2007/2008 Sales Compensation and Benefits...

SalesCompensationand BenefitsReport

2007/2008

© Sales Resource Centre, Canadian Professional Sales Association, 2008. All rights reserved. The use of any part of this publication reproduced, transmitted in any form or by any means, electronic, mechanical, recording or otherwise, or stored in a retrieval system, without the prior consent of the publisher, is an infringement of the copyright law. In the case of photocopying or other reprographic copying of the material, permission must be obtained from the Sales Resource Centre prior to reproduction.

Cover design: Katina Fyndikakis Editor: Anna Fredericks ISBN: 1-895879-34-5 The 2008 edition published by: Sales Resource Centre Canadian Professional Sales Association Suite 800, 310 Front Street West Toronto, Ontario M5V 3B5 Toll-free: 1-888-267-2772 Web site: www.cpsa.com If you have any questions regarding this publication, please contact the Sales Resource Centre.

TABLE OF CONTENTS

Introduction 1 Acknowledgements 2 Section I⎯Canadian Sales Representatives Total Cash Compensation Total Cash Market Values⎯National 3 Changes Between 2008 vs. 2007 Results in Total Cash Compensation Market Values 8 Components of Total Cash Compensation 10 Percentages of Incentive and Base Salary as Components of Total Compensation 13 Differences in Base Salary Levels by Region 16 Total Compensation Package of a Senior Sales Representative 18 Section II—Canadian Compensation Benchmarks for Inside Sales Personnel Profile of Survey Respondents 19 Compensation Trends for Inside Sales Personnel 22 Critical Issues 23 Section III—Sales Compensation Planning and Design The Shifting Seas of Sales Compensation 24 Communicating Your Sales Compensation Plan To Your Sales Team 27 Designing Sales Compensation for Inside Sales Teams 30

Section IV— Benefits 21st Century Cost Containment for Rising Group Insurance Premiums 32 What’s the Difference Between an American 401k and a Company-Sponsored Group RRSP? 38 The ABCs of Severance Packages: Is Your Company Prepared? 43 A Tailor-made Benefits Plan for Top Executives 48 Resources Section Glossary of Compensation Plan Terms and Position Titles 55

INTRODUCTION

The role of the sales professional has changed dramatically in recent years. But just as the sales professional’s responsibilities are changing face, so are compensation packages. Advances in technology, changing customer relationships and globalization have all impacted the way in which a sales professional’s performance is measured and rewarded. While for the majority of salespeople, compensation is about being paid a fair wage in return for their best efforts, for others it is a benchmark by which they can set goals and measure their performance. For still others, compensation acts as a marker used to keep track of who is winning the game. Whatever the case, compensation is not an issue to be overlooked or neglected. Sales managers, human resources personnel and business owners are faced with the task of developing sales compensation plans that support and underscore their company’s objectives. In addition to meeting specific objectives, sound compensation plans must also be competitive within the industry sector in which the company operates and possess the ability to retain sales personnel with proven sales abilities. Furthermore, management is also faced with the task of creating a motivating sales environment to retain top sales performers and ensure stable profit outcomes. With the heightened importance placed on compensation packages in recent years, it is no surprise that sales compensation questions are the most frequently asked questions by members of the Canadian Professional Sales Association (CPSA). New for 2008: The total cash compensation package for a senior sales representative has been outlined along with provincial averages for base salaries Our goal is to provide members with information to address their concerns. We have asked four experts in the field to provide information relevant to today’s sales and marketing professional. Our contributors focus on marketplace trends, compensation plan design and motivational issues. Anna Fredericks Manager, Sales Resource Centre January 2008

2007/2008 CPSA’s Sales Compensation Report 1

Acknowledgements Michel Dubé, Principle of Morneau, Sobeco, Coopers & Lybrand has contributed the national averages for positions in sales management, technical support, key accounts and customer service. Michel can be reached at (514) 392-7802 or by email at [email protected]. Michael Alvarez, Consultant of the Wynford Group has contributed the national averages for selected inside sales positions. The figures presented were excerpted from the Wynford Group’s 2006 Information & Advanced Technology Surveys (Sales and Call Centre Summary). Michael can be reached 1-877-264-5166 or by email at [email protected] Nick Bishop, Practice Leader of the Wynford Group has contributed the short article “Designing Sales Compensation for Inside Sales Teams.” Nick can be reached at 1-877-264-5166 or by email at [email protected] David Johnston, President Sales Resource Group a consulting and technology company that specializes in the audit, design, administration, reporting and outsourcing of sales compensation has contributed the article “Communicating Your Sales Compensation Plan To Your Sales Team” He can be reached at [email protected] or (905) 845-0192. Ally Motz, President & CEO SiriusDecisions Canada contributed the article “The Shifting Seas of Sales Compensation.” SiriusDecisions provides access to world-class sales and marketing experts, robust data, a network of your peers, best practice forums and conferences, and actionable sales and marketing strategies and tools that enable your company to achieve accelerated growth. You can reach Ally at (450) 965-7391 or via email [email protected]. Peter J. Merrick, BA, FMA, CFP, FCSI, is President of MerrickWealth.com, a fee-for-services Certified Financial Planner and executive benefit advisory firm in Toronto, Canada. He has contributed several articles to CPSA’s report. Peter is the author of “The Essential Individual Pension Plan Handbook” (Lexisnexis Canada, 2007) and was a presenter at the prestigious Canadian Institute of Chartered Accountants 2007 National Conference on Income Taxes. You can reach Peter at (416) 854-1776 or [email protected]


CANADIAN SALES REPRESENTATIVES’ TOTAL CASH COMPENSATION

The purpose of this article is to provide current market benchmarks for a selected group of sales related positions. The benchmark values were extracted from the annual Morneau Sobeco Compensation Survey of Sales and Marketing Positions. The survey results are based on data submitted by 217 companies in Canada, primarily located in Ontario, Quebec and Western Canada. Forty-three per cent of survey participants are in the manufacturing sector. Wholesale and retail trade accounts for 25% of participation, and the rest is distributed among other industries. The average sales volume of participating companies is $557 million. The first table presents current statistics on total cash compensation, including bonuses and commissions, for 13 sales-related positions.

2008 Total Cash Compensation - National (in thousands of dollars)

Directors Marketing and Sales

Divisional or Regional Sales

Number of observations 37 75 10th percentile 81.8 82.8 20th percentile 87.5 91.9 30th percentile 98.6 97.2 40th percentile 104.7 103.3 50th percentile 109.3 116.0 60th percentile 119.7 125.0 70th percentile 130.0 133.3 80th percentile 141.3 140.9 90th percentile 170.6 171.6 Average 119.0 122.0

The benchmark values were extracted from the annual Morneau Sobeco Compensation Survey of Sales and Marketing Positions.

The Œth percentile represents a point above which 1–Œ% and below which Œ% of observations falls when arranged in ascending order.


2008 Total Cash Compensation - National (cont.) (in thousands of dollars)

Managers Marketing and Sales

District Sales

Territory Sales

Number of observations 31 36 40 10th percentile 59.0 54.6 45.4 20th percentile 63.7 63.0 59.8 30th percentile 70.0 76.1 66.8 40th percentile 80.1 86.7 77.8 50th percentile 85.0 98.7 83.1 60th percentile 90.3 105.1 88.1 70th percentile 95.7 112.8 95.5 80th percentile 102.0 118.1 110.3 90th percentile 134.1 131.7 136.3 Average 92.0 99.0 87.8 Technical Sales Representatives

Junior

Intermediate

Senior

Number of observations 9 25 30 10th percentile 32.1 51.6 55.6 20th percentile 37.3 57.9 66.8 30th percentile 44.4 64.3 79.6 40th percentile 52.0 69.9 84.8 50th percentile 56.1 72.9 91.7 60th percentile 57.4 80.3 99.6 70th percentile 59.8 82.9 110.4 80th percentile 67.1 84.3 120.0 90th percentile 81.5 94.9 127.2 Average 56.3 74.3 93.6 Sales Representatives

Junior

Intermediate

Senior

Number of observations 16 59 43 10th percentile 33.8 42.5 55.2 20th percentile 36.3 47.8 59.1 30th percentile 39.4 50.4 65.3 40th percentile 42.7 54.3 69.4 50th percentile 44.4 58.0 72.3 60th percentile 45.4 60.0 79.8 70th percentile 46.7 62.3 87.2 80th percentile 52.5 65.3 91.7 90th percentile 55.9 76.0 133.2 Average 59.4 59.7 82.9 The Œth percentile represents a point above which 1–Œ% and below which Œ% of observations

falls when arranged in ascending order.


2008 Total Cash Compensation - National (cont.) (in thousands of dollars) Key Accounts and Customer Service

Key Accounts

Customer Service

Number of observations 40 79 10th percentile 63.5 33.8 20th percentile 68.9 36.6 30th percentile 76.3 39.7 40th percentile 79.0 41.3 50th percentile 83.4 43.4 60th percentile 93.2 44.6 70th percentile 102.3 47.2 80th percentile 111.1 53.0 90th percentile 118.0 62.2 Average 91.7 46.3 The Œth percentile represents a point above which 1–Œ% and below which Œ% of observations

falls when arranged in ascending order. The average total cash compensation levels increased by 5.5% this year, compared with an average 4.7% increase for the same positions last year.


Last year’s average survey results showed a decrease for the positions reviewed and these values have been appended below: 2007 Total Cash Compensation - National (cont’d) (in thousands of dollars) Directors Marketing and

Sales Divisional or Regional

Sales Number of observations 33 81 10th percentile 82.0 80.0 20th percentile 93.5 88.7 30th percentile 98.6 98.3 40th percentile 104.6 104.6 50th percentile 107.2 111.8 60th percentile 111.7 121.9 70th percentile 125.6 128.1 80th percentile 130.6 141.5 90th percentile 142.0 161.7 Average 112.2 120.4 Managers Marketing and

Sales District Sales

Territory Sales

Number of observations 25 35 28 10th percentile 54.5 60.9 60.0 20th percentile 58.4 66.5 64.5 30th percentile 64.0 70.1 66.3 40th percentile 69.5 77.9 73.5 50th percentile 78.9 94.1 79.2 60th percentile 82.9 99.8 84.2 70th percentile 89.7 102.7 98.8 80th percentile 95.6 111.3 133.0 90th percentile 101.2 128.9 148.1 Average 78.2 98.6 93.9 The Œth percentile represents a point above which 1–Œ% and below which Œ% of observations



2007 Total Cash Compensation - National (cont’d) (in thousands of dollars) Technical Sales Representatives

Junior

Intermediate

Senior

Number of observations 7 26 34 10th percentile 42.7 49.2 55.9 20th percentile 51.8 53.6 66.3 30th percentile 53.6 60.0 72.1 40th percentile 54.3 65.4 75.8 50th percentile 54.4 68.2 84.5 60th percentile 66.4 75.7 91.8 70th percentile 76.1 78.6 93.9 80th percentile 81.2 79.9 105.0 90th percentile 91.9 85.2 122.4 Average 64.7 70.8 89.5 Sales Representatives

Junior

Intermediate

Senior

Number of observations 16 62 41 10th percentile 31.5 36.9 57.5 20th percentile 32.8 44.2 60.1 30th percentile 34.4 47.5 64.9 40th percentile 37.4 50.9 68.5 50th percentile 40.3 53.8 72.7 60th percentile 43.2 57.3 76.7 70th percentile 45.0 61.2 86.9 80th percentile 48.2 66.5 99.5 90th percentile 52.4 86.6 117.2 Average 40.7 60.8 83.4 Key Accounts and Customer Service

Key Accounts

Customer Service

Number of observations 35 78 10th percentile 59.2 32.3 20th percentile 65.1 34.4 30th percentile 72.1 38.3 40th percentile 74.6 39.8 50th percentile 78.4 41.0 60th percentile 88.6 42.8 70th percentile 93.1 45.7 80th percentile 102.8 50.0 90th percentile 111.2 54.8 Average 87.3 43.0 The Œth percentile represents a point above which 1–Œ% and below which Œ% of observations



Changes between Current Results vs. 2007 Results in Total Cash Compensation Market Values The average total cash compensation levels increased by 5.5% this year, compared with an average 4.7% increase for the same positions last year. The highest increase in average total cash compensation was observed in the Junior Sales Representative position. The following table shows applicable indicators for all positions reviewed.

2008 Changes in Total Cash Compensation Values

Job Title 2008 vs. 2007 Marketing & Sales Director 6.0% Divisional or Regional Sales Director 1.3% Marketing & Sales Manager 17.7% District Sales Manager 0.4% Territory Sales Manager -6.5% Technical Sales Representative - Junior -12.9% Technical Sales Representative - Intermediate 4.9% Technical Sales Representative - Senior 4.7% Key Account Representative 5.0% Sales Representative - Junior 46.1% Sales Representative - Intermediate -1.9% Sales Representative - Senior -0.6% Customer Service Representative 7.7%


2007 Changes in Total Cash Compensation Values Job Title 2007 vs. 2006 Marketing and Sales Director -9.2% Divisional or Regional Sales Director 7.4% Marketing and Sales Manager -8.7% District Sales Manager 4.0% Territory Sales Manager 15.0% Technical Sales Representative - Junior 15.8% Technical Sales Representative - Intermediate 9.0% Technical Sales Representative - Senior 5.7% Key Account Representative 4.2% Sales Representative - Junior -6.3% Sales Representative - Intermediate 8.8% Sales Representative - Senior 10.9% Customer Service Representative 4.2%


Components of Total Cash Compensation

Our participants reported practices with various combinations of fixed base salary, bonuses and commissions. The following table presents the distribution of the cash compensation mix encountered for each benchmark position.

