly working environment, etc.). It has lower turnover rates. It can also be beneficial if a firm is entering a new market or location. 100% (2 ratings) FALSE because straight salary can make all sales reps equivalent individuals, which is best when th . 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. Helps management to control salespeople's activities. Plan B is to issue 100,000 shares of common stock. Sales Management Insight: Sales Commission Plans. 5. This can lead to high turnover, a need for more recruitment resources, and higher training costsall of which cuts into potential bottom-line savings. In this, salespeople continue to receive a commission as long as their accounts are generating revenue for the employer. System is easy to understand and compute. \hline\\ The tools and resources you need to run your own business with confidence. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Straight Salary Straight salary sales compensation plans aren't very common, but they do have a place in some organizations. Although quite popular, salary compensation plans have some disadvantages. WinningTeamArizonaDukeFloridaStateKansasKentuckyLouisvilleOklahomaStatePurdueStanfordWisconsinPoints90857578716572767776LosingTeamOregonGeorgetownWakeForestColoradoNotreDameTennesseeTexasMichiganStateSouthernCalIllinoisPoints66667057636266706756WinningMargin241952183661020. Example: Each rep in your company earns a straight salary of $75,000 a year, or $1,440 a week (gross). Are benefits included in the definition? \text{Duke} & \text{85} & \text{Georgetown} & \text{66} & \text{19}\\ What change in the firm's salesforce reward system might be in response to customer's needs? The content on MBA Skool has been created for educational & academic purpose only. a. 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. \text{ } & \text{ } & \text{52-Week} & \text{52-Week} & \text{ } & \text{ } & \text{Sales} & \text{ } & \text{ }\\ Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. 30,000 && 4,000 && 75,000\\ Are they just trying to pay their way through college? On the other hard, straight commission method does not give the management sufficient control over the salesmen. You have a meeting with her to outline the drawback(s) of this type of plan . The sales numbers are added up and all commissions are split equally among all sales professionals. Assume that the points scored by the winning teams for all NCAA games follow a \\ $$ Your ultimate goal is to control selling expense and provide extra rewards for added results. A salesperson who is extrinsically motivated, is motivated by the rewards that the job provides, Reward system management involves the selection and utilization of organizational rewards to. For example, if you work 42.5 hours in a week, you earn 40 hours of pay at your hourly base rate and 2.5 hours at 1.5 times your hourly base rate. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. \text{Bal.} salesperson's total pay that is salary should be relatively high? Relevant resources to help start, run, and grow your business. \underline{\underline{2,300}} && \underline{\underline{101,000}} && \underline{\underline{-2,000}} && \underline{\underline{35,000}} && \underline{\underline{-29,000}}\\ \\ \\ \\ Provide a mix of both compensation and noncompensation rewards comparable to other firms. Flexibility has been cited as both an advantage and a disadvantage of this compensation pay plan: A common criticism of combination pay plans is that they. 7. \hline $$ Laws differ by state, so do your research before making any decisions. Compensation rewards might include all of the following except. https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. Katey Maddux is a paddle boarder, music lover, Zumba instructor, and Founder and CEO ofMillennial Accounting, LLC in Miami, Florida.
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