Alternatives to Wages and Salaries

Alternatives to Wages and Salaries Commissions, Piece Work, and Push Money

Today we’ll learn 4 new ways to earn money… • Straight Commission • Graduated Commission • Piece Work • Push Money

You promise wages of $7.00 an hour • So the person sets up a small table on the sidewalk outside their own house. • They sit at the table for 8 hours and sell no cookies • They demand their $56.00 • Maybe promising the $7.00 an hour wasn’t such a good idea. • Suppose you hire a person to help you sell cookies.

Straight Commissions • Many salespeople are NOT paid an hourly wage • Instead, they are paid a commission • A commissionis a percent of the price the customer pays • For example, if a customer pays $100 for an item and the salesperson gets an 8% commission, how much would the salesperson earn?

Straight Commissions • Many salespeople are NOT paid an hourly wage • Instead, they are paid a commission • A commissionis a percent of the price the customer pays • For example, if a customer pays $100 for an item and the salesperson gets an 8% commission, the salesperson would earn… 8% x $100 (.08) x $100 = $8.00 Paying an employee a commission prevents the employee from loafing.

Sell a lot… Sell a little… Earn a lot… Earn a little… Suppose you earn a 20% Commission on Sales

Straight Commissions • Suppose you sell leather shoes and get an 8% commission on all the shoes you sell. • Yesterday you sold $500 worth of shoes. • Yesterday you earned…

Straight Commissions • Suppose you sell leather shoes and get an 8% commission on all the shoes you sell. • Yesterday you sold $500 worth of shoes. • Yesterday you earned… 8% of $500 = .08 x $500 =$40.00

Straight Commissions • Suppose you sell leather shoes and get an 8% commission on all the shoes you sell. • Today you sold $4,000 worth of shoes. • Today you earned…

Straight Commissions • Suppose you sell leather shoes and get an 8% commission on all the shoes you sell. • Today you sold $4,000 worth of shoes. • Today you earned… 8% of $4,000 = .08 x $4,000 =$320.00

Straight Commissions • Sell a lot, earn a lot • Sell a little, earn a little

Straight Commission Formula (rate)(total sales) = Commission Ex. (8%)($500) = ?

Straight Commission Formula (rate)(total sales) = Commission Ex. (.08)($500) = $40.00

Question All things equal, which form of commission allows you to earn the most money? • Straight Commission • Graduated Commission • Both allow for earning a lot of money • There’s not enough information

Commissions • Straight Commission • The same commission rate (for example, 8%) no matter how much you sell • Graduated Commission • Different commission rates for different levels of sales

Graduated Commissions • For example, you may only get a 15% commission on the first $20,000 you sell in a week and a 20% commission on any amount over $20,000 • Let’s see how this works…

$12,000 } $12,000 x 15% $1,800 Graduated Commissions Sold $12,000 15% below $20,000 and 20% above $20,000 20% $20,000 15% Commission Earned: $1,800

Graduated Commissions Last week you sold $37,500 worth of goods. What is your gross pay if you make 15% of all sales below $20,000 and 20% of all sales above $20,000?

$37,500 } $17,500 x 20% $3,500 } $3,000 $20,000 x 15% Graduated Commissions Sold $37,500 15% below $20,000 and 20% above $20,000 20% $20,000 15% Commission Earned: $6,500

NEVER use the TOTAL AMOUNT Graduated Commission Formula (15%)($20,000) + (20%)($17,500) = $6,500 (1st rate)(1st amount) + (2nd rate)(2nd amount) = Commission $37,500

You try a Graduated Commission problem Suppose you get a3% commission on the first $4,000 you sell in a week and a 6% commission on any amount over $4,000 6% $4,000 3%

$9,000 6% $4,000 3% You try a Graduated Commission problem Now suppose you sell $9,000 worth of merchandise.

