Interviewing Sales Personnel

You have come to the end of successful interview with a potential top salesman for your company.  You are at the final stage when you need to ask that crucial question to find out what is his or her expected remuneration if she or he should join your company. Do you know what to ask? Do you understand what you are being told?

The typical salary structure of a salesman may comprise of 3 or 4 components. These are: (a) Basic salary and annual bonus of a fixed quantum (for example 1 month of basic salary) (b) Transport and mobile phone allowances (c) Commission (d) Long term incentives.

COMPONENTS

DESCRIPTIONS

COMPUTATIONS

EXAMPLES

Comp1

Total base or basic salary Monthly base salary times the number of months guaranteed Basic salary x 12 months

Annual Wage Supplement

Comp2

Total guaranteed cash remuneration Comp 1 plus other guaranteed or legally required cash payments Comp 1 plus Fixed allowances (eg transport allowances) x 12 months

Comp3

Total annual cash remuneration Comp 2 plus short term incentives Comp 2 plus variable bonus or sales commission (target OTC x 12 months)

Comp4

Total direct remuneration Comp 3 plus value of long term incentive programmes Comp 3 plus long term incentives

 

There are four basic sales personnel compensation arrangements: (a) straight salary (b) straight commission (c) salary plus commission and (c) salary plus performance bonus. The difference is in the salary versus incentive ratio.

As for the transport allowances, some companies (a) provide company car and issue a petrol card and reimburse parking and toll expenses (b) provide a car loan and issue a petrol card and reimburse parking and toll expenses (c) pay transport allowances, issue a petrol card with a spending limit and reimburse parking and toll expenses or (d) pay transport allowances only.

Sales personnel are not paid overtime pay, variable bonus, productivity bonus and do not participate in gain-sharing plan.

Long term incentives are typically applicable to sales department heads and senior sales team leads.

Although many types of commission systems exist, a common form is known as On Target Commission (OTC) where commission rates are based on the achievement of specific targets or quota that have been agreed upon between management and the salesperson. Usually, a higher commission can be paid if the sales personnel performs beyond the target (hit a higher target. Also called accelerated rate). Sales quotas are certain levels of sales that salesmen are expected to reach in a specific periods of time.

For example, a job advertisement for a sales personnel indicates that the on-target earnings for the job is $200,000. This amount may comprise of $50,000 basic salary and $150,000 commission payments. However, when someone is calculating the commissions portion of on-target earnings, there is no way of knowing whether a salesman will actually sell enough to earn that money.

The misleading statement comes from the implication that these are rates of pay which are actually achieved. You may note that OTC is an annual figure.

The term On Target Earnings (OTE) refers to the total earnings that a sales personnel will be able to receive if he or she meets the sales target. It is the total of Comp 1, 2, 3 and 4 and is an annual figure.

Here is what you should ask. First, to understand what is his current remuneration package, ask for the following information (a) what is the basic monthly salary? Any fixed quantum of bonus that he may receive in the year? (b) Any fixed monthly allowances that he is provided? (Do not consider reimbursements or loans) (c) What is the annual OTC that he is expected to earn? (d) Any Long Term Incentive that he may receive in the year? (e) Reconfirm his OTE. Second, ask him for his expected monthly basic salary and his annual OTE. These information will be useful when you need to make a salary proposal in order to make a job offer to your job candidate.

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