Answer to Question 1
In a straight salary compensation plan, salespeople are paid a specified amount per time period, regardless of selling effort. This sum remains the same until they receive a pay increase or decrease. Although this method is easy to administer and affords salespeople financial security, it provides little incentive for them to boost selling efforts.
In a straight commission compensation plan, salespeople's compensation is determined solely by sales for a given period. A commission may be based on a single percentage of sales or on a sliding scale involving several sales levels and percentage rates. Although this method motivates sales personnel to escalate their selling efforts, it offers them little financial security, and it can be difficult for sales managers to maintain control over the sales force.
In a combination compensation plan, salespeople receive a fixed salary plus a commission based on sales volume. Some combination programs require that a salesperson exceed a certain sales level before earning a commission; others offer commissions for any level of sales.
Answer to Question 2
True
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