Job Title Salary

only Salary & bonuses

only

Salary & commis-

sions only

Salary, bonuses & commis-

sions

Commis-sions and bonuses

only

Commis-sions only

Marketing and Sales Director

5% 76% 5% 14% 0% 0%

Divisional or Regional Sales Director

9% 73% 5% 13% 0% 0%

Marketing & Sales Manager

19% 61% 13% 7% 0% 0%

District Sales Manager

6% 64% 19% 11% 0% 0%

Territory Sales Manager

8% 60% 18% 13% 3% 0%

Technical Sales Representative – Junior

33% 11% 44% 11% 0% 0%

Technical Sales Representative – Intermediate

4% 32% 40% 24% 0% 0%

Technical Sales Representative – Senior

10% 37% 40% 13% 0% 0%

Key Account Representative

3% 73% 18% 5% 3% 0%

Sales Representative – Junior

19% 56% 0% 25% 0% 0%

Sales Representative – Intermediate

13% 33% 33% 20% 0% 0%

Sales Representative – Senior

9% 41% 23% 25% 0% 2%

Customer Service Representative

37% 57% 5% 1% 0% 0%


2007 Components of Total Cash Compensation Job Title

Salary only

Salary & bonuses

only

Salary & commis-

sions only

Salary,

bonuses &

commis-sions

Commis-sions & bonuses

only

Commis-

sions only

Marketing and Sales Director 6% 71% 9% 15% 0% 0% Divisional or Regional Sales Director 11% 72% 7% 10% 0% 0% Marketing and Sales Manager 24% 56% 8% 12% 0% 0% District Sales Manager 3% 71% 9% 17% 0% 0% Territory Sales Manager 7% 61% 14% 14% 4% 0% Technical Sales - Junior 14% 29% 43% 14% 0% 0% Technical Sales - Intermediate 8% 42% 35% 15% 0% 0% Technical Sales - Senior 12% 38% 41% 9% 0% 0% Key Accounts Representative 3% 77% 14% 6% 0% 0% Sales Representative - Junior 19% 50% 19% 13% 0% 0% Sales Representative - Intermediate 13% 45% 26% 16% 0% 0% Sales Representative - Senior 7% 49% 17% 20% 0% 7% Customer Service Representative 44% 51% 3% 3% 0% 0%


The change in total cash compensation is mainly attributable to the decrease in “Salary and Bonuses only” programs. The table below summarizes the most recent annual changes, on average, in the total cash compensation mix for the 13 benchmark positions under review.

Average percentage point differences in 2008 vs. 2007 survey results – Total Cash Compensation Policies Salary only +0.3 Salary and Bonuses only -2.9 Salary and Commissions only +1.4 Salary, Bonuses and Commissions +1.4 Commissions and Bonuses only +0.2 Commissions only -0.4

Average percentage point differences in 2007 vs. 2006 survey results – Total Cash Compensation Policies Salary only -1.7 Salary and Bonuses only -0.1 Salary and Commissions only -0.1 Salary, Bonuses and Commissions +2.5 Commissions and Bonuses only = Commissions only -0.4


Percentages of Incentive and Base Salary as Components of Total Cash Compensation The table below shows the current weightings of fixed and variable pay as a percentage of total cash compensation for all benchmarks in 2008.

2008 Percentages of Incentive and Base Salary as Components of Total Cash Compensation

Job Title Base salary as a % of total cash

Bonuses as a % of total cash

Commissions as a % of total

cash Marketing and Sales Director 75% 13% 12% Divisional or Regional Sales Director

73% 11% 15%

Marketing and Sales Manager 74% 12% 14% District Sales Manager 66% 11% 23% Territory Sales Manager 58% 9% 33% Technical Sales Representative – Junior

45% 26% 29%

Technical Sales Representative - Intermediate

70% 11% 19%

Technical Sales Representative - Senior

66% 12% 22%

Key Account Representative 68% 10% 22% Sales Representative - Junior 91% 6% 3% Sales Representative - Intermediate

73% 7% 20%

Sales Representative - Senior 66% 9% 25% Customer Service Representative 78% 5% 17%


The next chart translates the figures of the preceding table into dollar figures

2008 Average Survey Results (thousands of $) Job Title Base

salary Bonuses Commis-

sions Total Cash

Marketing and Sales Director 89.1 15.1 14.8 119.0 Divisional or Regional Sales Director

89.5 13.7 18.8 122.0

Marketing and Sales Manager 68.1 11.3 12.7 92.0 District Sales Manager 65.5 11.0 22.4 99.0 Territory Sales Manager 51.0 8.1 28.8 87.8 Technical Sales Representative – Junior

25.4 14.4 16.6 56.3

Technical Sales Representative - Intermediate

51.7 8.3 14.3 74.3

Technical Sales Representative - Senior

62.2 11.3 20.1 93.6

Key Account Representative 62.2 9.5 20.0 91.7 Sales Representative - Junior 54.1 3.3 2.1 59.4 Sales Representative - Intermediate

43.3 4.2 12.2 59.7

Sales Representative - Senior 54.5 7.4 21.1 82.9 Customer Service Representative 36.0 2.5 7.8 46.3


2007 Percentages of Incentive and Base Salary as Components of Total Cash Compensation Job Title Base salary

as a % of total cash

Bonuses as a % of total cash

Commissions as a % of total

cash Marketing and Sales Director 66% 12% 23% Divisional or Regional Sales Director 65% 14% 21% Marketing and Sales Manager 73% 9% 19% District Sales Manager 66% 14% 20% Territory Sales Manager 58% 13% 29% Technical Sales Representative – Junior 60% 20% 20% Technical Sales Representative - Intermediate 72% 10% 18% Technical Sales Representative - Senior 67% 11% 22% Key Account Representative 82% 9% 9% Sales Representative - Junior 84% 7% 9% Sales Representative - Intermediate 71% 11% 18% Sales Representative - Senior 51% 10% 40% Customer Service Representative 91% 4% 5%

2007 Average Survey Results (thousands of $) Job Title Base

salary Bonuses Commissions Total

Cash Marketing and Sales Director 73.6 13.0 25.6 112.2 Divisional or Regional Sales Director 78.5 16.9 25.0 120.4 Marketing and Sales Manager 56.8 6.7 14.7 78.2 District Sales Manager 65.1 13.3 20.2 98.6 Territory Sales Manager 54.4 12.4 27.1 93.9 Technical Sales Representative – Junior 38.8 12.6 13.3 64.7 Technical Sales Representative - Intermediate 51.2 7.0 12.6 70.8 Technical Sales Representative - Senior 59.8 9.9 19.8 89.5 Key Account Representative 71.8 7.9 7.6 87.3 Sales Representative - Junior 34.0 2.8 3.8 40.7 Sales Representative - Intermediate 43.3 6.7 10.8 60.8 Sales Representative - Senior 42.2 8.2 33.0 83.4 Customer Service Representative 39.1 1.9 2.0 43.0


Differences in Base Salary Levels by Region The next table shows the regional differences in base pay offered to incumbents in sales and marketing positions by a typical survey participant in 18 regions.

2008 Differences in Base Salary Levels by Region*

Newfoundland 0.94 Nova Scotia 1.01 Prince Edward Island 0.88

New Brunswick 0.99

Québec (except Montréal) 0.97 Metropolitan Montréal 1.01 Greater Toronto Area 1.03 Southwest Ontario (south & west of Toronto)

1.01 Eastern and Northern Ontario (east & north of Toronto) 1.00

Manitoba (except Winnipeg) 0.96 Winnipeg Area 1.02 Saskatchewan (except Regina) 1.03 Regina Area 1.01

Metropolitan Calgary 1.04 Alberta except Calgary and Edmonton 0.99 Metropolitan Edmonton 1.05

British Columbia (except Vancouver) 1.03 Vancouver Area 1.03 *Example: Participant "A" operates in GTA and in Vancouver and reports an average base salary level of, 50k in Vancouver and of 55k in GTA. The applicable regional ratio for this participant will be of 1.05 in GTA (e.g. 55 / 52.5 - its "National Average") and, conversely, of 0.95 in Vancouver. The indicators in the table are averages of the ratios by participants with operations in more than one region for the job category (sales & marketing positions).

Performance Appraisal Criteria for Variable Cash Earnings (% of participants)

The next and last table presents the prevalence of performance indicators among our set of 217 participants for grants of bonuses or commissions to sales related positions.

2008 Performance Appraisal Criteria for Variable Cash Earnings (% of participants)

Financial Indicators (%) Non-financial Indicators (%)

Improved sales 72.3 Measurable non-financial individual objectives 59.3

Target profitability 59.6 Strategic objectives 53.3 Cost reduction 33.3 Discretionary judgment 47.5 Economic value added (EVA) 25 Customer satisfaction 41.8 Capital returns 23.6 Productivity gains 35.7 Shareholders return 9.7 Market share 29.3


2006/2007 Performance Appraisal Criteria for Variable Cash Earnings (% of participants) Financial Indicators (%) Non-financial Indicators (%) Improved sales 77.8 Measurable individual

objectives 59.7

Target profitability 68.7 Strategic objectives 52.2 Cost reduction 33.8 Customer satisfaction 45.9 Economic value added (EVA)

28.6 Discretionary judgment 44.2

Capital returns 26.2 Productivity gains 40.9 Shareholders return 12.3 Market share 29.9


Total Compensation Package of a Senior Sales Representative In Canada For 2008 Market practices pertaining to employee benefits follow cultural and industry patterns by job category. A Senior Sales Representative position is generally included in a “Management and Professional” job category. Typical group insurance coverage offered to managers and professionals includes health care, short and long term disability protection, dental care, professional services such as physiotherapy, acupuncture or vision examination, and life insurance. Compensation value of group insurance in this job category generally falls in the range of three to eight per cent of salary. Typically, large organizations offer a defined benefit plan that provides pension benefits at normal retirement age equal or up toto 1.5 to 2 per cent of “pensionable earnings” per year of service. The definition of pensionable earnings may or may not include full or partial bonuses and commission earnings. Approximately 50 per cent of employers do include bonuses and commissions in the definition of pensionable earnings. Defined pension benefits typically require annual employee contributions in the range of three to seven per cent of pensionable earnings. On the other hand, small organizations tend to offer group RRSPs or defined contribution arrangements to managers and professionals with employer contributions that fall in the range of four to five per cent of salary. Morneau Sobeco currently conducts a comprehensive national survey on vehicle policies, perquisites and other working conditions that are significant from a compensation standpoint. The detailed survey results by job category for 2007, including sales and marketing positions, will be published in January 2008.


SECTION II—CANADIAN COMPENSATION BENCHMARKS FOR INSIDE SALES PERSONNEL The growth of new sales channels, specialized sales knowledge and the rising costs of face-to-face selling have stimulated the creation of new sales roles and other customer-focused roles in Canadian businesses. These new roles actively contribute to the sales process by interacting with the customer at different stages in the sales/service relationship. When two or more telephone service representatives are engaged in a systematic program of inbound or outbound selling, customer service, market research, lead qualification, account management, collections etc., they exist in a specialized marketing business operation that is referred to as a “call centre.” These personnel are dedicated to servicing a marketplace from a distance via telecommunications, the Internet, other technologies and they act as a termination point for multiple distribution channels. Call centres have evolved from simple reactive order-taking situations to pro-active needs-based and one-stop service scenario’s. In the world of low margins and little customer loyalty, service excellence will continue to be the strategic weapon for the next millennium. In many cases the term service, appears to translate into providing callers access to one person capable of handling any query from start to finish wherever possible. This is more commonly referred to as the “universal agent” concept and it has radically changed the face of call centres. With this concept, call centres don’t just take or make telephone calls. They must integrate complex workflow processes with traditional call handling functions and utilize technologies that enable one universal agent to accomplish what was once handled by multiple departments and distribution channels in a single telephone call. Moreover, call centres have evolved to supporting multiple distribution channels including the Internet, interactive voice response, e-commerce, telephone and traditional sales personnel. The purpose of this article is to provide benchmarks for a selected group of call centre positions. The benchmark values were extracted from the annual Professional and Administrative and Contact Centre survey reports (2008) published by the Wynford Group. The Wynford Group collected data for


the 2008 survey report during 2007, from 55 organizations throughout Canada. Profile of Survey Respondents Survey respondents are represented evenly by geographic area.

