Phase B. Determine Financial Requirements

The design process needs to address how much a compensation plan will cost as a percentage of sales as well as how to pay out compensation earned under the plan. Prior to detailed design, it is critical to determine the level of cash compensation that will be available for each job.

Step 4. Establish Compensation Levels

This task calls for a balanced approach to be sure that the pay levels are externally competitive (to attract and retain talented people) and internally equitable (to facilitate retention, career movement, and team cooperation). The cash compensation level for each job must also be large enough to motivate and to pay for performance to drive business results. You must balance mix (at-risk ...

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