11 Factors that Affect Company's Remuneration Plan

Salesmen’s performance depends on remuneration plan. The remuneration plan must be suitable to the prevailing market condition, must be attractive to salesmen, and must be affordable for the company. A manager has to consider a number of factors while designing suitable remuneration plan for sales force.

Below discussed are some of the important factors that affect company’s remuneration plan:

1. Objectives and Policies of Company:

Amount of pay to salesmen is directly affected by objectives a company wants to achieve and its remuneration policy. If the company’s objective is to solve consumer problems via sale force and to raise sales volume, the company pays more fixed salary and attractive commission. Similarly, the company will pay attractive remuneration when it has liberal policy toward employees.

2. Type of Products:

Salesmen who are engaged in selling different products must be remunerated differently as different products need different amount time and efforts. Certain products are ‘easy-sold products’ that require less efforts and time, while some products are ‘hard-sold products’ that requires comparatively more efforts and time.

Likewise, a completely new product requires salesmen to struggle more to convince consumers. Even in case of technical products, more efforts and time are needed to teach them how to use products safely in normal a condition. Based on type and nature of products to be sold by salesmen, remuneration plan is prepared.

3. Qualification, Experience and Ability of Salesmen:

Quite obviously, a salesman with higher qualifications, rich experience, and better ability to sell expects attractive pay package. Company must pay a fair and adequate remuneration to qualified and able salesmen as it is benefited by them.

4. Nature and Amount of Tasks:

Compensation to salesmen is based on what a company wants its salesmen to do. Amount differs significantly if salesmen have to perform variety of tasks over and above selling the products. For example, salesmen may be required to generate new customers for existing products, to promote new products, to introduce products in new territories, to collect information of competitors’ policies, to win competitors’ customers, to conduct market survey, to handle special problems of consumers and dealers, etc. These extra efforts must be compensated by paying higher remuneration. Not only different tasks, but also the intensity of these tasks affects amount of remuneration.

5. Competition and Competitors’ Remuneration Policy:

A manager has to consider the degrees of competition and competitors’ remuneration policy to decide on the company’s remuneration policy. It is quite obvious that salesmen need to put more efforts when there is competition. Their efforts must be compensated with the attractive pay. Likewise, no company can completely ignore competitors’ remuneration policy.

6. Availability of Sales Personnel:

Availability of the required sales personnel is one of the important factors influencing the remuneration plan for salesmen. When company finds it difficult to recruit the needed salesmen at low payments, it has to offer high salary and other attractive benefits.

7. Legal Provisions and Restrictions:

Naturally, each company has to formulate and practice the remuneration plan within limit of the contemporary legal framework. Legal provisions and restrictions of the relevant Acts like the Payment of Minimum Wage Act, the Bonus Act, etc., must be considered while deciding on remuneration to avoid any legal problem.

8. Current Remuneration Practices in Industry:

No company dares ignore the current practices followed in the industry. Companies prefer to maintain parity with the industry. So, company’s remuneration plan consists of such features similar to the industry.

9. Area and Types of Customers:

In certain areas where product is either not familiar or is facing a severe competition, a salesman requires more efforts. Obviously, salary must be high in such a territory. When salesmen are paid mainly by commission on sales volume, the rate of commission must be kept high. Similar is the case with the types of customer. Different types of customers need different treatment to be convinced. So, the pay must be linked with the types of customers.

10. Financial Condition of Company:

Along with above stated factors, a manager should also consider financial health of the firm. Firm’s payment policy must be complementary to its financial position. Financially sound companies adopt an attractive package for salesmen.

11. Other Factors:

Apart from the factors discussed so far, there are some additional factors, which have been list below:

(a) General business and economic conditions

(b) Nature of market for the product

(c) General market trend, etc.

Submitted by : Dr. Jason, Category : Salesmanship