DISTRIBUTION OF ORGANIZATIONS: BY LOCATIONThe IAT Surveys - 2007

Manitoba9%

Ontario17%

Quebec7%

Atlantic7%

Saskatchewan11%

Alberta32%

British Columbia17%

© The Wynford Group

Survey respondents are represented from 10 different industries: Advanced technology (6%) IT services (14%) Telecom (1%) Engineering, procurement & construction (11%) Financial services (9%) Manufacturing (9%) eCommerce/Internet solutions (5%) Entertainment/Multi-media (2%)

Public sector (9%) Software development (5%) Contact centres (3%) Logistics / transportation / distribution (6%) Retail (6%) Energy (6%) Utility (1%) Other sectors (7%)


Compensation Trends for Inside Sales Personnel Survey respondents reported the average amount of base salaries increased by 4.3 % (with 3.9% range increase) as compared to 3.21% in 2006. Base salary increases for 2008 are projected to average 4.0% (with 3.6% range increase). Base salary and salary range increases were highest in Alberta for 2007 at 5.1% and 4.4% respectively with these numbers projected to be 5.3% and 4.6% for 2008.

Select sales positions increased by as much as 10% for base pay. Positions that showed most significant increases in salary and bonus rates between 2006 and 2007 included Account Executives and Inside Sales Below please see base pay data for four select sales and marketing positions. Please note that variable pay has not been included and that data is available by province and municipality. Position Total

Eastern Canada

Total Western Canada

National

Account Executive 2 No. of observations 173 138 311 50th percentile $109,476 $109,600 $107,000 Average $102,187 $105,795 $103,788 Sales Representative 3 No. of observations 129 155 284 50th percentile $55,279 $54,522 $55,344 Average $59,639 $57,400 $58,417 Call Centre Sales (Inbound) Rep #2

No. of observations 2635 730 3365 50th percentile $39,251 $39,392 $39,474 Average $38,840 $39,857 $39,061 Call Centre Sales (Inbound) Rep #1

No. of observations 2396 543 2939 50th percentile $35,115 $32,760 $34,268 Average $35,370 $32,193 $34,783

From The Wynford Group’s 2007 Professional & Administrative and Contact Centre Surveys ©

2007/2008 CPSA’s Sales Compensation and Benefits Report 22

The majority of organizations aim to have their sales professionals compensated at the 50th percentile. The 50th percentile is the point where half of data points are above and half are below (middle).

Critical Issues

The following table outlines the critical issues identified by employers and employees alike when it comes to compensation for insides sales personnel:

CRITICAL ISSUESThe IAT Surveys - 2007

Career Planning / Development Opportunities

Challenging Work

Clearly Defined Goals / Expectations

Competitive Compensation

Comprehensive Benefits Package

Effective Leadership

Flexible Work Environment

Learning Opportunities

Organization Culture / Fit

Recognition for Contributions

Work / Life Balance

EmployerEmployee

© The Wynford Group


SECTION III—SALES COMPENSATION PLANNING AND DESIGN THE SHIFTING SEAS OF SALES COMPENSATION The speed of business change within the world of B2B has forced sales leaders to rethink their sales compensation strategies. Nothing changes but the changes. Leave it to that old philosopher Gary Busey to help put into words the ever-shifting compensation plan environment that is challenging time-honored, old school beliefs. You can do a lot of things to salespeople, but make a mistake with their comp and be ready to face a revolt at best, or at worst a mass exodus that dramatically impacts topline revenue. Today, we are seeing sales leaders constantly rethinking and rebuilding their compensation plans at least annually – if not more frequently. In this article, we’ll identify developing sales compensation trends and look at five key “must practices” that you should consider during your next compensation review. The New Drivers Overhauling a compensation plan is risky; this is why fewer than 10 per cent of sales organizations completely redesign their compensation structure in a given year. The other 90 per cent make anywhere from minor tweaks to major alterations driven by organization evolution, offering expansion and demand for greater insight and accountability to performance and costs of sales. These drivers have manifested themselves in three major trends, including: • Increased complexity—Demands for greater visibility and transparency by finance and business units have led to an increase in both the number and sophistication of comp plan metrics, including margin, profit, annualized revenue or non-quota contributing recurring. Compounding the problem is the increasing number of specialized sales roles, each of which requires its own compensation plan. Along with expected role expansion associated with an evolution to a tiered sales structure or the movement to a hunter/farmer designation, product specialists are increasingly being deployed to offset sales capacity. Inside sales roles are expanding for teleprospecting (e.g. partnered sales and


business development), while channel managers are asked to sell and educate partners. Each role must be credited, which leads to a complex crediting matrix and a chief financial officer scratching his or her head when they see how many people are being paid on a single transaction. Crediting splits for national/global accounts with local sales resources or channel partners often requires management intervention to determine who should be paid. Only metrics that can be measured reliably and objectively should be selected for compensation; other metrics such as activity, accuracy, productivity, process utilization, SFA adoption, connect rate or passed leads should be coaching metrics that are important but not part of the target income equation. New sales roles need specific definitions to craft variations of the core plan to ensure their behaviors are motivated by factors that reflect their focus. Rules of engagement documents and a governance process and committee are becoming critical to ensure both the rule and the spirit of the compensation plan is being upheld. • Balanced performance—Salespeople tend to sell what they know, which is fine until organizations increase the complexity and diversity of their product and service offerings through either innovation or acquisition. A dollar is not necessarily a dollar when you factor in the margin and profit implication from various categories of products, services, renewable services or other non-core offerings, but salespeople are more likely not to embrace new offerings if they are paid on a single metric like revenue. Delivering balanced performance requires the creation of a balanced plan to drive a more complex product/service suite, including quotas established by product type with accelerators based on financial contribution. When combined with a strong sales readiness program to coordinate product introductions, manage sales knowledge and deliver relevant customer messages, this type of compensation plan can really drive noticeable incremental results. • Execution—There has always been tremendous pressure to get sales paid accurately and on time; this was difficult enough when plans were tied to a single metric and paid to a couple of sales roles. With the speed and frequency sales management needs/wants to adjust the plan; the rewarding of sales on metrics that are difficult to track or crediting structures that are different than forecast hierarchies; the demands of compliance for audit and reporting capabilities; and executive requirements for modeling data and analytics, most commission systems can no longer keep up. Historically, more administrative staff was devoted to manually processing comp plans, quotas and special needs, but now, incentive compensation management (ICM) software applications are quickly gaining traction. Beyond compensation calculation, sales performance management capabilities are being developed that are expanding the scope of what these systems can do.


Automated plan distribution and acknowledgement, quota management and integration with SFA systems are just the footings for a future state of sales operations management that will integrate sales performance, opportunity and territory management functionality with marketing measurements and costs of sales data to create a real-time comprehensive view of sales. The “Must Practices” Although the challenges of developing, managing and maintaining the sales compensation plan are numerous and difficult, there are five “must” practices every compensation team must keep in mind: • Keep it as simple as possible. If a salesperson can’t describe what they get paid for, the compensation plan has lost its impact. Develop a simple plan that incorporates company goals with the objectives of the sales role. • Align goals. Teamwork is built on the premise of the pursuit of common goals. Alignment of salespeople, specialists and their managers through comp plans and quotas will allow them to focus on the customer, not manipulating the situation for personal gain. • Pay accurately and on time. Nothing will bring a sales force to its knees and away from customers quicker than confusing transaction registers and inaccurate commission checks. Develop compensation plans that you are confident your commission systems can handle, even if that means giving up on innovative compensation strategies. • Release plans and quotas at year/quarter start. Salespeople cannot truly engage in selling until they know their plan, quota and territory. Compensation plan project management ensures that when salespeople leave the kickoff, they are ready to play. • Develop a reconciliation process. Mistakes in payment are bound to happen, and interpretations will need to be made regarding your compensation plan structures. Implementation of a clean, trusted process for submitting and reconciling errors will get sales back on the street and maintain confidence. The creation of an escalation path and governance board for crediting and interpretation will further improve this confidence. Ally Motz, President & CEO SiriusDecisions Canada contributed the article “The Shifting Seas of Sales Compensation.” SiriusDecisions provides access to world-class sales and marketing experts, robust data, a network of your peers, best practice forums and conferences, and actionable sales and marketing strategies and tools that enable your company to achieve accelerated growth. You can reach Ally at (450) 965-7391 or via email [email protected].


COMMUNICATING YOUR SALES COMPENSATION PLAN TO YOUR SALES TEAM Communication issues are the greatest problem in the corporate world today, particularly in sales compensation. Most organizations struggle to communicate clearly with their customers, the people paying for their products. Internally, they do an even worse job of communicating to their salespeople in whom they invest both fixed and incentive compensation to secure, manage and grow their business. Sales compensation is all about communication. It is a critical management tool to ensure that salespeople understand what is expected of them and what they can expect if they deliver. To be successful, the sales compensation plan should tell salespeople what you value and want to pay them for and also where to spend their time and effort. In focus groups held with sales representatives, the most common reply to how do you feel about your sales compensation plan is “I have no idea.” Why is it that sales organizations have such trouble communicating with their field sales force? Most often, the plans are designed and developed with the financial targets in mind, and the implementation focuses on getting the plan out, not making sure that the plan is well understood. It is most common that the sales compensation plan is late being rolled out to the field (in some cases up to four to six months into the fiscal year). This is a tremendous waste, particularly if you recognize that the objective with the sales incentive plan is to influence the sales behavior and results. A plan delivered part way into the fiscal year basically eliminates its potential in influencing sales results. By the time salespeople have digested it and incorporated it into their sales planning, there is little chance that it will play any significant role in their sales efforts. Plans should be rolled out on time and clearly communicated. In addition to lateness, another major problem is the failure to link the design and measures of the plan to the sales objectives. When there is poor communication regarding the link between business goals and sales strategies, and the behaviours and activities associated in tactical execution, performance suffers. Carrots and Sticks


Salespeople are used to change in their sales compensation plans. In fact, the research shows the average sales organization significantly changes its sales compensation plans every three years. In many organizations, there are changes made every year as the sales group tries to find the right combination of “carrots” and “sticks” to achieve their goals. When changes to the sales compensation plan are made, those affected need to understand not only the plan design change, but the rationale behind it. Understanding the reason for the change and the link to sales strategy allows them to commit to execution and achievement with the knowledge of why they are doing it. Most sales leaders have the best of intentions when they implement the plan for the new fiscal year. They are looking for improvement in account management, growth and a focus on solutions selling. All are worthy goals. However, they lack the detail necessary to ensure a focused and well executed sales approach to achieve expected results. This lack of detail in the steps and expectations for how the accounts will be managed and what accounts should be focused on to achieve the growth (including new business criteria), as well as the measures and assessment of the quality of the solution, all leads to the same problem: interpretation. When salespeople are not explicitly told your expectations for execution, where to focus, and the important metrics, they interpret the situation and they make decisions about what you want. However, they do not do it with malice. We all interpret differently, based upon our past experiences, successes and failures. This individual interpretation results in everyone going off in their own well-meaning direction to deliver what they believe is the “correct” result. Some are successful, but many end up confused and disillusioned. The results of poor communication are significant. Not only does it result in poor performance against quota, but there is also a loss of commitment, lack of a common direction and wasted efforts, and the organizational drain on resources to support these divergent efforts is considerable. Recognition and Commitment So, what then is the organization to do? The first and most important factors are recognition and commitment. Communication is an integral part of the sales compensation design and implementation process. It starts with the launch of the project and for best practice organizations it doesn’t end, but is a continuing part of the on-going interaction with the field and their performance management. Recognizing the value in that interaction (both the quantity/frequency and quality of the information) requires a commitment and dedication of resources to make it happen. Some


organizations spend many thousands of dollars on consulting and dedicate hundreds of hours of management and administrative time to create good plans and then negate their value to the organization when they send them out by fax or e-mail. What a colossal waste of manpower and resources. Another critical element to optimizing the effectiveness of your sales compensation plan is being aware of the different constituents in the sales compensation process and their specific information needs. Keep Everyone in the Loop Executives must understand the impact of the new design for the sales and broader organization, what the costs will be and the financial implications. Sales managers will want to know what questions to expect and what to answer. Salespeople must know how the plan and any changes will affect the way they sell and what the potential impact will be on their income. Administrators and IT will ask “How do I administer this? What data do you need and where do I get it from? What are the calculations, how frequently do I pay them and in what format do you want the tracking and reporting done?” All have different needs, all are critical to the process, and all play an important role in supporting sales execution. Everyone needs a common understanding to build the desired teamwork and create a motivational environment, but only if they each have a clear understanding of their expected contribution and required performance. Finally, most sales forces work remote from the head office, often out of their homes and with limited supervision and they lack the intimate face-to-face contact of those working in headquarters. These people are the second-class sales citizens of the organization whose isolated work environment is exacerbated by the deafening silence from head office. Communication of the sales compensation plan and their on-going performance against targets is crucial to achievement of strong sales performance in the field and a focused sales approach to execution. The sales compensation plan is one facet of the sales performance puzzle that is maximized by good management and strong, effective communication. David Johnston is president of Sales Resource Group Inc. a consulting and technology company that specializes in the audit, design, administration, reporting and outsourcing of sales compensation. He can be reached at [email protected] or (905) 845-0192.