$9,000 } $5,000 x 6% } 6% $4,000 x 3% $4,000 3% You try a Graduated Commission problem Now suppose you sell $9,000 worth of merchandise. = $300 = $120 Commission Earned = $420

You sell $9,000 NOT $9,000 x 6%

Another problem… • Now suppose you hire someone not to sell, but to make bird houses for your company • You promise wages of $7.00 an hour • So the person sits around all day long and makes only one bird house • After 8 hours they demand their $56.00 • Maybe promising the $7.00 an hour wasn’t such a good idea.

Piece Work • Some workers are paid piece work • The more pieces you make, the more money you earn • Paying an employee piece work prevents the worker from loafing

Piece Work • You earn $15.00 for each window you assemble • The more windows you assemble, the more money you earn • You are being paid piece work • How much would you earn if you assembled 9 windows? • Suppose you assemble windows

Piece Work • You earn $15.00 for each window you assemble • The more windows you assemble, the more money you earn • You are being paid piece work • How much would you earn if you assembled 9 windows? • Suppose you assemble windows $15.00 x 9 =$135.00

Piece Work • Work a little, earn a little • Work a lot, earn a lot

Piece Work Formula ($15)(9) = $135 ($ per piece)(total pieces) = Gross Pay

Piece Work • Gene is paid $1.50 for each uniform he irons • Gene irons 66 uniforms today • Gene earns…

Piece Work • Gene is paid $1.50 for each uniform he irons • Gene irons 66 uniforms today • Gene earns… $1.50 x 66 = $99.00

Another way to earn money… • Some businesses offer salespeople extra money to sell a special item • The salesperson tries to “push” the item on the customers • If customers buy the pushed item, the salesperson gets extra money Be careful when taking advice from a salesperson. They might be earning push money.

Push Money • Suppose you work as a server in a restaurant • Your boss bought 25 flats of strawberries this morning • She’s got to sell those strawberries! • She offers all servers $1.25 for each order of strawberry shortcake they can get customers to order today • She has offered “Push Money”

Push Money • A dealership just got in 50 new 6-cylinder pickup trucks. • The owner know that most truck buyers prefer 4-cylinder or 8-cylinder trucks. • The owner offers all salespeople an extra $500 for every new 6-cylinder truck they sell in the next three days. • One salesperson sells 7 6-cylinder trucks and earns an extra…

Push Money Formula ($500)(7) = $3,500.00 ($ per item)(items pushed) = Push Money

Review • Straight Commission Paid by how much you sell; one percentage for all sales • Graduated Commission Paid by how much you sell; different percentage for different levels of sales • Piece Work Paid by how much you produce • Push Money Paid extra for getting customers to buy a special item

Francis is paid $5.00 for every basket of grapes he picks. Francis is being paid… • Piece Work • Straight Commission • Push Money • Graduated Commission

Francis is paid $5.00 for every basket of grapes he picks. Francis is being paid… Piece Work

Alex is paid 14% of the customer sale price for every thing he sells. Alex is being paid… • Piece Work • Straight Commission • Push Money • Graduated Commission

Alex is paid 14% of the customer sale price for every thing he sells. Alex is being paid… Straight Commission

Carrie is paid $10.50 for every wooden frame she makes. Carrie is being paid… • Piece Work • Straight Commission • Push Money • Graduated Commission

Carrie is paid $10.50 for every wooden frame she makes. Carrie is being paid… Piece Work

Ada gets an extra $1.10 for every dessert she gets customers to order. Ada is being paid… • Piece Work • Straight Commission • Push Money • Graduated Commission

Ada gets an extra $1.10 for every dessert she gets customers to order. Ada is being paid… Push Money

Vic is paid 10% on all sales under $5,000 and 17% on all sales over $5,000 Vic is being paid… • Piece Work • Straight Commission • Push Money • Graduated Commission

Vic is paid 10% on all sales under $5,000 and 17% on all sales over $5,000 Vic is being paid… Graduated Commission

Well Done!

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Alternatives to Wages and Salaries