What is Straight Salary Method?
Fixed salary paid to salesman at at the end of every month, irrespective of the sales made by him during the month is called Straight Salary. Under Straight salary method, a salesman is paid remuneration on time basis. Increment is given annually as per the scale of pay, and after a certain number of years of service, salesman is promoted to a higher scale of pay.
Suitability of Straight Salary Method
Straight salary method of remuneration is found suitable and is usually adopted under the following circumstances:
1. When the work done by the salesmen cannot be measured satisfactorily.
2. When the sales effected by the individual salesman cannot be isolated (i.e., when the sales are made collectively by two or more salesmen).
3. When the salesmen are required to create markets for a product.
4. When there are considerable seasonal variations in the sales made by the salesmen.
5. When the salesmen are required to perform some other functions in addition to selling.
6. When the salesmen are new to the job (i.e., for remunerating the newly appointed salesmen.).
Advantages of Straight Salary Method
1. Straight salary method of remuneration is simple. So, it can be easily understood by all salesmen.
2. It is easy to calculate.
3. It assures a steady minimum income to the salesmen. As it assures a certain minimum income (the living wage) to the salesmen regularly, it creates a feeling of security in the minds of the salesmen.
4. By creating a feeling of security in the minds of the salesmen, it maintains high morale among the sales force.
5. It gives greater control to the management over the salesmen by means of withholding increments, effecting a transfer, etc.
6. As the various salesmen on a particular scale of pay are paid the same remuneration, it avoids jealousy among the salesmen.
7. Any re-adjustments in sales territories or management policies can be easily carried out under this system without much resistance from the salesmen, as the salesmen will be paid the same remuneration, irrespective of sales territories.
8. It is a very useful system of remunerating newly-appointed salesmen who are new to the job.
9. As the remuneration of the salesmen under this method does not depend upon the volume of sales made by them, the salesmen will not be reckless in increasing their sales by selling to every customer on credit. That means, there will not be much bad debts.
10. It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. This system safeguards the interests of the consumers also.
11. Straight salary method promotes team-spirit and cooperation among the salesmen in the case of joint sales.
12. It helps the firm to direct the activities and efforts of the salesmen towards the cultivation of markets (i.e., creation of new customers), undertaking of window display, store demonstration, etc.
Disadvantages of Straight Salary Method
1. It does not provide any incentive for hard work. So, it does not encourage salesmen to do hard work.
2. Under this system, rewards are not matched with efforts.
3. It does not distinguish between efficient and inefficient salesmen, as the same remuneration is paid to both efficient and inefficient salesmen.
4. Under this method, there is no direct relationship between sales revenue and selling costs.
5. As salesmen’s remuneration is not related to the volume of sales made by them, this method imposes a serious burden on the earnings of the firm in terms of sales.