LANNING


DESIGNING SALES COMPENSATION FOR INSIDE SALES TEAMS

Great salespeople are an asset to any organization, every company wants them and when you recruit a good sales professional you need to retain them. An important part of the attraction and retention package for sales professionals is the compensation package. The best sales professionals know that they will achieve a lot for you so they want to know what their rewards will be in return. There are a number of myths and legends associated with sales compensation and I have identified the most common so you can dispose of the myths and keep the wisdom.

1. “You have to keep base pay low in order to keep the sales team hungry” Not true, low base pay will just attract inferior candidates. Your best sales professionals will always more than pay back their costs, so don’t undercut on the base pay. Therefore, your strategy should be to keep up with the market rate. To determine what is the right market rate, it is essential to get good salary survey information rather than rely on anecdotal information or experience of one or two recruitment campaigns. 2. “What gets paid bonus gets done” Definitely true, so design of sales bonus or commission schemes is very important. The sales bonus scheme has a profound effect on your sales team behaviour. The design of sales bonuses can have a dynamic effect on sales productivity or can lead to dysfunctional sales behaviour ranging from over aggression to lack of follow-up. It is essential that the design of your sales incentive package is right for your business, your product or service at this time. An idea that works in another business may be wholly inappropriate for your business at this time. To determine the exact incentive structure for your business, you need to work with a specialist compensation consultant, who can take you through the process of determining your needs and what you can afford to put into your sales incentive structure.


3. “You shouldn’t change your incentive scheme until you need to”

Not true, the best incentive schemes are those designs that are adaptable to change and modification. Sales people can get used to a commission or incentive structure and know how to work the system. Therefore, it is important to regularly review the way that your incentives are structured in order that they can be kept fresh, interesting and provide stimulus for your sales teams.

4. “Great sales people are born not made” Total nonsense, there is no such race or ethnic group as sales, there are no special maternity wards for sales babies. In fact, some of the worst sales people are those who are called or think they are “natural salesmen”. These days those who are successful in sales have superior product and customer knowledge. They put together sales strategies, prioritize their customer targets and help their customers win by providing great service and support. All these skills have to be learned and even more important they have to be identified and rewarded. By working with experienced compensation consultants you can identify the behaviours and skills in your sales team that you want to develop, encourage and reward. Your customers need and deserve sales professionals that are more than just “nice people”, they want your representatives to be able to help support and develop their business as a partner. As markets become more and more competitive, sales and sales professionals have never been more important. They are the key to a successful business and deserve to have the most innovative arrangements in their compensation package. Nick Bishop, Practice Leader of the Wynford Group has contributed the short article “Designing Sales Compensation for Inside Sales Teams. Nick can be reached at 1-877-264-5166 or by email at [email protected]


SECTION IV—BENEFITS 21ST CENTURY COST CONTAINMENT FOR RISING GROUP INSURANCE PREMIUMS In the face of Canada’s public health care crisis, providing your employees with adequate and competitive health and dental coverage has never been more important. In 2005, more than $142 billion was spent for health care in Canada with 70 per cent of the costs paid for by the federal and provincial governments’ publicly funded system. Corporate Canada paid for most of the remaining 30 per cent of non-essential medical and dental expenses, according to the Canadian Institute for Health Information and Statistics Canada. While employer medical and dental plans were originally designed to be supplementary to the publicly funded government plan, as a result of the federal and provincial cut backs in health care services employers and private insurers across this country have had to alter and redesign their medical and dental plans to keep up with emerging trends of higher claims and new cost realities. In an age where publicly covered services continue to be reduced, we are likely to see Corporate Canada’s share continue to increase in the coming years. In the midst of these economic pressures on the current health care system, employees are demanding an enriched company medical and dental benefit plan. While the traditional corporate employee medical and dental benefit plan in Canada provides coverage for semi-private hospital rooms, prescription drugs, dental, chiropractors, physiotherapists, vision care, extended health coverage and travel medical insurance, employees are asking for more options then ever before. Opinions on what to add are largely influenced by age and experience - items like teeth whitening can compete with orthotics. Older employees want expanded drug coverage, while younger workers are concerned about their deductibles. The end result is employees want choice and employers want/need to contain their costs. The vast majority of Canadian small and mid-sized businesses offer medical and dental benefits to their workforces by utilizing insurance carriers. With the consolidation frenzy of the last decade, the number of insurance carriers has dwindled in an effort to make the Canadian players more globally


competitive. This new, streamlined landscape has been good for the carriers, but not for the small- and medium sized Canadian business, which have been underserved by the carriers focused on delivering shareholder value with big premium clients which are $500,000 or more in annual premiums. The increasing pressures on the current health care system, the consolidation of the insurance industry and the growing employee demand for more flexible and expanded coverage is having the greatest impact on the small and medium-sized Canadian business. With health and dental care coverage escalating by approximately 15% for health and 7% for dental. Small and medium sized employers are facing uncontrollable and unpredictable costs to their businesses to provide these benefits. Employers have tried to curtail these costs by introducing annual limits, co-insurance, deductibles and exclusions to their medical and dental plans. Upon closer review of the average group medical and dental policy for small to mid size businesses, usually only 60% to 75% of the overall premium dollars are ear marked for payment for eligible claims. The remaining portions of these premiums are used to pay administration cost, create reserves, pay commissions and earn insurance carriers profits for shareholders. As an alternative to the traditional medical and dental insurance solution, some employers are choosing to move towards the Administrative Services Only (ASO) model offered by traditional insurance companies and third party administrators. There are generally three components to this model: a)Self-Insurance - The employer self-insures, assuming the cost of all claims. b)Stop Loss Insurance - To reduce the risk of a large employee claim, Stop Loss insurance provided by a traditional carrier or specialty provider is combined with the self-insurance to payout claims beyond a certain level. The premium for this reduced level of insurance is reasonably affordable. c) Third Party Administrator (TPA)- In order for CRA to allow the cost for medical and dental plans to be tax deductible for the employer and the benefits to be non-taxable in the hands of employees the administration of these plans operated through the ASO model must be handled by a third party. By avoiding a great deal of the administrative costs and reserves incurred by traditional insurance companies, this model allows the employer to pay more claims with every dollar spent, and offers greater flexibility when designing a plan. Under the ASO model, the company assumes the cost of predictable claims, and purchases Stop Loss insurance for the catastrophic risk for unpredictable large claims.


When an insurance company assumes a small business’ (under 50 lives) full health and dental risk from $1 to $3,500, the premium is high. Under the Stop Loss conditions, where the risk and expenses for an insurance company start only after the first $3,500 per employee per year for eligible medical and dental expenses, the results employers could see is their costs reduced significantly to as much as 10% - 40% from that of traditional group medical and dental insurance. ASO and Insured Plans in ActionA small transportation company in Ontario with approximately 70 employees, over the past three years faced a number of challenges which involved sky rocketing group insurance plan premiums increasing annual at 10%. In a competitive industry with only 5% profit margins the company had to take immediate action. This company outlined that it wanted to achieve two objectives when reviewing its group insurance plan. 1) Provide an enhanced medical and dental plan that would be attractive to new and existing personnel. 2) Maintain and if possibly reduce expenditures on its balance sheet. After a thorough consultation, the corporate benefits program was reengineered to meet the company’s objectives. This was accomplished by modifying the existing fully insured group plan to an ASO and insured model. After the new solution was implemented, annual premiums went from $403,562 to $239,706, a 40% savings in year one of the new plan and in year two the premiums for ASO and insured plan increased by 5.5% instead of the10% premium increases seen by the traditional group insured plan. Based on the above assumptions this company will realize an accumulative savings by transitioning from the traditional group insured plan to the new ASO and insurance plan totaling $3,345,439 over the next 10 years. Had the employer paid for the entire plan these savings will have been equivalent to the company generating $67 Million of gross revenue during the same 10 year period.


Regardless of whether employers continue with traditional group insurance plans or adopt the ASO model, employers need to review their plan designs and understand where employee spending is occurring. It is strongly recommended that the employer include Stop Loss insurance coverage with a reputable provider along with a pooled out of province, out of country travel insurance program. Now with the ASO model the cost of benefits are directly claim driven versus premium driven of the old traditional insurance carrier plan model. Third party administrators and insures will report all claims by employee by category (drug, dental, paramedical, hospital, vision) to the employer. In accordance with PIPEDA the employees’ names are not disclosed due to


federal privacy laws. With this information, employers together with their administrators are tooled to act to control skyrocketing medical and dental costs. If an employee or their family has large drug claims, a drug cost management program can be initiated. While it is recommended, if the employer chooses not to include stop loss insurance coverage in their ASO program there are additional provincial funded drug programs that employees can access that have high drug utilization. This falls outside of the scope of employer provided coverage but represents an additional option that individuals can access when drugs are not covered by their employer. In the case of Trillium, Ontario’s Provincial drug program, residents must pay an out-of-pocket deductible based on their family net income and the number of their dependant children. The Provincial drug formula is reviewed regularly and not all drugs are covered by these provincial funded drug plans. Lastly, adopting the ASO model allows employers to provide either Health Spending Accounts (HSA’s) or enhanced benefits for key executives within an organization. An ASO can be structured to provide varying reimbursement limits to different classification of employees (i.e. exec, part-time staff, etc.). Each employee classification can be assigned an annual reimbursement limit, with different classes of employees with differing reimbursement limits. In this competitive employment environment, employers looking to attract and keep key people, are finding that offering enhanced executive medical and dental plans gives these employers an edge over their competitors aiming to achieve the same results. Enhanced executive medical coverage using the ASO model for key people within an organization in addition to traditional health care coverage can include the rest of an individual’s costs, such as the following: • insurance premiums paid by the executive/employee or the individual’s

spouse for private health and dental plans; • cosmetic dental and medical treatment; • over-the-counter drugs, provided they are prescribed by a physician; • drugs for conditions sometimes excluded under conventional plans; • facilities and services - special school, alcohol/drug addiction, nursing

home care, institution for mental or physical handicap, licensed private hospital, semi-private or private charges in a hospital, care of a person who has been certified as mentally incompetent, care of a blind person, and full-time attendants in a nursing home, fertility clinics;

• laser eye surgery;


• professional services of a dietician, acupuncturist, psychologist or nutritionist;

• dental care (preventive/restorative/orthodontic); and, • medical equipment and devices.

Individually, employers have no say over the direction of government policy towards healthcare or how the Canadian economy will behave. But what they do have is complete control over how they choose to navigate with their employees through these challenging times by providing medical and dental benefit solutions that address the needs of both their company and their people. It is how corporations act during these periods of transition that will result in creating goodwill - and profitable results.


WHAT’S THE DIFFERENCE BETWEEN AN AMERICAN 401K AND A COMPANY-SPONSORED GROUP RRSP? Sometime ago, I received an email that read: “Peter, I am the chief financial officer with a midsize software company in New York state. My company has just purchased a Canadian firm with more than 200 employees. We are seeking your assistance to help us with the set-up of an equivalent to the 401k plan for our new Canadian workforce. Can you refer us to a competent resource?” The Canadian equivalent to the 401k is known as the Group RRSP. Unfortunately, very little has been written to act as a primer comparing a 401k plan to similar employee registered retirement plans for American companies that are in the process of locating in Canada or who have acquired a Canadian company. This should be very surprising to the reader since Canada is the United States' largest trading partner of goods and services with more than $518 billion of cross border trade in 2007, according to the U.S. Census Bureau. This partnership has been accelerating since 1984 when then-Prime Minister Brian Mulroney declared Canada “open for business” with the dismantling of the Foreign Investment Review Agency, a Canadian protectionist agency, coupled with the passing of the Investment Canada Act (ICA). A December 2005 report by the Canadian Centre for Policy Alternatives showed Canadian owned companies valued at more than $620.7 billion had been taken over by non-resident-controlled corporations since Investment Canada started keeping records of these transactions in 1985. Just in the last two years, $156 billion worth of domestic companies have been sold into foreign hands. Of those, the majority of these takeovers were by U.S. interests. This has all occurred within a country which Statistics Canada says has a population of 33 million people, a 2007 GDP of $1.274 trillion, and a national debt of only $467.3 billion. In the later part of this decade, Canada has successfully avoided an economic recession while maintaining the healthiest financial statements of all the Group of Eight Nations (G8). All things being equal, if we were to remove the Canadian publicly funded healthcare system from the equation the difference between the Canadian and U.S. economies are marginal at best. The Fraser Institute’s Economic Freedom of the World 2007 Annual Report says the United States and


Canada ranked together with Britain in fifth spot as the most economically free, open, and competitive economies in the world today. It is this continuous trend towards integration of the economies of the United States and its partner to the north that has prompted me to create this primer to decipher the secret code between the U.S. 401k and the Canadian Group RRSP and help demystify these two great retirement plans for employers on both sides of the 49th Parallel. 401k Versus Group RRSP The story of the 401k begins in 1978 when the U.S. Congress amended the Internal Revenue Code to add section 401(k). The birth of the RRSP occurred more than 20 years prior in 1957 when the Canadian federal parliament passed legislation amending the Canadian Income Tax Act to include these retirement plans. Both retirement plans are similar in that they allow workers to save for retirement while deferring income tax on the saved money and earnings until withdrawal. Found within the plan text of both the 401k and the Group RRSP is the voluntary nature of membership for all employees. For an employee to be eligible to participate in a 401k, they have the choice to become a member of this plan the first day of each calendar quarter, following the participant’s date of employment. Eligibility and membership in a Group RRSP is similar to the 401k. However, in a Group RRSP there is no legislative requirement to limit or grant eligibility. Employers may set eligibility rule for their Group RRSP to suit their needs. The normal retirement age for a 401k participant is after their 65th birthday. The earliest that a 401k participant can withdraw income is at age 59½ and the lastest is age 70½. The normal retirement date for a Group RRSP member is very flexible and may be set by the employer as age 65 or earlier. Group RRSP participants can enjoy the benefits of a registered plan until December 31 of the year after they turn age 71. At that time, members must convert all their RRSPs into a Registered Retirement Income Fund (RRIF) or an annuity and start withdrawing money from their retirement plan. Other main differences between the 401k and the Group RRSP revolve around the maximum allowable employer matching contributions rules and eligibility rules.


