Pay curve examples

1. Pay curve examples

2. Stepped Incentive – Bonus Plan • When you might use this • Annual incentive plan (if we achieve target we earn “x”) • Base salary is high • Advantages • Highly predictable payment outcome. • Easy to understand and explain • Should be “self funding” • Disadvantages • “One size fits all” • No compensation below target is a problem if base is not competitive $xxx bonus Base 100% target achievement Sales person is paid a salary plus a bonus at goal attainment

3. Straight-line Commission Plan • When you might use this • Classic sales commission plan • Advantages • Motivation levels increase above target • Clear line of sight • Disadvantages • Pressure on target setting and modelling accuracy 100% goal attainment Sales person is paid a salary plus a % of OTI up to goal attainment plus accelerated incentive above target Page 3

4. Progressive Incentive Plan with a near target hurdle 200% • When you might use this • Classic sales incentive plan model where there is base + variable • Advantages • Highly predictable payment outcome • Easy to understand and explain • Disadvantages • “One size fits all” % of OTE 100% 70% % of target 50% 100% 150% Sales person is paid a salary plus a % of OTI up to goal attainment plus accelerated incentive above target Page 4

5. Regressive Plan • When you might use this • Where sales targets are well established and it is very difficult to exceed target by more than 10-20% • Advantages • Tends to cap commission payments above target without having to cap the plan per se • Disadvantages • Reduced motivation after achieving target – no real incentive to sell after reaching target • Incentive to “sandbag” sales – hold over to the next payment cycle? 100% goal attainment Salary Sales person is paid a salary plus 3% of sales to target and 1% for sales over target “uncap lite?” Page 5

6. Stepped Plan • When you might use this • There are clearly defined levels of performance across your sales force • Advantages • Clearly defined payment outcomes are easy to understand • Disadvantages • Lack of granularity can cause disengagement and/or odd outcomes Salary Sales person is paid specific amounts for sales achievement Page 6

7. Mixed Plan • When you might use this • Where “on target performance” is the expected minimum level • Advantages • Clearly defined payment outcomes are easy to understand • Disadvantages • Any errors in target setting have a big impact $10,000 bonus Salary Sales person is paid a salary plus $10,000 bonus on goal attainment + 1% for sales above target