Monday, December 8, 2008

Compensation plan types

Types of compensation plans:

A. Straight salary plan:
This is the simplest compensation plan under this plan sales person receive fixed sums at regular intervals, representing total payments for their services. This method has advantages as well as disadvantages it should be carefully chosen according to the type of product industry.

B. Straight-commission plan:
This plan mainly relies on the theory that the sales personnel should be paid according to productivity. The assumption underlying this plan is that sales volume is the best productivity measure and can therefore be used as the sole measure.

C. Combinations of salary and incentive plan: Most sales compensation plans are combinations of salary and commission plans. It includes fixed salary plus incentive according to the performance of the individual sales person.

Apart from the above methods some companies may have the system of paying bonus and fringe benefits, Bonus differ from combinations – Infact a bonus is a amount paid for accomplishing a specific sales task a commission varies in amount with sales volume or other commission base. Fringe benefits, which do not bear direct relationship to job performance, it is normally percent of the total sales performance package, out of which some are required by legal and government such as provided fund, gratuity, etc.

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