401k employer contributions can be up to 100% of an employee’s pre-tax compensation. 401k employee maximum contribution limits for 2008 for individuals under age 50 are $15,500 and for 401k participants age 50 and older limits are $20,500 annually. As of 2009, 401k maximum contribution limits will be indexed to inflation. While the maximum contribution into a Group RRSP (both employer and employee) allowed by the Canada Revenue Agency is the lesser of 18 per cent of last year’s earned income of the employee – up to a maximum of $20,000 in 2008, $21,000 in 2009, $22,000 in 2010, and indexed thereafter. If the 401k maximum contribution amounts are not used in the year that they are awarded the member of the plan is not allowed to carry that unused room forward to future years to make contributions into these plans. RRSP unused room can be carried forward indefinitely. In addition and individual can accumulate unused RRSP room going back to 1991. The rules for vesting the employer’s contributions into the 401k for the member differ greatly from the Group RRSP. The vesting rule of an employer’s contributions for the 401k by law is six years. The Group RRSP vests an employer’s contributions in the employee’s hands as soon as the employer contributions are remitted to the employee’s RRSP account. Salary Deferrals However, employee salary deferrals into a 401k are immediately 100 per cent vested – that is, the money that an employee has put aside through salary deferrals cannot be forfeited. When an employee leaves employment, he/she is entitled to those deferrals, plus any investment gains (or minus losses) on their deferrals. Many American companies can rest at ease knowing that an RRSP can accommodate the 401(k) contributions formula. Employee and employer contributions are remitted monthly for both the Group RRSP and 401k. If the employer matches the employee contribution, these matching contributions are also remitted monthly. Within both the 401k and the Group RRSP, transfers from other similar registered plans are allowed into these plans. In addition, monies within these plans may be transferred out to similar registered plans as well. Both transfers into the 401k and the Group RRSP and transfers out to other registered retirement plans will not trigger taxes by either the Internal Revenue Service (IRS) or Canada Revenue Agency (CRA) for their members choosing to do so.


Participants in a 401k may be permitted to access funds from these plans subject to the rules set within the individual 401k plan text for reasons other than retirement. These allowable 401k withdrawals may occur for the purchase of a primary residence or to avoid foreclosure on a primary residence. 401k funds can also be used to pay for post-secondary schooling within a 12-month period, medical expenses, and funeral expenses. In regards to the Group RRSP, registered assets are not assignable and cannot be used as collateral for a loan, except for an interest-free, tax-free withdrawal for Home Buyers Plans or other eligible Canadian government program such as the Lifelong Learning Program. Under the RRSP Home Buyers Plan, the maximum that can be withdrawn is $20,000 and the withdrawal amount must be repaid into any RRSP within 15 years, in no more than 15 equal yearly installments. Although $20,000 can be withdrawn from an RRSP over four years to pay for a post-secondary education using the Lifelong Learning Program, the most that can be taken out of an RRSP in one calendar year is $10,000. The participant has 10 years to repay the money borrowed from their RRSP. Required monies not repaid back into the Group RRSP for either the Home Buyers Plan or the Lifelong Learning Program are counted as income by the RRSP member for that year and taxed. Both the 401k and the Group RRSP have taxes withheld on funds withdrawn out of these plans for retirement. With a Group RRSP, the plan must allow for withdrawals at the employee’s discretion. However, deterrents from withdrawing funds can be imposed such eliminating the right to future employer contributions for a period of time. Informed Decisions In both Canada and the U.S., there are rules revolving around what employers and plan sponsors are required to communicate to their plan participants about their plans to help their members make informed decisions. All 401k plans must follow the Employee Retirement Income Security Act (ERISA). ERISA is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary duties for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get


benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty. Most providers offering Group RRSPs have procedures that are consistent with ERISA and comply with the Canadian Capital Accumulation Plan (CAP) Guidelines. CAPs include all Group RRSPs, Defined Contribution pension plans, deferred profit sharing plans, employee profit sharing plans, and all other types of employee non-registered savings plans in which employees make their own investment decisions. One of the guidelines is employers are responsible for providing access to investment decision-making tools and for cautioning employees that they ought to obtain independent investment advice. Obviously, setting up Canadian retirement benefits such as Group RRSPs, DC pension plan, Retirement Compensation Arrangement, Employee Profit Sharing Plan, Defined Benefit pension plan, or group medical and dental plan for American companies locating in Canada requires specialties in areas as diverse as the Canada/U.S. Tax Treaty, the Employee Retirement Income Security Act (U.S.), and Canadian Capital Accumulation Plan Guidelines, accounting, actuary evaluation, investment management, pension legislation, employment law, and employee benefit plan construction. Many employers and their trusted advisors will need to seek educational services to aid them in the set-up, maintenance, and wind-up stages of these employee group benefits. Therefore, it is well worth the time and money to hire a skilled certified financial planner who possesses this expertise to assist in the design, implementation, maintenance, and wind-up of these solutions.


THE ABC’S OF SEVERANCE PACKAGES: IS YOUR COMPANY PREPARED? We can choose to use whatever language we like: downsizing, rightsizing or firing, in the end, the result of losing one’s job can be devastating. Companies provide severance packages for a range of reasons, and most firms are good corporate Canadian citizens, wanting to help their former employees. Their reasons vary from wishing to be known as fair so they can, perhaps in the future, recruit top talent when the economy improves or they may want laid-off workers to have some reason to sign legal agreements designed to protect the company. Legal aspects The last thing a company would want to do would be to put in place a downsizing program and then be sued for it. Right off the bat, they’d pay more money for legal fees—and their HR staff would be trapped in legal proceedings. Unfortunately, many employers and employees negotiate severance packages at the time the employee is fired. Many companies have found that the best way to avoid any confusion or misunderstanding between their employee and themselves at the time of termination is to have a written company policy in force on termination and severance packages which is agreed to when every employee signs their employment contract. Each province has a piece of legislation like the Ontario Employment Standards Act (ESA). The ESA establishes minimum standards for termination and severance pay. Further, the common law requires employers to provide employees who are terminated without cause with reasonable notice. In reality, what a separation package is doing is providing employees with money in lieu of reasonable notice. According to employment and labour lawyer Michael Sherrard, of the Toronto-based firm Sherrard Kuzz LLP, “One of the most significant requirements under employment standards legislation is the minimum standard for notice of termination and severance pay.” In Ontario, employers are required to provide notice of termination to employees who are terminated without cause who have been employed for three months or more at the time of the termination.


This notice of termination requirement increases with each year of employment to a maximum of eight weeks’ notice owing to an employee who has been employed for eight years or more. An employer is also required to provide an employee with severance pay if, at the time of termination, the employee has been employed for five or more years and the employer has a payroll of $2.5 million or more. Severance pay is also tied to the employee’s length of employment and increases for every year of employment to a maximum entitlement of 26 weeks of severance pay. For example, an employee who had 10 years of employment at the time of termination, with an employer who had a payroll of $3 million, would be entitled to 18 weeks (10 weeks of severance pay and eight weeks’ notice of termination). Common law employee entitlements are almost always greater than entitlements under ESA legislation which are just minimums. Generally, Sherrard has found that, as an example, “under the common law, a middle- aged manager with 10 years service who is terminated without cause would likely be awarded between nine to 12 months, subject to the duty to mitigate. Senior executives with longer service may be entitled to as much as 24 months notice with some recent cases seeing greater periods awarded by the courts where there are unique circumstances.” When the economy was very hot, not so long ago, many highly qualified individuals were lured away from secure positions to join new companies to only find that within a year they were unemployed. Sherrard refers to this type of situation as “inducement or luring.” In these cases, the new employer under the common law could find itself responsible for paying damages to these employees with consideration being given by the courts for not only the length of employment with the employer, but also the period of employment with the previous employer. During the past decade, an emerging trend in Canada has been the move northward of American employment principles. For example, class action lawsuits are seeing more success in the last three years than they have in the previous decade. Sherrard points out that “it appears that our Canadian courts are now prepared to certify class action suits for breach of employment related obligations.” This exposes an employer to a group of employees who may be more apt to withstand the financial pressures of litigation than the individual employee might have otherwise been equipped to.


When considering the employment issues which arise when an organization has to make the difficult decision to restructure and reduce headcount, prudence warrants engaging a qualified employment and labour lawyer. The Financial Side of Layoffs and Severance Packages Typically severance packages include some or all of the following: • some form of lump-sum severance payment and/or a severance

payment paid out over a set period of time; • an extension of group benefits, such as medical and dental plans, for a

predetermined period; • an option for the employee to convert group life insurance to a private

policy; • a provision for the employee to obtain financial planning and

outplacement services for a specified period of time; and • if the company has a pension plan there are usually three options given

to terminated employees: (i) an option to keep their money in the company pension plan, (ii) an option to transfer their pension to a new employer’s plan or (iii) an option to transfer their entire vested portion of their pension into a locked-in RRSP. (The law requires that the plan administrator of a pension plan give former employees a Termination Statement within 30 days of being let go, if these employees are entitled to a deferred pension.)

An organization may need to make the following arrangement for laid off employees: 1. Employees may need to look at their Notice of Assessment from the Canada Customs and Revenue Agency to see what RRSP contribution limits are, to know how much severance they can invest in their RRSP to reduce taxable income for the year. A company many arrange to direct a portion of the severance payment directly into the employee’s RRSP before the payroll department calculates taxes that will be withheld. 2. If a company has a defined benefit pension (DB) and the employee decides to transfer the vested amount into a locked-in RRSP, by leaving the DB plan the individual is eligible for the Pension Adjustment Reversal (PAR). PAR was created by the federal government to address lost RRSP room for employees who participated in a company’s DB plan as a result of termination from their pension plans. As a rule of thumb, a person’s PAR will be equal to the amount by which both their company’s and their


contributions to their pension plan exceed the lump sum amount they will receive when they are terminated from the pension plan. ( Pension plan administrators are required to report an employee’s PAR by the Dec. 31 of the year of termination from the DB plan.) 3. If the former employee was involved in the company’s Registered

Pension Plan and started working for the firm in 1995 or earlier, they should be able to transfer at least $2,000 of their severance payment to their RRSP for each year of service before 1996. And if their employment goes back to 1988, they may be able to top this up by another $1,500 for each year before 1989 in which the company’s pension plan contributions did not vest in their name.

Beyond the Financials Several years ago I was very fortunate to meet a certified financial planner named Gilles R. Marceau, who had a profound influence on the way I viewed layoffs and severance packages. Marceau developed a system called “Beyond The Financials.” It arose out of his experience in the early 1980s; he had a specialty called early retirement, severance and pension plan wind-ups. Remember those days? During that period he had more than 1,000 one-on-one discovery interviews with ordinary people who were going through transitions. Transitions they could not understand, and when he would sit down and present the financial severance package, he quickly realized there was never enough money in the world because these people were emotionally hurt. As employees learn their legal rights, a company’s fiduciary obligations could perhaps be the most worrying of all for creating potential employer liabilities. In Canada, employers have been found liable for failure to bring the terms of benefit policies to the attention of employees. From Marceau’s experience with severance packages, the pattern he noticed emerging as a solution to help people deal with being let go was to have them visualize the life that they wanted to create, to see a new life beyond the one they had just left. Employees in today’s employment environment need to take responsibility for their careers and finances. It is important that employees don’t perceive your pension plan, benefit plan or the company group RRSP as their “retirement plan.” Many employers are confused about company’s fiduciary obligations to employees in regards to company benefit plans. This confusion arises over the distinct differences between the meanings of “information,” “education” and “employee financial knowledge.” When a


company just provides information about its pension, RRSP and other benefit plans, 99.9 per cent of these employers are not meeting their fiduciary responsibilities because the information just adds to the confusion of their employees. And having an education program for employees about benefit packages only goes so far to explain what they need to know. Education is not enough without employees having the knowledge and wherewithal to take responsibility and be empowered to integrate the company’s benefit plan with what they are doing outside the company with their entire financials. In addition to help with financial planning, employers should offer tangible assistance with job search, retirement and life transition. These so-called “career transition services” might be offered in-house or handled by a company specializing in providing such assistance. It is also important to understand that the employees left behind after a downsizing are also hurt. You don’t want your employees to believe that they will vastly receive different severance payouts from one round of layoffs to the next and for remaining staffers to believe they have no assurance that they would get anything. Individually, employers have no say over the direction of the Canadian economy but what employers do have control over is how they choose to navigate with their employees through their careers and life transitions. It is how corporations act during these transitions that will result in creating or losing goodwill in the labour force and marketplace.


