All of the following are disadvantages of straight commission plans EXCEPT

2 . All employees are provided a share of the company's profits in a specified period with a(n): [Hint]

3 . Group incentive plans that tie pay to a measure of overall profitability is a(n): [Hint]

4 . Paying workers for units of production is: [Hint]

5 . Disadvantages of piecework plans include all the following except: [Hint]

6 . Workers are less likely to link production standards to pay with the standard hour plan if the incentive: [Hint]

7 . Issues to consider when awarding short-term incentives may not include: [Hint]

8 . Team-based incentive plans may demotivate hard workers because their pay may not: [Hint]

9 . Using a straight percentage of a company's net income to decide how much bonus money to make available is a(n): [Hint]

10 . Long-term incentives are designed to encourage executives to: [Hint]

11 . A(n) _________________ gives an executive the right to purchase a company stock at a specific price at a specific time. [Hint]

12 . Restricted stock plans provide stock to an executive: [Hint]

13 . Executives receive units representing stock shares under _________ plans. [Hint]

14 . Top managers' incentives are increasingly being tied to: [Hint]

15 . Paying a straight salary to salespeople may not be desirable because: [Hint]

16 . Commissions tend to shift a salesperson's emphasis to: [Hint]

17 . Turnover among salespersons is highest when paying by: [Hint]

18 . A disadvantage of combination plans is that they: [Hint]

19 . A salary increase that is based on a person's individual performance is termed: [Hint]

20 . Merit pay may be a demotivator because of supervisors' tendencies to: [Hint]

21 . Lump sum merit payments may be attractive because they are: [Hint]

22 . Not giving lump sum merit payments to poorly performing employees forces employees to focus on: [Hint]

23 . Employees receive a share of the company's annual profits by means of: [Hint]

24 . Firms contribute shares of stock or cash to a trust that purchases stock for employees as part of: [Hint]

25 . ESOPs encourage employees to develop a sense of ownership in the firm due to all the following except: [Hint]

26 . Cost-saving gains are shared among employees and the company as a result of: [Hint]

27 . An employee's weekly pay is subject to the firm's meeting its financial goals under the: [Hint]

28 . Under the Fair Labor Standards Act, employers must include incentive payments in: [Hint]

29 . Work standards are set for each team member and each member's output is counted when using: [Hint]

30 . Providing appropriate incentives for professional employees is challenging because they are: [Hint]

In a commission-based pay plan, you pay sales employees a percentage of what they sell. Some employers use straight commission, meaning sales numbers determine every dollar a worker gets. A commission-based incentive plan often means that workers receive a salary, but commissions serve as an incentive for strong sales production.

Advantage: Increases Sales

The primary reason companies use commission incentives is to motivate sales employees to work harder, more effectively or more efficiently to convert sales. The motivational impact can vary, but those salespeople driven by income tend to go after more prospects and work more diligently to get sales if pay is connected to success. Employees often take salary pay for granted. However, knowing that extra effort or results means more pay can motivate.

Advantage: Pay Tied to Revenue

A financial advantage with commissions is that you know you only pay on sales conversions. Thus, you typically don't incur the commission costs unless you also get the revenue that comes with the sales. This factor is why many sales-intensive companies pay on straight commission. Managers can effectively control labor costs or ensure optimized selling efficiency by only paying workers for the results that they produce.

Disadvantage: Unpredictable Expenses

Naturally, a company that pays commissions would gladly incur high commission costs in exchange for strong revenue performance. However, the uncertainty with commission pay can lead to budget challenges, especially if you sell on account to buyers. If you pay commissions shortly after the purchase but don't collect payments for an extended period, you have a lack of alignment in revenue and compensation. Some salespeople also struggle with the uncertainty of a commission plan.

Disadvantage: Overly Aggressive Sales

The philosophical view or values of your business also dictate whether commissions make sense. Commission incentives sometimes motivate staff to use an overly aggressive approach to secure business. While this approach may lead to strong short-term sales results, you can also drive away prospects and customers turned off by high-pressure tactics. Some companies use a relatively small commission percentage, especially in retail environments, to balance the motivational advantages of commissions while limiting the potential for over-aggressiveness.

Strike Balance With a Blended Approach

To assist in attracting experienced sales staff while still creating a pay structure where achievement is rewarded, many businesses offer a blended compensation package. A blended package provides sales staff with a base salary for pay stability with additional commission-based compensation on top to help employees reach a target compensation goal. In a reliable industry for sales, a 50/50 split is not uncommon. For example, an employee with a $50,000 target compensation would receive a $25,000 salary and use commissions to augment earnings.

What is a disadvantage of straight commission plans?

Which of the following is the major disadvantage of a straight salary plan quizlet?

What are the disadvantages of commission?

Which of the following is an advantage of a straight commission compensation plan?