Sales Compensation and Expense Allowances

OTHER FORMS OF RECOGNITION

There are also other forms of recognition for the field sales force outside of the Sales Compensation Plan.

Special Performance Incentive Funds (SPIFFs) are used to reward sales representatives for contests and other short-term initiatives such as:

• new product sales
• special promotions
• product sales where quotas are unmeasurable
• limited to one or two performance periods only

SPIFFs are often delivered through prizes or contests. SPIFF awards may be delivered in gift cards, electronics, travel, dinners, memberships, or even cash, etc.

The President's Club is a common recognition program for top performers and could include one or both of these:

• a trip
• cash

This very often is the coveted prize each year for top sales performance. It typically is budgeted at approximately 2% of the total incentive compensation budget.

Non-Cash Recognition

Travel Allowances

Why do employees quit their jobs? Entrepreneur.com recently reported that 82% of employees polled report they don't receive enough recognition. Recognition and praise goes a long way to retain your key sales representatives.

Don't underestimate the motivational power of public recognition. People will respond positively to something as simple as a notation on business cards for high achievers, public recognition at a Sales Meeting, or even a "Wall of Fame" on the company's internal website.

BENEFITS

We cannot end this course on sales compensation without discussing some specialized benefits that the sales team may receive. In particular, the sales team may be granted two benefits that are not common to other employees:

• expense accounts
• travel allowances

Expense Accounts

Typical expenses covered include:

• meals with customers
• cell phones
• lodging
• social events with customers
• company credit cards
• car allowances
• company cars
• mileage reimbursement

Ordinarily, the only other employees to have these benefits are executives.

Important Note: These expense accounts have the potential for abuse and are watched closely by the IRS.

Travel Allowances

Sales people travel more than any other group in the organization. Some of this travel is around town from one location to another during the day. Other travel requires the salesperson to be "on the road" for some period of time. This creates costs that must be reimbursed to the employee.

The IRS classifies reimbursement plans into 2 categories.

Non-accountable plans: Expenses are considered income to the employees, although they may itemize these expenses as deductions on their personal income tax forms.

Accountable plans: Expenses are classified as a business expense and are not income to the employees. The next section deals with accountable plans.