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