From :

Group 2
Dheeraj
Richa
Arun parkash
Shibashish
Ramesh
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.
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
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
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