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 |. But straight commission method distinguishes between efficient and inefficient salesmen. Sales Costs: Under the straight salary method, sales costs are not matched with the sales. Which of the following conditions would indicate to the sales manager that the proportion of the In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). A per diem expense plan pays the salesperson for all reported expenses. Which of the following is/are most likely to be among them? 1. However, a straight salary plan also has its own advantages. WinningTeamArizonaDukeFloridaStateKansasKentuckyLouisvilleOklahomaStatePurdueStanfordWisconsinPoints90857578716572767776LosingTeamOregonGeorgetownWakeForestColoradoNotreDameTennesseeTexasMichiganStateSouthernCalIllinoisPoints66667057636266706756WinningMargin241952183661020. 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. Which of the following is not an advantage of combination plans? \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ But when that same group opened up about things that weren't essential to the negotiation, 59 percent were able to strike a deal. tend to produce too many salesforce objectives which are of the crisis-resolution variety. Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. Following are the advantages of the straight commission plan: Pay relates directly to performance and results achieved. Once the person has established himself in the area, the company can switch to performance-based salary. Working as a contractor definitely has its benefits. Employees may be confused as to how pay is calculated, so transparency is important. 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 \\ If he earns less in commissions, he must pay the remainder back to the company. Straight salary method of remuneration is simple. The companys income tax rate is 35%. It gives greater control to the management over the salesmen by means of withholding increments, effecting a transfer, etc. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. more points. You have a meeting with her to outline the drawback(s) of this type of plan . This compensation category also includes restaurant employees paid mostly in tips. 6. plan is recommended: Advantages of straight-salary compensation plans include all of the following except. Wage caps are used by some firms to prevent salespeople from making too much money. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. 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. 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. It does not provide any incentive for hard work. Part A: Compare the advantages and disadvantages of straight salary and straight commission compensation plans. For employers, hourly employees can be a good option for work that fluctuates seasonally. The compensation is usually calculated by finding out territory volume. This type of plan is often found in multi-level marketing (MLM) companies. You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. 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. 5. Employers are often hesitant to use this type of compensation, as payroll expenses can be high or unpredictable. 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. Straight salary might not be tempting to top-performing sales reps who want to make as much money as they can through hard work and dedication. Employees who receive it are considered nonexempt by the FLSA, meaning their compensation is regulated. Under Straight salary method, a salesman is paid remuneration on time basis. As a result, she avoids the high degree of stress and uncertainty that comes with pay-for-performance compensation. Your email address will not be published. They don't want to worry about the inconsistencies associated with a commission-based pay. Nevertheless, salary compensation plans are appropriate in a number of situations. A salesperson who is intrinsically motivated. they contribute little to company loyalty, resulting in potential salesforce control problems. As a result, salaried workers often dont track hours worked. In this situation, employees only receive their bonus if the district, division, or even continent hits its sales goals. In most companies, the bonus is usually tied to a budgetor other target that has little significance to the employee. Get the definitive guide to employee compensation packages and benefits in this comprehensive QuickBooks resource written by payroll expert Katey Maddux. their compensation plans to recognize team performance? Companies often feel they can justify a lower salary or rate if they include a more robust benefits package. Intuit, QuickBooks, QB, TurboTax, Mint, Credit Karma, and Mailchimp are registered trademarks of Intuit Inc. 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. But straight commission method does not assure any minimum income to the salesmen. An advantage of the straight salary plan for compensating salespeople is that it: Provides a direct relationship between sales and expenses. By clicking Submit, you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement. Fringe Benefits and Salary Plan based upon the employee's rate of pay immediately preceding retirement. 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). \end{array} 9. 8. 2. This type of compensation is often used for entry-level jobs or employees working in restaurants, retail, or the service industry, usually in non-management roles. except. 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? 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. Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired. Such a plan is quite common in the services industry as well as in the industrial goods sector. 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. