What Should A Compensation Plan Look Like? What is a Properly Documented Compensation Plan? What Should You Have in a Properly Documented Compensation Plan?

What’s in a Compensation Plan?

Any compensation plan is made of 3 basic things; Ranks, the requirements to reach those ranks, and the rewards for reaching those ranks. You need a properly documented compensation plan that explains every rank, every requirement to get to that rank, and every reward that’s paid for when they reach that rank. Most importantly, you need to have examples in your compensation plan. So often, we receive a simply an excel spreadsheet with with columns and rows showing a rank and an associated percentage, but they don’t document any rules or requirements for reaching that rank, how they can join the company and get to that rank, how they can earn that rank over time, or what the requirements are to earn that rank. Now you can have simple requirements or complex requirements to get to those ranks.

We also want to see from any MLM company or consultant that you’re working with, we want to see examples with a full breakdown of the ranks, the bonus, and the steps to get it; literally showing a genealogical structure whether it’s a binary, unilevel, or matrix. We want to see how someone earns that rank – and sometimes there are two or three different ways.

Now why is this so important?

You’re going to entrust your compensation plan to a company like mine that will custom program that compensation plan. In another one of my videos I say, “You’ll never get a second chance to make a first impression” and that’s the case when it comes to paying your distributors more than anything. You want to make sure that your compensation plan is properly documented and understood by the programmers, support team, and compensation team that is setting that up.

Now most importantly…

Both you and the company that is going to program that compensation plan needs to sign it. So often I see compensation plans designed that there’s no signature from the client, there’s no signature from the designer, no signature from the developer, so in 3 months or 6 months, as expectations change, you want to go back to that compensation plan and if it’s not signed, and something was said over the phone or by email, it may not have gone into the compensation plan. Everybody needs to sign that comp plan, you can even use tools like Docusign these days to digitally sign it.

So. Ranks, Requirements, Rewards, Examples, and Most Importantly make sure that compensation plan is signed by everybody. I’ve been involved in the industry for over 20 years, I’ve seen well over 3 thousand compensation plans, if you think I can help you with your compensation plan give me a call or send me an email!

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