Lakhasly

Combination Plans As noted earlier, some form of combination pay plan is used to compensate the majority of all sales forces.The incentive portion should be larger when a company is trying to increase its sales or gross margin, especially in the short run.The salary element should be larger when management wants to emphasize customer servicing, a fully balanced selling effort, or team selling.Combination plans introduce a component that we have not yet discussed--namely, a bonus.The word bonus is probably the most loosely used word in the compensation vocabulary.As a result,it is sometimes difficult to accurately assess the extent to which it is used in pay plans.Most of the combined plans fall within the following three categories: o o o Salary plus commission Salary plus bonus Salary plus commission and bonus In a combination pay plan, what portion should be incentive and what portion salary?The incentive portion in combination plans is most often in the 40 percent range.

Combination Plans As noted earlier, some form of combination pay plan is used to compensate the majority of all sales forces. Broadly speaking, the purpose of any combination plan is to overcome the weaknesses of a single method while at the same time keeping its strong points. Most of the combined plans fall within the following three categories: • • • Salary plus commission Salary plus bonus Salary plus commission and bonus In a combination pay plan, what portion should be incentive and what portion salary? The answer depends on the nature of the selling tasks and the company’s marketing goals. The incentive portion should be larger when a company is trying to increase its sales or gross margin, especially in the short run.The salary element should be larger when management wants to emphasize customer servicing, a fully balanced selling effort, or team selling. The incentive portion in combination plans is most often in the 40 percent range. Combination plans introduce a component that we have not yet discussed—namely, a bonus.The word bonus is probably the most loosely used word in the compensation vocabulary.As a result,it is sometimes difficult to accurately assess the extent to which it is used in pay plans. A bonus is a lump-sum payment for an above-normal performance.Because of its nature, a bonus cannot be used alone but instead must always be combined with another element such as a salary or commission. Strictly speaking, management need not announce in advance either the amount of the bonus or the basis for distributing it. However, most companies devise sales bonuses to stimulate the sales force to perform specific tasks. Unless they explain the plan in advance, managers will gain nothing by giving a bonus. The most commonly used basis for paying a bonus is the measure of a salesperson’s performance against a quota—another aspect of compensation

that has not been discussed yet. Quotas and sales expenses are discussed in the next chapter.