Compensation Plan

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Compensation Plan

Category: Term paper

Subcategory: Construction

Level: College

Pages: 4

Words: 1100

Compensation Plan
Student’s Name
Institutional Affiliation
Specific Objectives
For AirProducts Company, the sales plan shall focus on the outcome-based measures, and in particular, the sales results on the number targeted quarterly.
The Sales Representative is assigned the following Quarterly Quota.

Performance Category Quarter 1 Quarter 2 Quarter 3 Quarter 4
Product Sales Target 300,000 300,000 300,000 700,000
Transaction and Credits
For the company’s transactions that involve the Sales Representative, a commission is arrived at on the amount of sales ordered. Fifty percent of the calculated commissions are given out in the immediately after the subsequent commission pay period. The other fifty percent of commission is detained until the amounts for the order have been fully received.
The product revenue commissions are then calculated through multiplication of the sales amount by a commission rate, and the rate is based on level that one attains compared to Quarterly targets for Sales representative, and the following table summarizes commission rates.
Attainment % minimum Attainment % maximum Commission Rate
0% 100% 4
100% 124% 5
125% 149% 7
150% Over 9

General Levels of Compensation
Pay Structure
Salary Range    Lowest Salary    Target Salary    Highest Salary
A                           $19,000             $22,500         $24,750
B                           $24,500              $26,750        $29,500
C                         $26,750              $29,250         $32,000
D                           $29,250              $35,000        $38,500
E                         $35,000               $41,750         $45,750
In the table above, the lowest salary that is to be offered by AiProducts Company shall be $19,000 and to arrive at the target salary, a multiplier of 120% was applied on the minimum salary, and result rounded off to the nearest $250. In the determination of the highest salary the firm can offer, a multiplier of 110% was applied to the target salary and then rounded off to the nearest $250.
Compensation Mix
Multiple research outcomes have consistently indicated that pay incentives are sufficient motivational programs that contribute to increased productivity of an employee. The incentive schemes emphasize a common focus for the achievement of objective of the organization through expansion of the opportunities for bonuses to conventional groups, and at the same time functioning external to merit, which is the base pay. Incentive systems build an ecosystem that advocates for a philosophy, which reflects a common commitment through the ideals that every person has a role towards the success of an organization. Businesses implement incentive schemes for different reasons, and these include high labor rates, competition, and a high likelihood for production bottlenecks amongst others.  For this plan, the incentive plans shall be purely applied to non-executive employees, and it shall focus on the individual bonuses. 
For the employees of AirProducts Company, the individual bonus payment shall be based on the number of units; for example, production targets and the sales targets. These values have been incorporated into the pay structure above that displays the minimum and maximum salary ranges for the 3500 workers in the firm.  Other criteria that AirPoducts may consider in the future when offering an incentive plan can be based on cost reduction, quality improvement and performance criteria in the organization. The Sales rep preventatives shall be paid for all their travel and lodging costs that have a direct relationship with the sales activities. Auto travel shall also be reimbursed at the present national reimbursement rate, which stands at 0.37 cents for every mile.
Fresh Sales Incentives
Fresh sales incentives are paid given on the number of new sales opened in the territory of the sales representative in a month. The new sales incentives are paid contingent upon the following table for each month.
No of New Sales Amount for every new sales in the territory
1-9 90
10-19 190
20 and above 290
Annual Business Unit Bonus
An annual bonus is paid when all sales per year exceed the total Product quota value for the year at the national level. All the sales representatives get a bonus when their goal is exceeded. A sales representative should have begun their employment within the first quarter to make a cut for the bonus. A table has been created for the determination of the total Bonus Payout amount. For product sales representatives the payment for their team bonus is anchored on two things, first the quarterly percentage and two annual attainments.
Attainment % Minimum Attainment % Maximum Yearly Bonus
0% 100% $9,000
100% 110% $1800
110% 120% $3800
120% Above $7000
President’s Club
Every AirProduct’s Company sales representative is entitled to take part in a Chairman’s Club contest, and the top 10 ranked representatives among the sales unit shall be beneficiaries the following benefits on achieving Chairman’s Club. The product Sales Rep must exceed Quota to be eligible for Presidents Club.
Ranking BottomRanking Sales Retreat Trip Briefcase Bonus
1 25 Tick Tick 1000
6 75 Tick Tick 16 100 Tick Pretest
The Quarterly amount for every product sales is $4,000,000 for each region
The Attainment for all sales for the quarter = $3,763,000
Quarterly Attainment percentage = 94.07 % or (3,763,000 / 4,000,000 X100)
The payout bonus for each sales product representative = $4,000.00
Administering the Plan
The Plan shall be thoroughly administered so that it complies with the national and regional laws; moreover, it should respond to the industry averages. Obviously for ease of administration, this plan shall be created in a special company policy document, that shall have the specific policies mentioned above herein the paper. Moreover, another document strategy that merits that issues that were raised, and which include pay increases and cost of living adjustment, promotions and reviews shall be contained in another additional policy subsection and shall be the reference for future plans. Accompanying documents such as the performance appraisal form and the merit raise schedule shall be instrumental in ensuring that an individual receives the amount of products sold. Finally, a constant meeting with the compensation committee shall be conducted to review, adjust and approves of this plan and a new one or improved one.
Evaluate the Plan
The current data on sales-representative match industry averages, while at the same time can meets the company‘s employee daily cost of living. Hence this compensation plans seems to suitably align to the strategy of the company, to the principle of the sales compensation plan, market, and it makes a lot of business sense.

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