Glossary

A

Accelerator

An accelerator payment is an overachievement payment for attainment over 100%. Commission rates and quota rates move to an accelerated rate when the Participant achieves the annual quota. This is also referred to as ramped rates or over quota accelerators meaning a rate to be paid for over quota attainment.

Accruals (commission/ bonus)

A charge that has not been paid by the end of an accounting period, but must be included in the accounting results for the period. If no payment has been made by the end of the period, an estimate must be included in the accounting results. Company’s estimate earned commission based on sales or other key performance metrics and record an accrual for the commission expense.

Achievement

This is the value that the Payee has achieved towards their plan. This value can be Volume, Revenue, SOV, EBIT, etc.

See also: Credit, Actuals.

Actuals

The value summed by incentive measure for a particular period. Actuals help determine attainment and are used to calculate commission or bonus payments. This value can be Volume, Revenue, SOV, EBIT, etc.

See also: Credit, Achievement.

Annual incentive

Any form of variable payment tied to performance. The payment may be a monetary award such as cash or equity, or a non-monetary award such as merchandise or travel. Typically, incentives are intended to provoke behaviors consistent with company or business unit objectives.

Arrears

Refers to when a commission payment is delayed. For example, Company A is processing January 2010 commission; however, payees do not get paid until the end of February. Thus, Company A pays commissions one-month in arrears.

Assignment

Identification of the key sales roles for sales representatives. Sales reps are usually aligned with a territory. Territories aid in providing clarity to reps as to what accounts or opportunities belong to them from a sales credit view point. Assignments of reps can be by transaction, account, territory, channel, zip code, or team for allocating sales credit. It may also be referred to more specifically as credit assignment or territory assignment.

Attainment

Achieving an incentive target, quota, goal, or other target of measurement. Attainment represents achievement (actual) against the goal/target as a percentage, dollar, or unit. Quota attainment is commonly tracked to identify how well a sales rep is doing against a monthly, quarterly, or annual goal. Attainment may also be referred to as performance.

Award

A form of recognition given in the context of an event; often provided as a cash amount, prize, symbol, or intangible reward (public commendations).

Payouts of sales contests are also called awards.

B

Base rate

The initial commissionable rate for expected performance. The base rate may be applied up to 100 percent of quota or goal. The rate can be a linear rate, or for less than 100 percent attainment there may be thresholds or minimums restricting the start of a base rate payment.

Also known as derived rate or pay rate.

Base salary

Standard salary which an employee receives for doing a job. It is used as the basis for calculating other allowances and benefits exclusive of any additional allowances, payments or non-cash benefits. Base Salary is a fixed payment amount that often is paid monthly, semi-monthly, or weekly, depending on company policy.

Batch

Any quantity of data handled or considered as a unit in processing.

Bluebird

An unusually large sale yielding exceptional earnings for a participant. May be a transaction that was not forecasted or committed in the pipeline. The realized sale falls outside the normal sales influence of a representative. It is also known as a windfall and is sometimes excluded from normal incentive compensation treatment.

Bonus

Payment (may be discretionary or non-discretionary) based on the past performance of an individual, a group of workers operating as a unit, a division or business unit, or an entire workforce. Payments may be made in cash, shares, share options, or other items of value.

In the context of sales compensation, a bonus is a defined, pre-established amount of money to be earned for achieving a specified performance goal.

Planned bonus amounts are commonly expressed as a percent of the incumbent’s base salary, a salary range midpoint, a percentage of target cash compensation or incentive compensation, or a defined dollar amount.

Also see discretionary and non-discretionary bonus.

Bonus guarantee

A payment in addition to base salary that is received regardless of performance (for example, an incentive award that is guaranteed, usually to a new hire or to a newly promoted person). It is usually non-recoverable by the company.

Bookings

A sales order is considered a booking upon contract signature for the order.

Budget

The expected or estimated expenditures for a given period. This typically aligns with OTC/OTB.

Business groups

A function used to group users together in logical segments. Business Groups are displayed in the Results and Reports. Business Groups also drive one of the currencies used in payment calculations. Examples of business groups are Americas, EMEA, and APAC.

C

Calendar

Used to set up a company’s incentive calendar for compensation payments. The commissionable calendar can map to a normal calendar year, the company’s fiscal calendar, or another defined compensation calendar.

Cancellations

When orders are canceled, the commission and bonus payments that have been made usually are no longer considered earned. Companies should define a policy to recover any such payments that have been made.

Cap

The maximum amount a participant can earn in a given period for an incentive measure or for all incentive measures combined. Caps can impact motivation.

