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Incentive Plans





Example 1: Sample letter for incentive plans

Memorandum

TO:

FROM:

DATE:

SUBJECT: 4th Quarter Bonus Plan

In order to boost our gross revenues in the final quarter of the year the attached bonus/incentive plan has been designed. This plan applies to all sales divisions and their respective managers. It is effective October 1.

Year-to-date gross revenues are lagging behind the previous year by nearly 10 percent. This is despite a third quarter increase in gross revenues of more than 25 percent.

A detailed description of the plan will be distributed to each sales representative within each division. Managers will be responsible for monitoring progress within their respective division.

Please make the most of this opportunity to earn more for both yourself and the company.

Example 2: Employee incentive reward

Memorandum

TO:

FROM:

DATE:

SUBJECT: Division managers incentive plan

The recent reorganization of the company into nine separate divisions necessitates the development of a new incentive plan for each division manager. In the past, division manager bonuses were based on a percentage of each division’s contribution to the overall performance of the company.

As each division will be accounted for as a separate entity, division manager bonuses will be figured based on the attached formula. For some of you this could mean a substantial increase over last year’s bonus. For others, I would say it is time to get your division in order.

We feel this is the best way to reward individual managers for their performance and profitability of their division. Under the old system, division managers either profited or were hurt by being judged as a part of overall company performance.

Example 3: Incentive plan letter

Memorandum

TO:

FROM:

DATE:

SUBJECT: Commission plan

Per our discussion on Monday the following will be your sales commission plan for the third and fourth quarters of this year.

Base/draw against commission

Your base salary, which is a draw against your commission, will remain at $600 per week. This annualizes to $31,200. Your draw is paid on the 1st of each month.

Commissions

Commissions are paid on the 15th of the following month for the previous month. Commissions are calculated using the following percentages less your draw of $600 per week.

• 5 percent of net collected on established accounts
• 10 percent of net collected on new accounts

Quarterly bonus

For each percentage point increase in net sales revenue over the same quarter last year you will receive $200. For example, if net sales increase by 12.6 percent over the same quarter last year your quarterly bonus would be $2,520. Quarterly bonuses will be paid on 15th of the month following the quarter.

If you have any questions please let me know. This plan is effective Tuesday, August 1.

Example 4: Incentive program for employees

Memorandum

TO:

FROM:

DATE:

SUBJECT: Calling and Collecting

Starting on Monday each associate will be paid 5 percent of all completed sales between the hours of 9:00 a.m. and 9:00 p.m. Commission will be paid on all sales, but will be deducted from future commission payments should a sale go bad (i.e. failure to pay account balance within 60 days).

An additional bonus of $10 will be paid on all accounts paid in full the same week they are sold. In other words, get your customers to pay in advance and you’ll benefit even more. All accounts falling into the 90-day category will be deducted from future commission payments.

Your goal is to sell hard and collect hard. We cannot afford to pay commission indefinitely on uncollected sales.

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