Designing Sales Incentive Plans: How Often Should They Be Paid and Are They Part of CTC?

Hi Friends, I'm working in an Automation (Manufacturing) Company in the HR department, and we want to design Sales Incentive Plans for a newly joined Sales Manager. Kindly guide. Also, are incentives paid on a Monthly, Quarterly, Half-yearly, or yearly basis? Are they included in the CTC or separate from it?

Definition of Incentive

The definition of incentive is, "an additional payment (or other remuneration) to employees as a means of increasing output."

Additional Output by Sales Personnel

When salespersons bring in sales revenue above the assigned target, they are given an incentive. Generally, this incentive is based on an individual's performance. It is given as a percentage, such as 1% of the additional revenue, and is always included in the routine salary. Typically, it is disbursed half-yearly or annually.

Industry Variations in Sales Incentives

The percentage of sales incentive varies from one industry to another. Therefore, it is advisable to check with the HR managers in your industry regarding the prevailing practices.

Caveat: Challenges in Recovery

Selling is easy, but recovery is difficult. Therefore, some companies also pay incentives based on the salesperson's ability to complete the recovery process within a defined time span. Delayed account receivables can disrupt the company's cash flow.

Thanks,

Dinesh Divekar