Capital employed

A company’s equity plus its long-term debt. Also referred to as permanent capital, it is often used as a performance measure for executive incentive plans.

Cash-based plans

Long-term incentive plans designed to motivate strategic performance with cash awards.

Cave-in

An incentive award that is lower than expected due to events outside the participant’s control.

Charge-back

When a company recovers (takes back) a commission previously paid due to customer returns or other applicable commission policies. Also referred to as claw-back or recovery.

Claw-back

Refers to when an over-payment is taken back or recovered.

Also see recovery.

Combination pay plan

A plan comprised of a base salary and one or more cash incentive components, such as a bonus or commission.

Commission

Payment based on a formula that calculates the incentive compensation opportunity for sales people. A predetermined incentive amount for each discrete unit of sales made by the salesperson.

Commissions commonly are expressed as a percent of each sales dollar (revenue), a percent of gross margin (profit), or a dollar amount per unit sold. A commission-only compensation program is sometimes known as full commission or straight commission.

Commission accruals

A charge that has not been paid by the end of an accounting period but must be included in the accounting results for the period. If no payment has been made by the end of the period, an estimate must be included in the accounting results. Companies estimate earned commission based on sales or other key performance metrics and record an accrual for the commission expense.

Commission earnings

Earnings determined by the credit amount of the commissionable event times the commission rate. Once a commission is earned, the company must track the amount as a liability, even if the earnings aren’t paid until a later event.

Often there are timing differences between when commission is considered earned and paid. For example, according to one company’s rules, earnings are calculated at booking but payment doesn’t occur until cash receipt.

Commission payment

The amount of commission paid to the participant. It may occur at a different time than earnings.

Also see commission earnings.

Commission rate

The rate applied to the volume measure for incentive payment. It can be expressed as a percent or in dollars. The commission rate is multiplied by the volume measure to calculate commission earned.

Compensation committee

A subset of the board of directors that approves pay and incentive award programs involving senior management of the company.

Compensation cost

The total cost of compensation to the organization, including the unrealized or unknown future cost effects from current decisions regarding the total compensation program. Included are base pay, incentive opportunities, benefits costs and liabilities, perquisite costs, and time-off programs (vacations, sick pay, and so on).

Component

A component is a container that's used to organize your Composer model. A component can contain other objects (or other components).

Conditions

A set of criteria that make up a rule.

Contract value

The value of the sales order. Also, referred to as Sales Order Value (SOV).

Cost of capital

The cost of long-term debt plus a cost attributable to common stock, taking into account the risk-free rate of return, a premium for risk, and a factor related to the stock’s volatility. Sometimes used as a measure in incentive plans.

Cost of sales

The costs associated with gene rating reported sales, including merchandise, direct labor, and other costs attributed to current sales activity. The costs related directly to achieving the sale is tracked for commission purposes, whereas businesses may track many other factors in the cost of sales.

The cost of sales, expressed as a percent, is calculated by dividing the total sales dollar volume sold by the sales force into the total or aggregate cash compensation costs of the sales force.

Costing

Often performed during modelling exercises, costing is an estimation and analysis of the expected or actual cost of the sales compensation plan(s) or rebate/incentive programs.

Credit

The value summed by incentive measure for a particular period. Credits help determine attainment and are used to calculate commission or bonus payments. This value can be Volume, Revenue, SOV, EBIT, etc. See also: Actuals, Achievement.

Credit amount

The amount counted by incentive measure for a particular period. Credits determine quota or other measure attainment and are used to calculate commission or bonus payments.

Credit timing

The point at which a credit is counted; for example, book date, ship date, invoice date, payment date, or order date.

Crediting

The process by which events are associated with sales reps or companies for recognition. Typically, complex sales plans or programs will credit multiple layers and teams to encourage teamwork and avoid channel conflict. Also see assignment.

Critical incident

A behavior-based approach to performance management that measures specific individual actions as either meeting (positive feedback) or not meeting (development opportunity) desired outcomes.

Cumulative performance period

For sales incentive calculation purposes, a type of performance period in which an incumbent’s performance is accumulated and measured over time, and compared against goals that are also accumulated over various performance periods.

For example: While incentive payouts are made each month, the actual performance for a salesperson is accumulated in each successive month of a quarter and compared against accumulated goals. In month two, an incumbent’s performance is the sum of the actual performances of the first two months compared with the sum of the performance goals for the same two months.

Customer relationship management (CRM) Systems

CRM software allows a company to measure and control sales activities and contacts with customers. It can be used for managing contacts with a customer by phone, fax, mail, and email. For example, CRM systems analyze customer contacts in call centers. The data collected can then be used for research and analysis of the customer relationship. A CRM system is crucial to every company, as the customer is the most important part of any business.