A TAILOR-MADE BENEFITS PLAN FOR TOP EXECUTIVES

Incorporated businesses looking to add a benefit for their owners and top executives might want to consider a little known tax-avoidance structure called the individual pension plan (IPP). IPPs are a wealthy person’s answer to registered retirement savings plans. They are sanctioned by the Canada Revenue Agency and offer the best tax and retirement savings solution for individuals 40 years old and older who have a T4 income of more than $100,000 and have historically maximized their RRSPs and pension contributions. IPPs are Defined Benefit Pension Plans set-up for an individual, a family or a small group of key employees. Many top executives and owners of businesses in this competitive employment environment want tailor-made benefit packages that best suit their individual needs. Fortunately, for these high-income earners employed by an incorporated or professional corporation, the federal government in 1991 introduced into the Income Tax Act the concept of IPPs to compensate high-income earners disadvantaged by RRSP rules. IPPs are presented as an RRSP upgrade, with annual contributions fully deductible by the corporation/IPP sponsors and are a nontaxable benefit for the plan beneficiaries until, like an RRSP, money is withdrawn from the plan. The IPP tax solution allows for hundreds of thousands of tax-deferred income dollars (from an incorporated business) to be invested into an IPP structure, allowing that owner/executive nontaxable interest which compounds until retirement. IPP Versus RRSPImagine a 45-year-old owner/executive who has worked for the same company since 1991 and has averaged a T4 income of more than $100,000 a year. If they decide to ‘max-out’ their IPP contribution room and RRSP (using a yearly rate of return of 7.5 per cent), they will accumulate $4,796,518 in registered retirement assets. Opting for this tax solution, this individual would have a registered retirement yearly benefit at age 69 of $362,549 fully indexed to the consumer price index.


In comparison, if this same owner/executive only utilizes their RRSP option from 45 years old to age 69, they would only accumulate $3,226,413 in registered retirement tax sheltered assets. This amount of RRSP assets on an annual basis would generate $243,871 of retirement income from age 69 and beyond. The decision is clear. The owner/executive who implements both the IPP and RRSP tax solutions as part of their retirement plan would have an additional $1,570,105 of tax-sheltered assets in their registered retirement plans and have an additional $118,678 in annual retirement income. Other Key IPP Advantages

• Creditor proofing – Assets held in the IPP cannot be seized by creditors of the plan or the incorporated business.

• Extended contribution period – A company has 120 days after its year-end to make an IPP contribution, which will be considered an expense for the company in the previous business year. Contributions into a RRSP that can be applied back to the previous calendar year need to be made within the first 60 days after the start of the new year.

• CRA registration – CRA cannot de-register an IPP on condition that the plan was set-up in good faith by an active corporation.

• Ownership of plan assets— At retirement, the IPP member owns any actuarial surplus. It may be used to upgrade pension benefits, or the plan holder may pass it on to his or her spouse, heirs, or estate.

• Guaranteed lifetime income to IPP members and their spouses— This pension plan offers a predictable retirement income. An actuary determines the current annual cost of the future retirement income. Spousal pension benefits may be upgraded to 100 per cent at the time the member retires or at the plan member’s death.

• Pension Income Spousal Income Splitting— Recent changes to the Income Tax Act (Canada) allow employees age fifty-five who are drawing a pension from their IPP may allocate to their spouses up to one-half of their IPP pension income. Compared to the new changes that only all individuals age sixty-five and older to allocate to their spouses up to one-half of their income paid out of their RRSPs.

• Past service funding – For owners/executives, the IPP funding formula is more generous than the RRSP limits. The plan allows companies to contribute for the pension plan member for years of service prior to the set-up of the plan going back to 1991. If the first year of the set-up of an IPP is 2007, the past service and current service funding contribution/corporate deduction could be as much


as $361,000. Remember, the maximum 2007 RRSP contribution is $19,000.

• Terminal funding— One of the most attractive features of the IPP is the possibility of terminal funding. While CRA restricts the benefits that can be pre-funded, the plan can be amended at retirement to provide the most generous terms possible. Some of these include full consumer price indexing and early retirement pension with no reduction as well as bridge benefits. Imagine an IPP has been created for a 49-year-old owner/manager. As of January 1, 2005, this owner/manager has T4 earnings of $100,000 and has maintained this level of income since 1991. It is safe to project that their income will remain at $100,000 annually adjusted to inflation until retirement. Assume that this IPP member will retire at 60 on January 1, 2016, with 25 years of pensionable service (1991 to 2015). Before the retirement benefit begins to be paid out of the IPP, there is a window of opportunity for their company to make a onetime $251,000 terminal funding contribution to the IPP, in addition to regular IPP government prescribed funding contribution and annual growth calculations.

• Flexible funding options – Money can be used to fund the IPP that has accumulated in retained earnings of a company. Funding can come from outstanding bonuses owed to owners/executives by making the employee’s contributions into the IPP. Another option would be for the employer to obtain financing/ loans from a financial institution. All interest on loans to fund IPPs is a taxdeductible expense for employers and a non-taxable benefit for IPP members.

• Luring key people to your organization—By using an IPP as part of a total executive benefit package, a company can attract people who are currently employed and are members of a Defined Benefit pension plan. Traditionally, such candidates may not have wanted to leave an employer or DB plan before retirement because tax rules prevent them from transferring the full value of their pension credits to a locked-in RRSP. Now a company can avoid such an obstacle by creating an IPP for these employees and transferring existing pension plans to the new IPP without tax implications.

Mitigating Employer Risk And Financial LiabilityMany employers involved in the IPP setup stage ask “how can their company mitigate the potential liability of being responsible for maintaining an employee IPP benefit for an unspecified period until the employee or his or her spouse die?”


Employers have several options available to them. The employer, as a condition of opening and maintaining the responsibility for an executive IPP for a key person, may negotiate to have the key employee guarantee to work for the employer for a stipulated period of years in advance of promising to allow them to keep the IPP at their company if they leave before they retire. For example, a company may promise to continue to keep the pension on the company’s books provided this individual works another five years or promises not to retire before he or she turns 55 years old. Alternatively, the employer can negotiate to have the employee do one of several things should he or she resign if the above conditions are not met. The executive can transfer the IPP to another company that will take responsibility for the pension benefit, convert the IPP into a locked-in RRSP, or buy an annuity. What employers usually find preferable for long-term employees is to convert their IPP to an annuity at retirement because the responsibility of funding the pension benefit is then shifted from the employer to an insurer. For employees who have a short term of service with the company, employers usually prefer that their former employees transfer their company IPPs to a locked-in plan. If the IPP is registered in Quebec, IPP monies can be transferred into a non-locked-in RRSP. Many individuals 45 and older, who believe they have many more years to work, find the option to transfer their IPP appealing because they can continue to control how the assets are invested. In addition, employees who decide to transfer an IPP to their own company or another employer will continually see their contribution room increase compared to what they would receive if they had only a Defined Contribution pension plan or RRSP option to defer taxes from their income. Watch Out It must be remembered that IPPs are registered pension plans that must be set up and maintained properly. If it is determined that an IPP is not in compliance with the Income Tax Act/ regulations and CRA’s Registered Plans Directorate regulations, the registration of an IPP may be revoked at anytime. Recently there have been a number of high profile tax case that have resulted in the deregistration of IPPs for individuals who have transferred pension monies from other exciting Registered Pension Plans based on these plans satisfying CRA’s four criteria:


Criteria One: The IPP must comply with all laws and regulations governing registered plans and all filings must be up to date; Criteria Two: The IPP was established to create a pension plan prior to the plan being set up and/or the transferring of pension benefit assets from another defined benefit plan from another employer to the IPP; Criteria Three: The employee/employer have a bona-fide relationship between the plan member and his/her company; Criteria Four:If assets from another defined benefit plan have been transferred to an IPP members of the IPP can expect earnings similar to those earned as an employee. If an IPP’s status is revoked it immediately turns into a retirement compensation arrangement. The formerly registered IPP will forward 50 per cent of assets to CRA on behalf of the plan member. These funds will be refunded to the RCA plan member at a later date when money is withdrawn from the RCA. On withdrawal of funds from the RCA taxes will be paid at the RCA beneficiary’s marginal tax rate. In the worst scenario CRA may not permit the assets from the IPP to be rolled over into a RCA and taxes will be charged on all assets held in the former IPP. Heavy interest charges may be leaved by CRA for overdue taxes owed by both the IPP sponsor and member of the plan, plus there may be large fines charged for noncompliance. If an IPP is in violation of the Pension Benefits Standards Act, 1985, provincial acts, or the Income Tax Act individuals can be guilty of an offence and can be fined up to $100,000 or imprisoned for a term not exceeding 12 months, or both. In addition a corporation/ sponsor of an IPP that is convicted for violating these acts and regulations may be fined up to $500,000. Where Is The IPP Tidal Wave Coming From?Currently, there more than 9,000 registered IPPs across Canada representing approximately $1 billion of total assets invested. In the year 2000, 22 million Canadians filed tax returns. Of those 598,700 (2.7 per cent of tax filers) earned more than $100,000 in T4 income. Potentially, an additional 600,000 business owners and executives have the ability to pay themselves T4 incomes of more than $100,000 if there is a tax incentive, such as the IPP, for them to do so. The richest 10 per cent of Canadian families have an average net worth of $980,903, accounting for 53 per cent of national wealth in 1999. At that time,


72 per cent of the $420 billion in RRSPs was owned by the top 20 per cent of affluent families. This 20 per cent also owned 94 per cent of the $92 billion invested in stocks outside RRSPs and 81 per cent of the $80 billion invested in mutual and investment funds outside RRSPs. In the 1990s, there was an explosion of self-employment in this country. Currently there are 2.3 million self-employed Canadians and 1.1 million active incorporated businesses in Canada. With 75 per cent of Canada’s one million businesses employing fewer than five people, it means most of the IPPs in this country will be created by owners of Canadian controlled private corporations looking for a strategy to take money out of their corporations in a tax effective way. In 2001, the average Canadian worker was 39 years old. The creation of an IPP only makes sense for individuals aged 40 and over, earning $100,000 or more. IPP yearly contributions at 40 years old are $21,700 and will increase at a compound rate of 7.5 per cent annually. It is hypothesized that the IPP market will experience a growth similar to that of the mutual fund industry in Canada. The Investment Fund Institute of Canada says, in 1990, the mutual fund industry was $24 billion. At the end of 2000, it had grown to $430 billion. The IPP market is on the verge of the same kind of explosion as more Canadians earn $100,000 and prepare to enter retirement en masse beginning in 2010. Boomers are looking for both tax and investment solutions that will provide them with:

• wealth preservation • CRA-sanctioned tax avoidance solutions • creditor protection • wealth accumulation • wealth distribution

IPP specialists predict over the next 15 years, if half of the people who currently earn $100,000-plus choose to upgrade their RRSPs to an IPP, there will be more than 300,000 of these DB pension plans in place across Canada. It is inevitable that the 20 per cent of affluent Canadians who own 72 per cent of the $420 billion in RRSPs will opt to migrate much of their RRSP assets into IPPs. If the average plan accumulates $500,000, there will be more than $150 billion sitting in IPP assets. Given an average asset management fee of two


per cent a year, the assets held in IPPs will create more than $3 billion in recurring investment fees paid annually. In addition, each IPP (to remain registered) will require actuarial and trustee administration billing of approximately $1,500 a year, generating approximately $450 million annually. In real terms, an IPP will need to be accounted for on a company’s corporate financial statement. The average cost for the total IPP new accounting services will roughly generate 2.4 million billable hours (IPP set-up) and also create 1.2 million in (on-going) annual billable hours. Lastly, the emerging IPP industry will create about $4.5 billion in new annual revenue for Canada’s 68,000 chartered accountants, 35,000 certified management accountants, 60,000 certified general accountants, 100,000 plus financial advisers, and 2,600 actuaries, which is not calculated in Canada’s current gross domestic product formula, yet. Closing ConsiderationsObviously, IPPs require a specialty in areas such as accounting, actuary evaluation, investment management, pension legislation, employment law, and employee benefit plan construction. Many employers and their accounting professionals will need to seek educational services to aid them in the IPP set-up and maintenance stages. Therefore, it is well worth the time and money to hire an IPP consultant to assist in the design, implementation, and maintenance of an IPP solution. Peter J. Merrick, BA, FMA, CFP, FCSI, is President of MerrickWealth.com, a fee-for-services Certified Financial Planner and executive benefit advisory firm in Toronto, Canada. His consulting work involves creating executive and employee benefits that meet the requirements set in the Canadian/US Tax Treaty, ERISA standards and CAP guidelines. Peter is a professor of financial planning and group benefits, author of “The Essential Individual Pension Plan Handbook” (Lexisnexis Canada, 2007) and was a presenter at the prestigious Canadian Institute of Chartered Accountants 2007 National Conference on Income Taxes. Peter can be contacted at 416.854.1776 or [email protected]


RESOURCES SECTION

GLOSSARY COMPENSATION TERMS AND POSITION TITLES To understand the components that you can use to design a compensation plan, see the descriptions of the main elements below: Account Executive 2 (Senior) Responsible for sales and optimal service to existing accounts/client base and achieving new business annual sales targets. Develop new revenue streams from unassigned accounts. Meet and exceed sales targets. Tasks

• Actively contacts/cold calls potential customers to identify market opportunities.

