Components and Characteristics of a Compensation Plan

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Compensation Plan
Name:
Course
Professor’s name
University name
City, State
Date of submission

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Question 1
There are several components in a compensation plan and each one has a particular objective.
Fixed . It is a fixed sum of money and is paid at regular intervals. This is usually fixed based on
experience, competence and time in the position (Picciotto, 2004).
B. Commission. It is a payment based on a seller's short-term results. It is considered volume of
money or units of sale.
C. Bono. It is a payment that is made at the discretion of the board to reach or exceed a certain
degree of performance. Quotas are often the minimum measurement requirement.
D. Sales contests. It is an activity that is carried out among the sales personnel E. Benefits. They
are the basis of most compensation plans integrating these packages. They include medical
insurance, life, retirement plans, disabilities, etc.
CHARACTERISTICS OF THE COMPENSATION METHODS
A combination of base salary plus incentives.
Whether the base salary is combined with commission payments or bonuses, the administration
must
respond to other problems when designing effective plans for combined compensation.
1. Appropriate size of the incentive in relation to the base salary
2. Existence or not of a ceiling or cap on income through incentives

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3. When a specific sale is considered
4. Employ or not group incentives and how to distribute them among team members
5. The frequency or periods of payments for the incentives.
For an executives pay, the total sum of salary, option exercised, bonus, restricted stock grants
and long term incentive payout is what makes thee total executives’ pay. Using all these
variables. All these incentives are a way of maximizing the company’s value (Mellon, 2016).
Mr. Robbins compensation will be calculated according to his achievements as the new CEO for
sisco systems. Formulae for calculating the CEO’s executive pay.
salary Fixed
bonus 2% of the total revenue of the company
Restricted stock grants The number of shares will be determined by his
performance
Long term performance based
grants
Based on performance
Other compensation
Total