D

Data Stores

Used to combine multiple data sources into one source.

Deferred compensation

Compensation payments that will be payable to an employee at some point in the future. These include voluntary deferral of earned incentives, mandatory deferral of earned incentives, as well as earnings and retirement plan vehicles.

Direct credit

Credit given to the company or person who was assigned initially or directly to the customer or partner.

Discretionary bonus

A periodic amount or additional bonus opportunity that is outside the compensation plan/program. Often companies define their entire bonus plan as discretionary to enable suspension or amendment of the plan as required throughout the year.

Dispute

The process of a payee questioning or inquiring about a payment. Typically a missing or incorrect commission payment. Also known as reconcile or commission inquiry.

Dividend equivalents

In some incentive plans, participants are paid an amount of money equal to the dividends that are paid per share of common stock.

Draw

A payment that is paid in advance of performance in anticipation of commission payments to be earned in the future. There are two types of draws: recoverable and non-recoverable. In both cases, if performance produces incentive earnings in excess of the draw, then the sales representative receives the additional monies beyond the draw amount.

If the sales representative’s incentive earnings are less than a recoverable draw, then the sales representative must return the amount of the draw that was not earned—or the unearned amount is carried forward to the next performance period. However, with a non-recoverable draw, if the incentive earnings do not exceed the draw, the draw monies are not returned or carried forward, and the rep retains the draw.

E

Earned time off

An incentive or reward that takes the form of pay for time not worked.

Earnings

The amount calculated by the incentive formulas. Earnings can be actual or planned, depending on the usage.

Actual earnings are the sum of all the elements of the compensation plan calculated based on the actual attainment of measures.

Planned earnings are the sum of all the elements of the compensation plan calculate based on 100 percent attainment of the measures.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

One popular measure of cash generated from the operation of a company. Financial analysts frequently use EBITDA to evaluate the ability of a company to service its debt obligations. EBITDA is also used as a measure of profitability in valuing a company and in comparing a company's financial performance with other firms.

Start-ups or highly leveraged companies might use this as a performance measurement when cash flow is the focus and there is an incentive to generate cash.

Earnings curve

A graphic representation of the planned earnings for the compensation plan: Linear curve is a straight line.

Progressive curve increases as the attainment percentage increases. Used when the higher levels of attainment are more difficult and more profitable. The goal is to reward the increased effort required.

Combination curve modifies as the attainment percentage changes. For example, it may use a step rate, one or more rates to a defined performance level (attainment percentage) combined with other options (linear, progressive, or regressive) as mentioned above.

Earnings per share (EPS)

The net earnings of an organization divided by total shares outstanding, with adjustments for common stock equivalents. Sometimes used as a criterion in executive incentive pay programs.

Economic value added (EVA)

A concept related to measuring the economic profit of an organization by determining the excess or shortfall of the economic profit compared with the cost of capital. May be used in incentive programs. (Note: There are many variations on EVA, Sterns Stewart has gone as far as trying to trademark EVA - http://www.investopedia.com/articles/fundamental/03/031203)

Effective dates

Defines the period of time that your data records are in effect. You set effective start and end dates for each record. This lets you create versions of the same record that come into effect at different times. For example, if a payee is promoted, you can add an end date to their current payee record. Then create a new record with a correlating start date for their updated title.

Eligibility

The requirements that must be met to participate in compensation plan. Including factors such as Job Title, Start Date, Location, Maternity Leave, Long Term Sick, Guarantee, and so on.

Eligibility for a plan

The basis for determining the individuals or classes of employees eligible to participate in a particular plan such as an incentive or a supplemental benefits plan. Eligibility may be based on salary, job grade, organization unit or function, or a number of other criteria.

Enterprise Resource Planning (ERP)

A system that integrates all data and processes of an organization into a unified system.

Excellence

Individual sales performance that falls in the top percentile of performance by all individuals measured. The top percentile is determined by the company but is often 100 to 120 percent.

Exchange rates

The Exchange Rates area is used to configure the rates for converting currencies. The active dates of exchange rates define when they are used.

F

Flat rate

A rate that remains constant regardless of the attainment level. Flat rates always result in linear earnings.

Flexible approach

An expatriate compensation methodology where in addition to base pay, performance incentives, and normal domestic benefits, expatriates are offered a choice from a list of perquisites, some of which are cost-effective in foreign countries.

Formula

The mathematical calculation that determines the payout amount for an incentive measure such as a commission or bonus.

G

Gain sharing

Any one of a number of incentive programs designed to share the results of productivity gains with employees as a group.

