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From :Group 2DheerajRicha Arun parkash ShibashishRamesh
Introduction Compensation is a systematic approach to
providing monetary value to employees in return for their contribution to the organization, that is, for doing their job.
The objectives of compensation plan:o Balancing the need of personnel.
- secure income and security- desire for personal recognition and status- reinforcement for doing good work.
o Managing effects of time.
Characteristics
Fairness to all Flexibility Provide incentive and motivation Lead to direction of efforts towards
company objectives Ease of administration
Types of Compensation Plans 1.Straight salary Salesperson paid a set amount of money
based upon hours or days worked. Often adopted when salesperson must
devote significant amounts of time to other duties.
e.g. Market research, customer service, administration.
Simple to administer by sales manager and provides regular income to the sales force.
There is no direct link between performance and reward and it does not distinguish between efficient and inefficient sales personnel.
2.Straight Commission Adopted by performance-oriented firms
that pay salesperson for their achievements. The income is proportional to the sales volume achieved by a sales person.
Each person is paid a percentage of their total sales.
It helps in setting targets for the sales force.
It’s a measure to judge the performance. Focus is entirely on increasing sales so
client relationship suffers as there will be short term relationships not long term.
Dissatisfaction among employees.
3.Combination Pay Plan It includes combination of salary,
incentives, commissions. It is suitable for the organization with a
wide range of products. It provides greater control as the plan
can be tailored to suit the sales force. It provides advantage of both fixed
salary and variable income. It involves lot of cost in calculation
because of the number of combinations.
Designing Compensation Plans Determine specific objectives
Income and security Equity Flexibility Economy
Establish desired levels of earnings Methods of payment
Methods of payments Salary Commission Bonus Employee stock options Special prize Drawing account Special cash incentives
Implementing compensation plans Pre testing Periodic monitoring
Sales Force Expenses
Expense Plans Company pays all Expenses Sales person pays all Expenses Company partially pays expenses
Fringe Benefits Social Security Pension and retirement Programs Insurance Holidays Time off with pay Other benefits