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SUMMARY
Organizations identify certain groups in order to establish special compensation programs for them. They do this for a number of reasons including organizational tradition, employee expectations, and the nature of the job.
Types of Plans
Sales compensation plans may be fixed salary, straight commission, or a mix of these two. The latter is the most common. Sales compensation plans also may include non-cash contests and special benefits, such as expense allowances.
Plan Design
In order to create a sales compensation program, you must:
- identify business goals
- choose the type of plan
- select measures
- develop productivity metrics
- determine the sales cycle
- communicate the plan
Remember to keep it simple. Your sales employees should understand very quickly how the plan works. If you want to encourage behaviors that are not included in the compensation plan, then utilize Management by Objectives.
After you have created a plan, test and evaluate it to make sure that it is:
- workable
- competitive in the labor market
- acceptable to employees
Expenses
A second part of sales compensation is the reimbursement for business expenses.
The IRS recognizes two types of reimbursement plans:
Non-accountable plans are considered income to the employees, although they may itemize these expenses as deductions on their income tax forms.
Accountable plans are classified as a business expense and are not income to the employee.
Travel expenses
The most common program for reimbursement is one that pays for both per diems and automobile expenses tied to federally defined rates. This course showed you how to research these rates online and via ERI's Relocation Assessor software database.