Geography

Varicent specific function that allows companies to create geographies that can be used in the incentive compensation rules.

Goal (target)

The expected level of attainment for the incentive measurement period. A quota is a special kind of goal (see quota).

Goal sharing

A group incentive plan that is designed to measure performance against future-oriented business objectives or performance targets (not against history).

Gross margin (GM) or

gross profit (GP)

An accounting term for the difference between sales and gross earnings. This can be combined with SOV or Contract Value, e.g., SOV GM, or CV GM, and so on.

Guarantee

For sales compensation purposes, a compensation payment, possibly in addition to base salary, that is made regardless of performance. It is usually non-recoverable. Guarantees may be temporary or permanent.

H

Hierarchy

Varicent specific function that defines the company’s reporting hierarchy by creating unique positions. Positions are company jobs that may be filled or vacant. Hierarchy defines relationships that can be used for the following:

Rolling indirect credits (that is, a manager receives credit for a sale by an account manager who reports to him/her).

Controlling information a user can see in team and wizard-created reports. For example, individuals see information only about themselves, but managers can see their own information plus that of all the people who report to them.

Hold back

Refers to the holding back of some of a payment until another event is completed.

Human resources

information system (HRIS)

Computer system of an organization that houses HR-related data. The system can be as simple as a database of employee addresses and position titles, or sophisticated enough to calculate incentive and sales commissions.

Hurdle

Similar to a threshold but based on a different measure than the one used for payout.

I

Incentive

Any form of variable payment tied to performance. The payment may be a monetary award such as cash or equity, or a non-monetary award such as merchandise or travel.

Unlike bonuses, performance goals for incentives are predetermined. Incentives are generally non-discretionary and can be paid at any time of the year.

Incentive compensation

Variable rewards for performance or achievement of short-term or long-term goals. This compensation is designed to stimulate employee performance.

Incentive earnings

The amount calculated by the incentive formulas, incentive earnings can be actual or planned, depending on the usage. Actual earnings are the sum of the elements of the compensation plan based on the actual attainment of the measures. Planned earnings are the sum of the elements of the compensation plan calculate based on 100 percent attainment of the measures.

Incentive eligible

A term referring to groups or classes of employees who are eligible to participate in an incentive plan.

Incentive formula

The mathematical calculation that determines the payout amount for an incentive measure such as a commission or bonus.

Incentive leverage

The multiplier relationship between sales results and incentive pay. The amount of leverage is tied to the amount of compensation that is at risk and the level of control a rep has over the sale.

Highly leveraged positions have a greater potential for earnings but could also make much less if they fail to attain their goals.

Incentive measure

Metrics for determining incentive pay. Examples of incentive measures are sales revenue, sales units, and profitability. Also referred to as performance measure.

Incentive pay

A general term meaning any or all variable pay elements.

Incentive pay plan

Formula-driven pay plan that is designed to reward the accomplishment of specific results. Rewards usually are tied to the expected results identified at the beginning of the performance cycle.

The plans can be individual, group, companywide, or any combination of the three. Incentive plans are forward-looking; in contrast to bonuses, they are not discretionary.

Incentive payment

Within the context of international compensation, any one of a variety of payments in excess of base pay, made as an inducement to accept, remain on, or complete a foreign assignment.

Incentive progressivity

A concept whereby the percentage target potential of an incentive award is higher at higher income levels. May be applicable to short-term incentives, long-term incentives, or both.

Indirect Credit

An indirect credit occurs when a payee’s direct credits roll up to their immediate supervisor/manager; so in this case, the supervisor/manager gets indirect credit for their subordinate’s sales.

Individual rate

A commission rate that is unique per individual instead of per plan. Also known as derived rate.

Invoice date

The date an invoice is created.

K

Kicker

An additional bonus or accelerated payment typically used to motivate payees and boost specific performance metrics.

L

Leverage

The multiplier relationship between sales results and incentive pay. The amount of leverage is tied to the amount of compensation that is at risk and the level of control a rep has over the sale.

Highly leveraged positions have a greater potential for earnings but could also make much less if they fail to attain their goals.

Linked incentive measure

A method of compensating based on more than one measure. The targets and breakpoints are unique per measure.

Long-term incentive plan

Any incentive plan (usually for executives) that requires sustained performance of the firm for a period longer than one fiscal year for maximum benefit to the employee. Some long term incentive plans are based on capital shares of the organization and may require investment by the employee, while others are based on financial performance.

Lump-sum incentive award

An award paid in a single cash payment.

M

Matrix

A method of using two measures in determining a rate for calculation. The targets and breakpoints are unique per measure combination. The rate is determined by the intersection of the two performances. Rates can be flat or ramped or both.

