Designing Incentive Plans: How Do You Set Fair Incentives for Sales Teams at Different Levels?

Hi all,

Please guide me on the incentive plans to be designed in an organization. Is there any formula to define incentive amounts for salespeople working at different levels? I know that incentives should be based on the revenues generated by salespeople or the targets given to them in terms of revenue.

Please share your views on this.

Thanks & Regards,
Vandana Sharma

Dear Vandana,

Greetings.

You have raised a good question on incentive plans. For a successful incentive plan, the following points may be taken care of before implementing:

1. There must be a guaranteed minimum amount for reasonable sales.
2. The plan must be rational and easily achievable by a person with moderate work.
3. As the success of every incentive plan is based on the participation and motivation of the earners, it must be well-structured with the required guidelines.

Cheers,

Trisha HR Professional

Hi,

I am waiting for your guidance. I want to add one more question with this: Are incentives part of salary or CTC? I spoke to a CA, and he told me that incentives must be included in the salary structure, and CTC comes only after adding incentives (if we have defined for any person).

Please guide me on this issue. How do you handle this incentive part?

Thanks & Regards,

Dear Vandana,

Greetings.

Incentive should not be included in CTC as you calculate a constant incentive amount. Incentive is based on work performance, completion of tasks, and achievement of production standards. Therefore, it is not correct to include it in CTC.

Cheers,
Trisha
HR Professional

Hi All!

With reference to the discussion, if incentives are not included as part of CTC, then what exactly is "Performance Pay" or "Flexi Pay" or "Variable Pay" which are a part of CTC in most organizations.

Secondly, how does one calculate this "Performance Pay" beforehand? What are the parameters for calculating "Performance Pay," and how do you earmark the performance standards for calculating variable pay?

Seniors, if you can provide some insight, it would be very helpful.

Regards,
Suchandra

Dear Vandana,

May I suggest an idea to potentially create a new policy in your company? Here are a few points to consider:

i. You should establish clear targets and corresponding incentives.
ii. It would be beneficial to discuss with your management team and determine appropriate incentives based on different departments.
iii. If this policy proves to be beneficial for business growth, could you please propose it to your management?

Regards,
D. Thirumurugan

Thanks, Trisha, but how can one set the target? According to me, there should be a minimum amount that a salesperson needs to generate, which also depends on their gross salary. Beyond that amount, the company can calculate the incentive. Is the target also indirectly related to the gross salary of a person? Is this the right approach?

Dear Vandana,

Greetings.

For getting salary itself, all salespeople need to achieve some agreed-upon targets. Otherwise, they may be regarded as poor performers and either removed or corrected to meet the sales targets. However, to receive an incentive amount, they must put in more effort. We need to set achievable targets for their performance.

Cheers,

Trisha
HR Professional

Hi,

Take BEP (Break Even Point) as one of your parameters to determine the incentive for administration and other departments. For the sales team, incentives should be based on the targets they achieve. For example, achieving between x and y number of sales could result in a certain percentage or a fixed amount per sale, and so on.

Before proceeding further, could you please specify the type of organization you are representing?

Regards,
Jyothsna

Hello All,

I am preparing sales incentive plan. Let me share the details with you:

· It’s a start up company in India in IT infrastructure management (IT managed services). We have to hire a sales person and have to pay him incentive above his salary.
· Sales cycle is long about 3-5 months
· Services sold can generate repeat revenue (monthly) or one time revenue
· Objective is to penetrate the market

It would be great if you could provide me following information:

· Things that must be covered in incentive plan/policy
· Percentage of incentive given to sales person in this industry on different target considering that incentive is paid on revenue and not profits
· Should the incentive percentage be different for repeat business and new business
Thanks & Regards,
Prachi