Features of a Good Sales Compensation Plan

Motivation is a key to success. Behind every work that an individual does, he/she needs a motive to drive them towards their goal. Sale compensation plan is a catalyst for motivation. It is basically a remuneration given to sales personnel for their excellent performance to establish a fair distribution of wages and incentives. Sale compensation plan is designed in a way to bring alignment between organisational and personal goals. It focuses on achieving the sales target and profit objectives in a desired period of time, which is rewarded thus resulting in high morale. Compensation plans are of two types- direct and indirect. Direct compensation includes salaries, wages, commission, incentives etc., whereas indirect compensation plan includes health insurance, pension, paid leaves etc. These plans not only include financial benefits but also some non-financial benefit like recognition, praises, opportunities for growth etc.

Compensation is an integral part in employee retention and survival as it included motivation factor in it and it also helps in fulfilling the overall objective of the organisation. A good compensation plan is designed to make the employees content and motivated. As we know, human is a social animal and he cannot survive only on breads. They want belongingness and growth in their life, so the compensation plans should be designed in a way that it takes care of other aspects also like healthy work culture, time-offs, personal development etc. A company establishes a compensation plan and policies to bring balance between incentives and sale performances. It should not be partial towards a particular employee to maintain equity to avoid skilled employees get de-motivated. It should be imparted on the basis of performance and productivity.
The features of a good sales compensation plan are:

  1. Fair
    The compensation plan should be fair and unbiased. The sales personnel should be given the appropriate value of incentives according to the performance delivered by them. Not all members should be eligible for the extra benefits, which keeps up the motivation to work hard and do larger sales.
  2. Simple
    The sale compensation plan should be easy to understand and should not include technical calculations that cannot be understood by the employees. Otherwise, this will create a confusion and creates a doubt that they are being paid enough or not which leads to disengagement.
  3. Clarity of goals
    The compensation plan should clearly address the goals and objectives of the company behind these policies. Without the clarity of what to achieve and whether it’s benefitting the company or not, it becomes risky to invest resources on it. 
  4. Takes care of the health
    Motivation generated by this compensation plan should not affect the health of the employees by overstraining themselves to attain the goals. To avoid such affects on health, compensation plan should include paid time offs giving them time to reboot themselves. These plans should also include health insurances to make them feel secured.
  5. Integration to sale performance
    A good sale compensation plan should be integrated with the objective of increasing the sales and attaining more profits as this is the bottom line. Every individual working should be intimidated to achieve higher sales to attain the benefits of the scheme resulting in higher productivity and profitability.
  6. Attractive
    The compensation plan should be attractive enough to tempt the employees towards it. If the incentives given are small then the employees will not feel motivated and gets discouraged to work hard for that amount of remuneration. Therefore, the incentive should be large enough to tempt the employees to work harder to achieve it and keeps them motivated.
  7. Attainable
    The standards fixed in the compensation plan to be eligible for the benefits should be attainable enough so that the employees feel encouraged to attain it. If the standards are that high which cannot be attained even with the extra efforts then it will de-motivate the employees and it will become futile.
  8. Reformation
    A good sales compensation plan should be such that it gets upgraded over a time period, to be at par with the generation and ever evolving market. If the management does not change the methods and standards used for compensation plan, then the new employees will not relate to it thus discouraging them to achieve it.

A good compensation plan is vital for both the society and the company. It helps the company by increasing their profits which brings in cash and it helps the society by uncovering more job opportunities and motivating the individuals to work harder. As incentives provided to the employees incurs a huge cost of the company and drains out the resources, so one should design it in such a way that it has a good return on investment. It should be distributed accordingly with a close analysis of the performance of the employees which creates fairness in the work culture.

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