Tag Archives: Comp

How Do You Design an Effective Sales Compensation Plan? Three Steps

Situation: A young company is redeveloping its sales department and wants to develop an effective sales compensation plan. What advice do members have for the company on effective sales comp packages? How do you design an effective sales compensation plan?

Advice from the CEOs:

  • The first step is to develop broad outlines to the plan:
    • What salary range is the company contemplating? What can the company afford?
    • What skills beyond the ability to sell will be required? For example, will the sales person require technical skills in addition to sales skills? Or will the sales person need engineering design assistance both in making the sale and in providing service post-sale?
    • Who will be the ongoing contact for the customer once the sale is made? Will this be the salesperson, or will ongoing customer contact will be managed by engineering?
    • The higher the skill level and both sales and post-sale responsibilities, the higher the potential salary.
  • Once the broad outline is decided, set parameters and objectives for the position. The compensation plan should reflect and be consistent with these.
  • Third, establish the behaviors that sales people are expected to exhibit. Any compensation plan should reinforce the behaviors desired by the company.
    • If salespeople are expected to bring in high margin business, focus and scale compensation based on the margin generated by the sale.
    • If an objective is to avoid customers who are bad credit risks, then pay sales people on collected funds rather than on invoiced business.

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How Do You Control Insurance Expense? Four Options

Situation: A CEO has seen the expense of employee benefits, particularly the cost of health insurance, grow higher than the inflation rate in recent years. There are no indications that this will be reduced. Employees appreciate their benefits, and in the current environment the CEO is hesitant to reduce them. What alternatives are available? How do you control insurance expense?

Advice from the CEOs:

  • To control rises in healthcare benefit costs, consider offering high deductible health insurance combined with company contributions to HSA Accounts. This combination can be less than current health coverage and may reduce the cost inflation of these benefits.
  • Another alternative is to raise the deductible on medical insurance provided but cover the deductible differential for employees.
  • Consider a benefits administrator to assist in putting together a benefits package to reduce costs. There are many alternatives available.
  • Another big expense is Workers’ Comp (WC). The group shared strategies to control WC expense. Investigate those that apply to the company’s business model.
    • Make sure that the company is coded in the proper category – if not the company may be paying a higher rate than required;
    • Develop a proactive company safety policy, with documentation – this can gain discounts from some insurers;
    • Industry or trade associations have developed ADR components for association members to help control costs;
    • Investigate eliminating the medical coverage component on auto insurance for company cars that employees use to drive home. This may already be covered by WC;
    • Shop insurance providers for WC coverage – some will quote more competitive rates to get the company’s business;
    • Challenge the amount of WC reserves that are required for outstanding WC cases – the insurers may be assuming an excessive reserve to cover contingencies and charging the company for this excess;
    • If the company’s insurer is maintaining an employee on the WC list pending resolution of the claim for an excessive period, push them to resolve the case quickly;
    • Eliminate optional employees (e.g., officers) from WC coverage.

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Should You Conduct Random Drug Tests at Work? Seven Points

Situation: A company is in the skilled trades. When there is an injury at work, Workers Compensation does not cover the employee if they were using drugs or alcohol at the time of the injury. Should you conduct random drug tests at work? How do you make employees aware of company policy on random drug tests?

Advice from the CEOs:

  • Laws governing Workers Compensation vary by state. Be sure to get the latest update on regulations from your State.
  • The best policy is preventative. Always test for drugs and alcohol prior to hiring. Let potential employees know that this testing is a requirement of employment, and that a positive test disqualifies the candidate. A candidate has the option to disqualify him or herself rather than be tested.
  • The use of medical marijuana with a doctor’s prescription does not preclude a candidate or employee from failing a drug test. State laws regarding medical marijuana are evolving, so monitor state regulations.
  • In your employee policy, specify that you can test for drug use at any time, at your discretion. Additionally, state that you have the option to perform a drug test in case of an injury. If there is an injury on the job, have the treating physician perform a drug test on the injured employee.
  • Assure that you are consistent in treatment of employees and in how you apply your policy.
  • There should always be a reason for a drug test – tie it to employee safety.
  • As you institute a new policy, let all employees know about the policy. Prominently post the policy at your place of work, and remind employees about the policy at appropriate company or employee meetings.

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