Compensation: Is it FAIR to all?
Restored from the Empower Network archive (2011–2017), lightly edited to meet our current advertising standards. Views are the original author’s.
The next thing you need to “investigate” when deciding on a company is WHAT TYPE OF COMPENSATION PLAN DO THEY OFFER?
There are a miriad of compensation plans out there, and each company boasts “we have the most lucrative compenstion plan in the industry” well, are they lying? or, are they stating a fact?
A couple of things to look at, and some of these are not easy unless you fully understand compensation plans.
1. How much breakage is built in for the company. I know, many of you are asking, “what is that?” breakage is money that is NOT paid out and funnels back up to the company coffers if there is no one that qualifies for it. This is “hidden” by many companies so that they can say they pay out XX% when in reality they pay out far less. In fact, Industry standard is that most companies pay out somewhere between 28-35% Yes, that is right! you might be busting your butt for a company that is actually only paying you a SMALL portion of the profits you bring to them. Let me also say, that companies MUST have profit, or they will not stay in business, so there needs to be a very very fine balance. The company DESERVES to make a good solid profit as they took all the risk, supply you with everything you need to then go out and sell their products thus earning an income.
So how do you find a good balance. If you know anything about business, then you know that most companies need 15-30% to cover overhead and stay in business. Lets just use the WORST case scenario of 30%. That leaves 70% profit that needs to be split between the company and the people who build the company and sell the products. and remember, I am using the HIGH of 30%, if a company has less overhead, then the profit could be much more, upwards of 80%.
Lets stay with 70% profit for the company. Now if you take 10-15% for the company and then 5-10% for contests, incentives, awards and such, then that leaves you 50% that they COULD be giving to the field.
I believe a good START is to look for a company that pays out an AVG of 50% to START!
If you are new to this industry or you have been around the block a time or two but are not a “comp plan” person. Always ASK to speak to THE person who can break downt he comp plan for you and disect it dollar for dollar and help you understand how much the company pays out! If n one in your upline can do this, then contact the company. Do not be afraid to ask them where their breakage is, as ALL companies have some breakage. What you do not want to see is that breakage is in the main compensation for the average associate.
Places you would expect to see breakage are in the upper levels of the compensation that the larger part of the associate base does not qualify for. OR, by the first few levels in a company compensation where monies roll up to uplines but there are no upline, for instance, master associates and the first couple of folks they introduce.
As I said when I started this post, there are a miriad of compensation plans and hybrids of all of those.
Some of the ones you may be familiar with: 1. Unilevel 2. Matrix 3. Binary
Most companies have a compensation that includes part(s) on one or more of these listed.
When looking at these, you need to find out how or what does it take for the NEW person to earn their money back on a monthly basis. In other words, do they personally have to go out and introduce 1,2,3,5 or 10 people in order to qualify for enough compensation to earn on a monthly basis the cost of their product.
Do not let anyone try to buffalo you into believing that because you get a “fast start bonus” (these are usually an up front bonus that is paid to the person who makes the sale or introduces a person to the business and is directly from mark up of the product in most cases) this will cover your monthly outgo. This is a ONE TIME payment for each new associate you PERSONALLY introduce to your team.
Lets talk about some of the types of commissions you will see by companies:
within each of the above types of commissions structuress, they will have within those other commissions that you can qualify for. The above is their BASE model. Each has its pro’s and con’s however, it is my opinion, that the binary is the least desirable for a miriad of reasons that I will not go into here.
You will see a FAST START of some type: Again, this comes from marking up the product so they can pay this out to the person who introduced you to the company know as “your sponsor”
RETAIL SALE: this bonus is paid to you each time you make a sale to a person(s) who does NOT join the opportunity but wants to use the product. This is a one time payout each time a product is purchased and should run 25-50% depending on the company, if they make the product themselves, if its delivered electronically etc..
MATCHING BONUS: This is a bonus paid to you based on the people you have personally introduced to a company and what their “base” pay is for the month. this usually means it does not count anything outside of the BASE compensation type, such as certain levels in a matrix or unilevel
POOLS: these are usually a % of money the company puts into a pool of some sort and if you qualify for it, you will get a share(s) of that pool on a monthly basis. These pools are sometimes a company wide pool, with a qualifcation based on meeting a certain rank within the company
CODED BONUS: These are commissions paid to people usually by hitting a certain rank and they then qualify for a certain % down to infinity on all people coming onto their teams even if they did not personally introduce them. This is meant for the team leaders who not only personally introduce, but help their teams grow by doing the “close” for the newer folks who may not be at that point yet. A true CODED bonus is paid out on the back end or residual end of a compensation plan. There are some that are based on the up front fees and paid only ONCE when the new person signs up
These are the most popular. some companies will then add in a car bonus. you need to be VERY CAREFUL of these!!! I know, to this very day, MANY people that hit something ONCE, get suckered into a lease on a bmw or mercedes and then CANNOT sustain the payments due to lack of qualification. READ THE FINE PRINT ON THESE CAREFULLY! Right now, TODAY there are dealers who will not touch some companies because of the returns and repo’s from these type of poor run incentives. Some companies will say, if you do not want the car, you get nothing, others, with more integrity will offer you maybe a % of the bonus in CASH… the caution here is, do NOT be pushed into getting a car, and beware of how the company runs that bonus,, I have seen SO MANY people hurt by this type of thing.
INCENTIVES/TRIPS/RECOGNITION: Companies must realise that many people will do something for recognition MORE than they will for money.. this is a very critical part of any company. does your company have incentives? Pins/regional meetings where they recognise achievment/trips that you can earn.. these are also a must for a company
CONTESTS: I do this seperate because I have seen so many companies make HUGE mistakes in how they run these. MANY TIMES, they are asking their top associates what THEY want.. and lets face it, sometimes these people do not give a rats behind about anyone but themselves (not the mark of a good leader) When looking at what a company puts forth in a contest ask yourself these questions.
1. Is it taylored to only the people who can “recruit” the most 2. Is it taylored so that leaders who HELP their teams earn the reward, can also be rewarded 3. Is it a “layered” contest, as in a trip, where you can win PART or ALL of it paid for based on how much you accomplish
There is so much more I could go into, and will, as we move forward.
BOTTOM LINE: find someone who knows that compensation plan and work thru it BEFORE you jump into a company.. it MUST be a fair and balanced compensation for all. not for just one sect….
Till next time,
This is Ruth, your Million Dollar Maven!