АGЕNСY RЕMUNЕRАTIОN STRUСTURЕ 1

АGЕNСY RЕMUNЕRАTIОN STRUСTURЕS

A commission structure is a form of payment which is founded on the quantity of sales which an employee makes and it is generally based on the overall percentage of the sales made by the employee. There are many forms of commission that exist but the most common one is the on target earnings, in which the rates of commission are based on the reaching particular targets which had been agreed upon amid the management of the firm and the person doing the sales. The other forms are straight salary, salary and bonus, straight commission, salary plus commission, variable commission, and residual commission.

Firms which embrace the commission structure might not involve the employees, rather they may singly set develop them by use of independent contractors. In this structure of remuneration, it is considered that contribution to sales is made by every employee and thus each employee is payed based on the revenues of the company rather than by use of profit sharing or bonus (Cao, and Pan, and Tian, 2011). The ratios in commission differ from development, finance, marketing, administration, customer support, sales among other different areas as per the metrics which the individuals are to control directly. Further the compensation of every individual is tailored as the base in addition to the commission.

Performance based remuneration is a type of compensation that is based on the percentage of the overall managed assets and is usually given out based on how best an employee performs (Lavy, 2007). This kind of remuneration structure is usually used by many employers to evaluate employees as well as setting salaries.

In performance based remuneration, compensation entails a base salary alongside a variable component which may be bonuses, gain sharing or company equity. The essence of this system is to keep and hold employees who are to performing, performance motivation to the desired level as well as cost control (Shields et al, 2015). For any company which intends to embrace this kind of remuneration plan it ought to define precisely performance, its objectives, terms that are quantifiable, measure it as well as track it.

Compensation plans which are successful usually pay for the outcomes. Consequently, also they need to identify the effort since it does not matter how hard the employees put their effort, at times they do not realize the results that are desired. Therefore, in this structure payment is for the results but other means need to be developed into the plan of rewarding and identifying hard work (Cheng and Hong and Scheinkman, 2010).

The commission structure inherently motivates the employees to concentrate their focus on revenue creation whereas the performance based remuneration focuses on generating superior outcomes. Also in the performance based remuneration, the plan involves all the full time employees but not the part- time, temporal or contract help, while in the commission based structure might not involve the employees, rather they may singly set develop them by use of independent contractors. In addition, the commission based structure can play as a stock dividend, team motivation to concentrate efforts and work harder in companies which cannot give stock options. Also it aids in bridging divisions and inherent gaps amid departments by making sure that every individual focuses on the revenue, savings and profits alongside agendas of individual departments. Whereas the performance based remuneration motivates the team to produce quality and superior results.

In conclusion, in the outcome end, one needs to differentiate amid levels of performance. This will help to take into account the difference amid mean performance and performance that is outstanding (Lee, 2009). Thus plans that are effective need to have a clear correlation amid superior rewards and superior outcomes.

References

Cao, J., Pan, X., & Tian, G. (2011). Disproportional ownership structure and pay–performance relationship: evidence from China’s listed firms. Journal of Corporate Finance, 17(3), 541-554.

Cheng, I. H., Hong, H., & Scheinkman, J. A. (2010). Yesterday’s heroes: Compensation and creative risk-taking (No. w16176). National Bureau of Economic Research.

Lavy, V. (2007). Using performance-based pay to improve the quality of teachers. The future of children, 17(1), 87-109.

Lee, J. (2009). Executive performance-based remuneration, performance change and board structures. The International Journal of Accounting, 44(2), 138-162.

Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., & Plimmer, G. (2015). Managing Employee Performance & Reward: Concepts, Practices, Strategies. Cambridge University Press.