What are the different methods of compensation planning available?
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Answer:
1. Straight Salary Compensation
Straight salary refers to the basic salaries and wage given to the worker. In most companies, the base pay is determined by the worker’s job title and job role. The company sets a minimum and maximum range that can increase, decrease or remain the same, depending on the worker’s performance.
2. Salary plus Commission
This is one of the most reliable types of compensation plans. 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
3. Commission Only
This is a primary method for compensating independent sales agents. It is a highly attractive model, especially to start-ups who are seeking to penetrate a specific territory.
4. Territory Volume Compensation Plans
This type of compensation is well-suited for employees who work in a team-based culture. The compensation is usually calculated by finding out territory volume. The sales numbers are added up and all commissions are split equally among all sales professional
5. Profit Margin/Revenue Based Compensation Plans
Profit margin is one of the most popular types of compensation used by start-up companies. Under this plan, companies compensate its employees entirely on the profits made by the business. Due to the complexity and compliance issues involved, very few companies offer equity or stock.
6. Residual Commission
This type of compensation plan is every salesperson’s dream. In this, salespeople continue to receive a commission as long as their accounts are generating revenue for the employer. Sadly, employers are usually reluctant to offer a residual commission deal to employees.