Getting Too Creative With Compensation Plans Can Create Problems!
It’s not hard to understand why the automobile industry attempts to motivate their respective sales staff by dangling carrots if front of their faces. The problem is that sometimes, even though the employees may agree, the plan itself may violate state guidelines.
Let me throw a scenario out there for discussion. If a bonus that promises a salesperson will receive $1,000 if he/she sells 10 vehicles in a month, and the salesperson sells 8, is there a bonus owed?
Let me hear from you!
What is the right answer?
Depends, is it a calendar month or a rolling 30 days?
I’m guessing the answer is yes, that you’d owe them 80% of the $1000.
The bonus was for selling 10 vehicles, not $100 for each vehicle.
So does that also pertain to a parts salesman bonus? They get a $200 bonus if they hit $75000. So if the hit $60000 they should get $160?
The answer would depend on how clear your guidelines are written. Some state that the bonus will be prorated based on your level of achievement, just as some state you must be employed on a certain date to receieve payment even though you may have hit your goal prior to termination. Without knowing how the bonus program is designed, I would era on the side that the bonus payment should be prorated based on the level of achievement.
There are two different types of bonuses, performance and discretionary. The first is based upon how well the individual performed. If he or she performed to a level of 80%, then they get 80% of the overall bonus offered. The latter is one where the decision to give the bonus is subjectively up to the decision maker. Admittedly, it is harder to get individuals to perform if the bonus is “discretionary” but trust me, in the long run, you will be better off from a liability standpoint. The California Department of Labor Standards Enforcement has been very clear on this issue. Note: All bonus plans should be specific and in a written format with a signature line for the employee.
Do you guys have any templates that would be helpful to write up the bonus plan we offer staff?
So like Sabrina asked, “does anyone have a template for bonus plans?”
Bonus plans are so unique that a template probably would not work. Each has to be customized. We will review bonus plans as a part of the services that we offer.