• Develops executive level relationships with key decision-makers. • Expands the business by identifying new opportunities within targeted

industry segments. • Makes presentations to prospective customer organizations to introduce

company’s products and services. • Develops strategic territory plans, sales goals, strategies and large

opportunities forecasting. • Prepares correspondence, proposals and marketing collateral to assist in

acquiring new customers and/or building business with existing customers. • Provides input to senior management on customers and competitive trends.

Account Manager Works with an assigned portfolio of accounts to provide overall quality of service to the customer as well as securing orders and increasing sales margins. Success depends upon a proactive approach to understanding the business needs of the customer, developing strong relationships at all levels of the organization and gaining the trust of influencers and decision makers. Prepares account plans to maximize customer satisfaction and to ensure proper order fulfillment. Maintains a responsive approach to customer issues and accepts responsibility for all aspects of the business-to-business relationship between the company and customer.


Post-secondary education (or equivalent in experience and training) with full understanding of industry and company and customer sales principles. Understands business processes and the consultative approach to sales. Knowledge of company products and services and how to position them with customers. Four-six years of sales experience preferably within the company or 5-7 years of industry experience and a successful track record and reputation. Matching Competencies: 1. Customer service orientation 2. Attention to detail 3. Planning & Organization Allowances Sums of money paid to the employee without tax deduction, in order to cover expenses that will be incurred on behalf of the company. Examples include a car allowance, entertainment allowance, travel allowance, etc. Average A figure obtained by dividing the total number of given amounts by the number of amounts in the set. Base Salary An annual amount of money paid to an individual. It does not include any overtime payments, vehicle allowances, cash bonuses, incentives or stock options. Benefits An allowance of specific services which are usually related to medical and health services, and/or retirement investment plans. Benefits can include fringe benefits such as memberships in a health club or golf club. Bonus A cash incentive given as a reward for achievement in a particular effort. In most cases, it is expressed as a per cent of base salary or expressed as a flat dollar amount. A bonus can be paid quarterly, semi-annually, yearly or upon completion of a goal. Business Development Director Responsible for the identification of programs and solutions that meet the needs of the markets identified for development by the corporation. Their strength is well-developed business acumen, the incumbent will exercise analytical skills, creative ideas and marketing savvy to design, lead and execute new business directions. Responsible for the needs analysis and


market assessment, measurement and on-going evaluation of sales initiatives, this individual will recommend sales channels, support missionary efforts to broaden penetration of targeted industry verticals, strategic partners and new applications for products and services. Post secondary education with knowledge of marketing and sales strategy development. Intimate knowledge of sales channel management and research techniques to identify and measure the needs and requirements of potential customers. Industry background, developed through 5-8 years of direct product and customer contact. Has proven sales expertise focused around selling effectively to senior executives. Matching Competencies: 1. Marketing expertise 2. Research capability 3. Ability to achieve commitment and sell internally Call Centre A facility in which telephone-based customer contacts occur to meet sales, service or marketing goals and objectives. The staff are skilled, trained and coached in effective customer communications through a range of contact strategies. The customer contact is supported and made efficient by systems and technologies designed to be of benefit to the customer; an environment designed to handle inbound and outbound traffic in the most efficient manner (Source: The 1997 Call Center Dictionary). Call Center Representative 1 (Junior Level) Responsible for answering telephone call inquiries and promoting an organization’s products and services. Duties may include: • Handles inbound inquires of a routine nature regarding problems,

products information, billing issues, etc. • Performs basic trouble shootings of issues, gathering information from

customers, and escalating difficult issues to more senior representatives. • May promote and sell value-added products and services • Work is performed from a standard script, input screen and defined

procedures. Typically has a High School diploma and 0 – 2 years related experience. Call Center Representative 2 (Intermediate Level) Responsible for answering telephone call inquiries and promoting an organization’s products and services. Duties may include: • Answers existing and new client/customer inquires regarding sales,

promotions, general services, billing etc.


• Troubleshoots routine issues and gathers information from customers to identify root causes of customer issues and determines appropriate course of action.

• May sell and promote value-added products and services. Typically has a High School diploma and 2 – 4 years customer service/call centre experience. Call Center Representative 3 (Senior Level) Responsible for answering telephone call inquiries and promoting an organization’s products and services. Duties may include: • Handles complex customer calls escalated by more junior team

members. • Answers existing and new client/customer inquires regarding sales,

promotions, general services, billing etc. • Troubleshoots and gathers information from customers to identify root

causes of customer issues and determines appropriate course of action. • May sell and promote value-added products and services. Typically has a High School diploma and 5+ years customer service/call centre experience. Channel Sales Manager This position is responsible for the incremental growth of revenue by developing and managing relationships with partners in the sales channel. This may include distributors, manufacturers representatives, dealers, value added resellers (VAR’s) and suppliers. The incumbent is responsible for identifying partners with the potential to drive profitable revenue. Once on board, they are accountable for developing the partner’s capability through product planning, training, promotion and on-going evaluation. Success typically revolves around gaining increased mind share with the partner, particularly when the product or products are not the primary focus of the partner’s business. • Post secondary education (or equivalent in experience and training)

with full understanding of industry and channel sales principles. • Understands business processes and the consultative approach to sales. • Has thorough knowledge of the company products and services and

how to position them in the sales channel. • Five to eight years of sales experience (including 3-5 years of channel

related sales activity – either selling to or within a channel partner). Matching Competencies: 1. Customer service orientation 2. Relationship development skills


3. Consulting ability Combination A plan that has two or more elements: a base salary and one or more cash incentive components such as a bonus, a commission, or both. Commission A variable amount of money paid to a sales representative based on sales results (e.g. a percentage of sales, or sales volume, dollar amount per unit sold, or a per cent of gross margin). It can be paid weekly, bi-weekly, semi-monthly, monthly or quarterly. Commission is different from bonus. A commission-only compensation program is sometimes known as 'full' or 'straight commission' Cost of Sales A relative measure of internal costs. The cost of sales, expressed as a per cent, is calculated by dividing the total sales dollar volume sold by the sales force into the total compensation costs of the sales force. Dealer Sales Representative Represents the company with dealers and retail partners in a defined territory or channel. Required to establish and maintain the dealer network. Assists dealers in business planning and setting of sales objectives. Conducts product training and provides sales support through demonstration, promotion and marketing assistance. Provides leads and assists with consumer research and with customer service support. Responsible to increase product sales through sales and marketing programs while maintaining a high level of communication with dealers and participation in corporate trade shows and events. • Post secondary education (or equivalent in experience and training) with

full understanding of industry and dealer sales principles. Has an understanding of basic business processes and retail sales.

• Demonstrates a thorough knowledge of company products and services and how to position them with dealers and their customers.

• Three to five years of sales experience (including 1-2 years of channel related sales/marketing activity or the equivalent within a dealer environment).

Matching Competencies: 1. Customer service orientation 2. Planning and coordination


3. Product application consultation Director of Sales Responsible for the profitable sales of products and services within current customer relationships. Focus on entrenchment, retention and growth of current customers. Develop and execute effective sales strategies through sales team. Promote sales and manage sales-related business operations. Tasks • Responsible for achieving sales volume and profits consistent with

company objectives. • Formulates and recommends plans, policies, goals and objectives for the

organization's sales activities to expand market share in existing markets and capture new markets.

• Develops in collaboration with senior management, the broad policies for the development of new products/services to increased market share as identified by marketing.

• Responsible for changes in the structure and organization of the sales area to achieve assigned objectives and to provide flexibility and swift reaction to ongoing problems and/or opportunities as they arise in the marketplace.

• May develop and recommend pricing strategy component of product marketing mix.

• Performs timely employee performance evaluation for middle management.

• Develops, manages and evaluates the company’s sales compensation with an eye towards retention and current profit and loss requirements.

• Coordinates the appraisal and reporting of corporate sales plans and programs to senior management.

• Recommends training programs for sales personnel. • Compensation: high base salary with performance bonus and other

executive perquisites. District Sales Manager Plans and executes the district sales tactics in support of corporate sales objectives and strategies. Tasks • Plan and execute the district sales tactics in support of corporate sales

objectives and strategies • Develop an effective sales force in order to maintain and increase sales

within an assigned district


• Facilitate representative training and skill development in brand plans of action, product knowledge, selling skills, relationship management skills and territory business planning

• Recommend appropriate changes to regional sales director with ensuring that sales activities reflect marketing strategies

• Develop and execute territory business plans in line with regional strategic plans

• Foster and maintain connections with critical stakeholders groups and key opinion leaders that may impact business

• Submit monthly reports on marketing and sales performance, legislative, competitive and promotional activities

• Analyses and evaluates through regular contacts with individual sales representatives the effectiveness of current strategies.

• Plan and conduct district sales meetings, in order to best train participants and communicate company policies and procedures as well as product strategies and tactics.

• Responsible for the recruitment, training, development, and performance of all direct and indirect reports.

• Primary liaison with therapeutic areas and coordinate communication with therapeutic areas to ensure business objectives are been met.

Divisional Sales Manager Responsible for sales of a specific product level or market segment that transverses geographic boundaries in a company. Tasks • Ensures consistent, profitable growth in sales revenue through positive

planning, direction and management of all sales personnel within division and through interaction with customers and prospects.

• Identifies and acts upon market opportunities in order to grow and expand sales revenues.

• Defines measurable expectations of each sales role within division and evaluates performance against expectations.

• Provides training, measurements and feedback enabling staff and field sales force to excel in areas of price administration, operating procedures and reduction in non-compliance.

• Develops training programs for all field based sales reps and co-ordinates with other departments to expose them to all aspects of company processes.

Draw against Commission A set amount of money paid to the sales representative by the company at regular intervals. When a commission amounts to a large percentage of a


salesperson’s income, a company can pay the person a substantial sum of money even before the commissions are earned. This payment method provides the salesperson with some sense of security and funds with which to plan and pay for basic livelihood expenses. When the commissions are earned, the salesperson pays back the draw. When the amount of commission earned is more than the draw, the salesperson receives the draw amount plus whatever is left over after the draw balance is paid off. When the commission earned is less than the draw, the salesperson receives the draw amount only. The draw activities are recorded in a ledger under the categories: commission earned, pay cheque amount and draw balance. An example of an active draw ledger for one salesperson is outlined below:

Pay Period (Week Ending)

Commission Earned

Pay Cheque Payment

Debt Draw Balance

Feb. 1 $400 $1,000 $600 $600 Feb. 8 $600 $1,000 $400 $1,000 Feb. 15 $1,200 $1,000 <$200> $800 Feb. 22 $1,500 $1,000 <$500> $300 Feb. 29 $1,400 $1,100 <$300> $0

50th Percentile Also known as the median. One half of companies paying above a stated amount, one half of companies paying below the stated amount. Guarantee A compensation payment. It is paid regardless of performance. Paid separately from the base salary, it acts as a non-recoverable draw. Guarantees may be temporary (such as for new hires) or permanent. Inbound Contact Centre Sales Representative (Junior) Responsible for answering inbound telephone call or email inquiries and promoting an organization’s products and services. This position is primarily responsible for sales of a specific product or service. Duties may include: • Answers incoming calls to sell new and additional products and/or

services.


• Typically handles calls of a routine nature, including customer service and order taking.

• Sells and promotes value-added products and services. Typically has a High School diploma and 0 - 2 years customer service/sales and/or contact centre experience, combined with contact centre specific courses. Inbound Contact Centre Sales Representative (Intermediate) Fully Competent. Responsible for answering inbound telephone call or email inquiries and promoting an organization’s products and services. This position is primarily responsible for sales of a broad range of products or services. Duties may include: • Answers calls from clients/customers to sell a broad range of new or

additional products and services. • Typically deals with complex or non-routine calls. • Handles calls escalated by more junior team members. • May coach junior staff. Typically has a High School diploma and 3 - 5 years sales/contact centre experience, combined with contact centre specific courses. Incentive Any form of variable payment tied to performance. The payment may be a bonus, commission or other non-monetary awards such as merchandise and travel. Incentive Pay A general term that encompasses any or all variable compensation elements (e.g. commissions and bonuses). Inside Sales Representative 3 (Senior) Responsible for selling the organization’s products and services. Duties may include: • Establishes new business and supports current business with

distributors and/or end-users. • Assists customers in the selection and purchase of a broad range or

more advanced products and/or services. • Handles situations which may require adaptation of response or

extensive research according to customer requirements. • May require advanced problem solving and/or sophisticated sales

techniques. • May assess needs and suggest/promote alternative products or

services.


• Completes sales contracts for orders, including pricing and payment terms. May use computerized system for tracking, information gathering, and/or trouble shooting.

• Identify and understand trends within client specific markets and industries. Requires extensive knowledge of company, products, and/or services.