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. Salaried individuals who earn less than $23,660 per year often qualify for additional compensation, including overtime pay, per the FLSAs standard for non-exempt salaried employees. Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. They receive fixed sums of money at regular intervals (usually each month). Tax basics you need to stay compliant and run your business. -15,000 &&&& +15,000\\ Which of the following statements regarding sales contests is true? A straight salary can greatly benefit someone who is transferring to a new territory. Employees need not be scheduled for the same number of hours each week. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability. Does not provide security, so the reps will work harder. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. The importance of the salesperson's personal skills in making sales is considerable. Commission-only compensation can be valuable for employers because top performers get the most money. Formal recognition programs have a better chance of success if sales managers do all of the following The introduction of HR technology has revolutionized the way HR departments operate. issue a press release detailing the company's changes. These can range from monetary benefits (like extra. &&&& -2,000\\ 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). Salaried workers who earn more than $23,660 per year are considered exempt under the Fair Labor Standards Act (FLSA). Circumstances: Straight salary method can be used under any circumstances, whereas straight commission method can be used only in cases where the sales made by the salesmen can be measured. 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. Salespeople are usually paid on a straight salary compensation, in which there is no opportunity to earn incentives. As the Vice President of Sales for a new startup company, you decide to hire and train your own field sales force. \hline Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform. 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). ____________ is the easiest plan to administer and budget for. 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. The importance of the salesperson's personal skills in making sales is slight. One of the advantages of the gross margin commission plan is the firm and salesperson share the same pool of money so both are interested in maximizing that amount. In designing plans one must balance the goals of the firm, as well as the needs of the sales force and customers. Because her income is stable, planning and managing her personal finances is easier. \hline\\ costing little and reinforcing desirable behavior immediately after it occurs. How much investment capital should you accept? How to start and run a successful e-commerce business. 6. The tools and resources you need to manage your mid-sized business. But under the straight commission method, sales costs are matched with sales. 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. Advantages. Which of the following is not one of the desired outcomes of an optimal reward system? A straight salary plan can be advantageous in certain situations. This is a very broad category of compensation. 30,000 && 4,000 && 75,000\\ Additional information and exceptions may apply. The company sets a minimum and maximum range that can increase, decrease or remain the same, depending on the workers performance. This form of nonfinancial reward is generally considered to be more desirable to younger salespeople Salary plus Commission This is one of the most reliable types of compensation plans. Employees who prefer to set their own schedules or be their own boss often thrive in commission-only environments. In order to "weather the storm," the best course of action among those presented below is to: Raise commission rates on higher margin products in all regions in order to boost sales. According to compensation surveys, ales managers typically earn less than the top reps in their district when sales reps are on an incentive-based plan. The straight salary plan proves advantageous to both the salesperson and the management. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. In case the salesperson shows high sales performance, the firm increases its salary. The ideal compensation plan motivates salespeople to achieve their own and the company's objectives. Corporate industries and IT sales, for example, often use this type of compensation when creating bonus plans. \begin{array} {rcrcrcrcr} The remaining 25% of the sick leave payout Are benefits included in the definition? 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. Straight salary offerings can also be good for attracting new talent thats concerned with stability. This is one of the most reliable types of compensation plans. TheDepartment of Laborhas very specific requirements for classifying and paying employees. 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). Disadvantages of straight salary compensation. What change in the firm's salesforce reward system might be in response to customer's needs? It assures a steady minimum income to the salesmen. Payroll essentials you need to run your business. Which of the following conditions would indicate to the sales manager that the proportion of the Ultimately, you have to determine the method of pay that your company can best manage and to weigh the advantages and disadvantages of offering a fixed salary. In commission only jobs, companies offer a safety net in the form of draw against commission. The company pays its salespeople a set amount known as a pre-determined draw at the beginning of each pay period. . Employers who pay by the hour should focus on increasing morale and showing employees they are valued in order to avoid turnover. The content on MBA Skool has been created for educational & academic purpose only.
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