COMMISSIONS  FOR  SALES  PEOPLE          

Generally Compensation schema for sales personnel consists of a straight salary plan, a straight commission schema or a combination salary and commission plan.

Salary plan

Some of the firms pay sales people a salary only. Such a plan is helpful when serving & retaining existing accounts is being emphasised more than producing new sales and accounts. Generally this approach is utilized to protect the income of new sales representatives at the starting of their career, trying to make their rapport with customers. It may also be put to use while both new and existing sales reps are supposed to spend lots of time learning regarding and selling customers new products and services.

Commission plan

In this schema, a sales representative attains a percentage of the worth of the sales made. He attains no compensation, if no sales are made. The sales representative ought to inevitably sell in to earn. High-performing sales people could earn record commissions if they are capable to deliver results. Thus, Sales costs are directly proportional to the sales made (instead of remaining fixed) and like companies would be more than eager to pay commissions depend on sales. The plan is fairly easy to understand and compute. Though, it is not without drawbacks. Here the emphasis is always on sales volume instead of on profits. Sales representatives tend to focus more on producing sales volumes and on high-value items neglecting other significant duties like cultivating dedicated customers, serving small accounts and pushing hard-to-sell items. Earnings tend to fluctuate broadly among good and poor periods of business. Extensive variations in income would take place as sales people compete with other and it could finally lead to negative feelings of, jealousy, bitterness and anguish among them. Again, sales people might be tempted to grant price concessions (against company policy) to push up sales.

Combination plan

The most frequently utilized form of sales compensation is the salary as well as commission, which combines the constancy of a salary with the performance aspect of a commission. Several companies also pay sales representatives salaries and after that offer bonuses as a percentage of base pay tied to meeting several levels of sales targets or other criteria. An ordinary split is 70% salary to 30% commission, though the split varies by industry and along other factors. Combination plans have several plus points. They offer sales people a floor to their earnings as they obtain a fixed salary for servicing existing accounts and earn additional incentives for greater performance. Combination plans offer superior design flexibility as they may be set up to help maximise company profits. They can build up the most favourable ratio of sales expenses to sales.

Box: Comparative Analysis of three Gainsharing Plans