• May train or supervise more junior reps. Typically has post secondary training/ product training certificate and 4+ years experience of sales experience and knowledge of computerized data entry systems. Has advanced knowledge of own and competitor products and/or services. Intermediate Sales Rep • Promotes/sells/secures orders from existing and potential customers.

Familiarizes established accounts with new products, services and developments (market penetration).

• Coordinates sales efforts with management and other internal departments. Between 2 to 5 years of direct sales experience.

Junior Sales Rep Promotes/sells/secures orders from existing and prospective customers through a personalized and consultative approach. Two years or less of direct sales experience. Mix The division between Base Salary and Incentive Total Target Compensation as expressed as a per cent of Total Target Compensation. Non-Monetary Rewards Compensation that is not cash, such as travel and merchandise. It includes other non-taxable items such as gifts and plaques/pins. Non-Recoverable Draw (see also Draw against Commission) If the sales representative's incentive earnings are less than a 'non-recoverable draw', draw monies are not returned or carried forward -- the sales representative gets to keep the draw. Number of Observations The total number of companies reporting data for the position title. Payout Frequency The timing of the incentive payouts. Payouts can be made weekly, bi-weekly, monthly, quarterly, semi-annually or annually.


Performance Payout The time span over which performance is measured for incentive purposes. Progressive Incentive One that features an increasing incentive rate as performance exceeds predetermined levels of performance. Quota A predetermined performance goal. Quotas can be expressed absolute numbers, a per cent, per cent change and units sold. Synonyms for quota include: goal, objective and target. Quota Setting The process of establishing performance expectations. Quotas can be established by senior management (top-down), by the field (bottom-up) or through a negotiated process involving both headquarters and the field (combination). Regional Sales Manager Manage regional efforts for the sale of assigned products throughout assigned geographic region or customer group to meet planned objectives as to sales volume, market penetration, profitability and selling cost. Tasks • Develops and implements a business plan to attain a position of market

prominence within the defined region while meeting sales objectives. • Provide a leadership, direction and coaching to a team of sales

representatives in the execution of their responsibilities to achieve goals including guidance relative to developing new business, sales shills, up selling etc.

• Recruits, trains, develops and coaches sales force (individual salespeople/major account reps/agents or distributors).

• Prepares sales forecasts and budgets. Analyzes sales statistics gathered by staff to determine sales potential and inventory requirements and monitor the preferences of customers.

• Organizes meetings on an annual or semi-annual basis for sales force. • Resolves customer complaints regarding sales and service. • Monitors customer preferences to determine focus of sales efforts. • Directs and coordinates activities involving sales of manufactured

products, services, commodities, real estate or other subjects of sale. • May determine price schedules and discount rates.


• Reviews operational records and reports to project sales and determine profitability.

• Directs/coordinates/reviews activities in sales and service accounting and recordkeeping, and in receiving and shipping operations.

• Confers/consults with other sales managers to plan sales efforts and to secure information on equipment and customer specifications.

• Advises dealers and distributors on policies and operating procedures to ensure functional effectiveness of business.

• Prepares budgets and approves budget expenditures. Regressive Incentive One that features a decreasing incentive rate as performance exceeds pre-established levels. Salary A regular pay cheque that a salesperson is guaranteed to take home. A salary is paid regularly weekly, bi-weekly, or semi-monthly and is not based on sales results. Sales Coordinator • Coordinates meeting schedules of the sales and marketing team,

including all internal/external meetings. • Assists in the preparation of sales and marketing materials (e.g.

proposals to clients) and coordinates production of materials. • Prepares monthly/quarterly client reporting packages. Organizes direct

mailing to new/existing and prospective customers. • Oversees/maintains company database and client files. • Handles telephone inquiries and general correspondence for sales team.

Prepares and distributes monthly/quarterly sales and marketing internal reports to management staff.

Sales Cycle The time, starting with identifying the customer (prospect), it normally takes to close the sale. Sales Manager (Regional/Industry) Manages the growth of the account portfolio in their region through direction of the efforts of others and input into the development of strategies for the sales organization. Drives results through the process of managing a sales team. Participates in the development of key account relationships through customer visits and contact with their counterpart in customer organizations.


Responsibilities include sales forecasting, coaching of subordinates for quota attainment, sales presentations, account management and development as well as short and long-term opportunity management. Scope of managerial control extends across a geographic or industry vertical segment.

• Post secondary education (or equivalent in experience and training) with full understanding of industry and company and customer sales principles.

• Understands business processes and the consultative approach to sales.

• Displays a knowledge of company products and services and how to position them with customers in their region or industry vertical.

• Seven to ten years of sales experience within the company or industry within the region or industry vertical with 3-5 years experience at a management level and a successful track record and reputation.

Matching Competencies: 1. Organization and coordination 2. Coaching/mentoring 3. Technical/industry knowledge and experience Sales and Marketing Director Assumes responsibility for all sales and marketing activities within the organization. This will include developing and executing a marketing plan, supervising sales staff, establishing processes, policies and procedures to achieve sales results. Recommends market positioning strategies, using a variety of sales channels and partners. Provides input to business goals, participates in customer visits and presentations and approves sales representative requests for special pricing for customers. Post secondary education with knowledge of the markets and major customers of the company. Significant knowledge of products and services likely developed through years within the company sales ranks or with another industry related organization (e.g.: competitor, customer etc.) Industry background, developed through 5-8 years of direct product and field sales experience. Matching Competencies: 1. Communications skills 2. Sales ability 3. People management skills


Sales Director This individual is responsible for input to business goals and strategy and for the development of tactical plans to execute sales strategy. Provides leadership to the field sales force. In small to mid-sized sales organizations, this may be the top sales position. Plays an active role in customer management and loyalty and likely participates in customer visits, major sales presentations and special requests from customers regarding pricing. In larger sales organizations, this may be a regional or line of business role with several incumbents. Revenue scope $25M to $100M. Post-secondary education with knowledge of the markets and major customers of the company. Significant knowledge of products and services likely developed through years within the company sales ranks or with another industry related organization (e.g.: competitor, customer, etc.) Industry background, developed through 5-8 years of direct product and field sales experience. Matching Competencies: 1. Communications skills 2. Sales ability 3. People management skills Sales Vice-President The incumbent is responsible for building and leading a team of sales professionals to achieve the sales goals of the corporation. • Demonstrates the ability to develop creative sales strategies and is able

to communicate the direction and expected deliverables. • Displays well developed leadership skills through their industry

experience and field sales background. Personal qualities demonstrated include calculated risk taking, strong communication and an analytical orientation. Has a proven track record of developing new markets through a remote sales and management team.

• Carries full responsibility for all aspects of the sales function and in small to mid-sized organizations may also have the marketing and customer service functions imbedded in their organization. Revenue scope $50+ million to $500 million.

• Post-secondary education with knowledge of sales strategy development. Well versed in management principles and sales channel management. Extensive industry background, that typically has been developed through 10+ years of related experience and an intimate understanding of company products and services.


Matching Competencies: 1. Leadership skills 2. Results Orientation 3. Planning & Strategic Focus Senior Sales Representative (Region/Industry) Within a defined territory or industry vertical, prospects, qualifies and closes new business opportunities. Provides sales and service to customers within their customer market. Under general supervision, he/she acts independently to promote the products and/or services of the company. Through disciplined sales activities, successfully implements sales strategies at the prospect/customer level to achieve clearly defined goals. Confident dealing at a functional level of the customer, uses their skills in presentation, communication and negotiation to meet the needs of the customer as well as the revenue/profitability requirements of the company. Post secondary education or equivalent in experience and training with full understanding of industry sales principles and company processes and extensive knowledge of the company’s products and services. Five plus years of sales experience preferably within the company or 5 – 7 years of industry experience and a successful track record and reputation. Matching Competencies: 1. Self motivation and initiative 2. Process and results driven 3. Communication and negotiation skills 70th Percentile Also known as the fifth quartile. Seventy per cent of companies are paying below this amount. Split Credit The division and assignment of sales credit to more than one salesperson Strategic/Key Account Representative Exceed assigned sales targets. Identify opportunities to effectively close sale. Utilize both prospecting and account management sales within a specific vertical market. Develop sales opportunities with the major accounts (50 – 499 employees) market, closing B2B opportunities with senior executives.


Tasks • Under minimal supervision, develops, maintains and expands gross

profit and sales volume for an assigned customer account/territory or market segment by developing and implementing national sales strategies.

• Establishes effective working relationships with the purchasing decision-makers at customer accounts.

• Develops and implements sales strategies, calls on customers, presents new concepts/products and ensures adequate sales service.

• Develop a business plan with the Major Account Sales Manager and/or Director which details activities to be followed during the fiscal year which will focus on producing or exceeding quota.

• Counsels and advises management on market trends and competitive activity encountered in the field.

• Maintain accurate records of all activities (calls, presentations, sales, etc.) within their assignment. This also includes maintenance of complete account profiles for all accounts on their list through the use of the CRM interface.

• Supports company-wide efforts to increase sales volume and profit margins from assigned national accounts.

• Serve as a liaison between the new client and appropriate support groups throughout the conversion cycle.

• Attend and participate in weekly Roll Call meetings. • Perform related functions as needed.

Target PerformanceThe expected level of sales results. It is often called the 'quota' or 'goal'. Technical Sales Rep Performs B2B sales and installation functions related to products and services for corporate clients. Interpret client requirements and communicate solutions, while ensuring excellent customer service. Tasks • Becomes involved with existing and prospective customers in evaluating

the use of company products for their applications. • Informs new and existing customers of product changes and production

requirements. • Maintains current job skills in product design, product application,

pricing, knowledge of system, and all phases of the Industry; develop personal skills to more effectively carry out assigned responsibilities.

• Performs service seminars on all company products and attends trade shows as required to answer customer inquiries.


Technical Service Rep Delivers comprehensive technical service support for all company products or a specific product line. Tasks • Provides assistance and information to branches, distributors, and

dealers in order to resolve technical problems that may occur with the products.

• Distributes technical materials to branches, distributors, and dealers, such as technical bulletins, parts manuals, repair manuals, microfiche, etc. Maintains an adequate inventory of technical literature to supply Distributor orders.

• Makes necessary field trips to gather information, properly diagnose product problems, and provide technical solutions for problems.

• Organizes and implements testing of products for known or suspected problems.

• Communicates with other internal departments to notify of technical changes to parts and field complaints regarding replacement parts. Suggests solutions to rectify technical issues.

• Maintains an up to date technical "library" to provide a resource for product technical information.

• Participates in service training programs to branches, distributors, and dealers. Assists with the design and development of service training aids for use by branches and distributors.

• Assists Sales and Marketing with product demonstrations and new product assembly/set-up. Participates and assists in sales meetings and trade shows as requested.

• Provides information and assistance to marketing department as requested.

10th Percentile Also known as the first quartile. Ten per cent of companies are paying below this amount. Territory Representative/Manager Builds relationships with small and medium-sized accounts in a defined geographical territory. Qualify profitable business opportunities and leverage existing business opportunities with established customers. Tasks


• Promotes/sells/secures orders from existing and prospective customers within a defined geographic area

• May assume an established territory or been transferred to the territory during a realignment of the sales force

• Achieves maximum sales profitability and growth in assigned territory by effectively selling the company's products and/or related services.

• Develops personal sales strategy for the company’s products and services to achieve maximum penetration in assigned territory.

• Calls upon new and existing customers either in person or via telephone.

• Expedites the resolution of customer problems/complaints. • Keeps abreast of the products, applications, technical service, market

conditions, competitive activities, advertising and promotional trends through the reading of pertinent literature and consulting with marketing and technical services.

• May participate in regional trade shows and other company organized marketing activities.

• Prepares price quotations, terms of sale, delivery dates and service obligations.

• Submits periodic reports detailing sales activities/sales volumes/expenses.

ThresholdThe minimal level of performance that must be achieved before an incentive can be paid. Total Target CompensationThe total cash compensation available (including all forms: base, bonus and commission) to the salesperson for achieving expected (quota) results. Vice-President, Sales/Marketing Plan, direct, or coordinate sales activities at the highest level of management with the help of subordinate executives and sales managers for regions, divisions or departments. Tasks

• Establishes sales objectives for the company and formulates or approves overall sales planning, policies and programs in accordance with company’s business plan.

• Directs and coordinates the activities of businesses or departments concerned with production, pricing, sales, and/or distribution of products.


• Authorizes and organizes the establishment of major departments and associated senior staff positions.

• Allocates physical, human and financial resources to implement sales policies and programs; establish financial and administrative controls; formulates and approves promotional campaigns.

• Selects middle managers, directors or other executive staff; delegates the necessary authority to them and create optimum working conditions.

• Represents the company or delegates representatives to act on behalf of the company in negotiations or other official functions.

20th Percentile Also known as the second quartile. Twenty per cent of companies are paying below this amount. Upside Potential For outstanding performers beyond the Total Target Compensation. Sometimes referred to as 'leverage'. Windfall A sales result that was realized outside the normal influencing role of the salesperson. (e.g. Company action such as a major discounting program or an atypical bulk purchase by the customer). Sometimes excluded from normal incentive compensation.


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