Compensation of Sales Force

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COMPENSATIONCOMPENSATION

OFOF

SALES FORCESALES FORCE

Presented by

Vishal Kapoor

310023



Compensating Sales ForcesCompensating Sales Forces

Compensating sales forces means giving

monetary and non- monetary benefits in

return for the services rendered by sales

force.

The basic compensation elements are

salary, commission, bonus, fringe benefits, or

any combinations of these.



According to Cundiff and Still

´Compensation plan is an essential part of total program for motivating sales

personnel.

A sales compensation plan should have

three elements:

i. Provide a living wage

ii. Adjust pay-scales to performance level

iii. Provide a mechanism for attaining

company goals and individual goalsµ



Compensation plan componentsCompensation plan components

Compensation plan has two basic

components:

1. Fixed

2. Variable



Characteristics of a GoodCharacteristics of a Good

Compensation PlanCompensation Plan1. Fair wages

2. Motivational

3.Equitable

4. Simple and Understand

5. Flexible

6. Timely Payment7. Linked to nature of job



Factors Determining CompensationFactors Determining Compensation

PlanPlan

1. Nature of Job

2. Ability of Organization to Pay

3. Level of Competition

4. Economic Condition of the Country

5. New Sales Territory

6. Advertising and Sales Promotion Efforts



Steps in DesigningA CompensationSteps in DesigningA Compensation

PlanPlan

1. Determine Sales Forces and

Compensation Objectives

2. Determine Major Compensation Issues

3. Implement Long-term and Short-term

Compensation plans

4. Related Rewards to Performance

5. Measurement to Performance

6. Appraise the Compensation Plan



Type of Compensation PlansType of Compensation Plans

1. Financial Compensation

2. Non-financial Compensation



Financial CompensationFinancial Compensation

I. Straight Salary Plan

II. Straight Commission Plan

III.Bonus and Incentives

IV. Salary plus Incentive Plan

V. DrawingAccount and Commission Plan

VI. Allied Method



Straight Salary PlanStraight Salary Plan

This is the simplest compensation plan in

which salesman receive fixed salary at

regular interval of time.

Salary is paid to sales force according to

salary grade approved at the time of

appointment.



Straight Commission PlanStraight Commission Plan

In this compensation method sales force is

paid according to their performance,

efficiency and productivity.

These plan pays fixed or floating rate of

commission on the sales volume achieved

by salesman.



Bonus andBonus and IncentivesIncentives

Bonus is defined as one sum supplemental

payment for above average performance.

Incentives are also supplemental

compensation that allows the salesperson

to perform the desire activity to earn

additional income.



Salary plus Incentive PlanSalary plus Incentive Plan

A combination plan where a part of the

income is given as straight salary and a

variable proportion is given in the form of

incentive.



DrawingAccount and CommissionDrawingAccount and Commission

PlanPlanThe organization opens a drawing account

in the name of the salesperson and credits

the commission due to him every month.



Allied MethodAllied Method

In this method, the company shares a part

of the profit with its sales staff and

sometimes distributes the equity holding of

the company in the form of earned share toincrease the stake of the salesperson in the

organization.

Also knows as ́ profit sharing planµ



NonNon--financial Compensationfinancial Compensation

I. Promotions

II. Recognition Programs

III. Fringe Benefits

IV. ExpensesAccounts

V. Perks

VI. Sales Contests



PromotionsPromotions

Job enrichment and additional

responsibilities across the departments.



Recognition ProgramsRecognition Programs

These are programmes designed to honour

individual salespersons· contribution and

recognize the excellent performance.



Fringe BenefitsFringe Benefits

This is given along with any other

compensation plan.

Fringe benefits includes retirement benefits,

pension plan, paid leave, maternity leave,

study leave, insurance cover, medical

reimbursement, car facility, gratuity, loan

facility, etc.



ExpensesAccountsExpensesAccounts

Expense accounts are compensation plans

that are designed to compensate sales

personnel for the expenses they incur on

the job.



PerksPerks

Perks are a special category of

compensation available to employees with

some special status or expertise in the

company.



Sales ContestsSales Contests

Sales organizations organize sale contests

for the salesperson to stimulate sales.

Compensation of Sales Force

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