Maximum

Relative to sales compensation, the total incentive opportunity a sales representative can earn in a given time period. The term may also refer to the total cash compensation an employee may earn in a given time period. A maximum may also be referred to as a cap, ceiling, or lid.

Measure, incentive or performance

Measures are the metrics that determine incentive pay. Examples of incentive/performance measures are sales revenue, sales units, and profitability.

Milestone

A discernible point of progress in the selling or implementation cycle.

Mix

The relationship of the elements in the compensation plan expressed as a percent. It may be salary and incentive relative to Target Total Compensation, or commission and bonus relative to Target Incentive Compensation.

Model

(Incentives) A version of your organization’s compensation program within Varicent Incentives. This is where you design and manage compensation plans and processes.

(Symon, Varicent ELT & AI): The Classifier or Regressor tools use training data to generate multiple models using different algorithms, such as Random Forest, XG Boost, and so on. These models are then evaluated against each other using the specified Performance Measure, and the single model with the highest score for that Performance Measure is chosen as the model to use for making predictions.

Modeling

Process for estimating the cost of the plan or all plans under various scenarios, varying things like the number of participants, attainment, rates, and so on.

Multiple-measure plan

Incentive plan designed to measure and reward performance using one or more goals. The plan may reflect several ways to measure performance against a single or several objectives.

N

Net price

List price minus discounts and allowances.

Noncash incentives/ recognition programs

An incentive payments that is not readily convertible to cash. For example, meal or merchandise awards, a reserved parking space, or membership in a luncheon club.

Nondiscretionary bonus

A plan in which management determines the size of the bonus pool and the amounts to be allocated to specific individuals after a performance period. These use a predetermined formula and promises.

Nonfinancial reward

Non-cash compensation, such as travel and merchandise. Excludes other nominal, nontaxable items (not on W-2 form) such as gifts and plaques/pins.

O

Objective-based plan

An incentive plan that links performance to a predetermined objective. For example, a management by objectives (MBO) plans.

On-Target Commission/On-Target Bonus (OTC/OTB)

The target amount for a sales representative's incentive compensation; the amount to be paid out at 100% attainment.  Also known as “Budget”.

On-target- earnings (OTE)

The amount earned by a person working on commission who has achieved the targets set.

Order cancellations

When orders are canceled, the commission and bonus payments that have been made usually are no longer considered earned. Companies should define a policy to recover any such payments that have been made.

Order date

The date an order is signed and accepted by the company.

Orders

Varicent specific function used by the administrator to upload and create sales orders, and organizes the orders into batches. Orders can be used to validate batches of orders, and initiate credit and incentive calculations. The function enables the creation of validation rules and corresponding validation error messages.

Organization

Varicent specific function used to set up information about users and their relationships in the company used to define incentive plans for the calculation and payment of incentive compensation. Within Organization, the Hierarchy relationships also control the visibility of data to employees; for example, allowing a manager to see subordinates’ information.

Organizational development (OD)

Systems and programs aimed at improving organizational and individual behavior and performance through training and development. Specific techniques may include group exercises, management by objectives (MBO), sensitivity training, and group discussion.

Output-based plans

Short-term cash incentive plans that use output as the basis for payouts.

Overlay credit

A credit for participants who don’t have direct influence over the customer when an order is placed. Some sales organizations have overlay sales representatives who have a particular product specialization or seniority required to close a number of deals.

Overpayment

Occurs when reps are paid more than they earned, which can result from canceled orders, processing or crediting errors or other related conditions.

P

Payee

Varicent specific function used to define and maintain the names of people who will receive incentive compensation, and to associate users (created in Setup & Users) to them. People information can be entered in the application or be uploaded from a data file.

Pay mix

The profile of various components of direct pay expressed as a percentage of the total; for example, 50 percent base salary, 35 percent short-term incentives, 15 percent long-term incentives.

Payout frequency

The timing of incentive payments. The frequency can be monthly, quarterly, annually, and so on.

Peer comparison

A concept in some incentive plans whereby a company’s results in specified financial measures are compared with those of peer companies. The comparative results can be used in incentive formulas.

People

Varicent specific function used to define and maintain the names of people who will receive incentive compensation, and to associate users (created in Setup & Users) to them. People information can be entered in the application or be uploaded from a data file.

Performance cycle

When performance of the job incumbent (or group) is measured on a year- to-date basis. For example, a third-quarter incentive payment based on the cumulative results from the beginning of the year through the third quarter.

Performance management

A systematic approach for managing individuals and/or groups that involves planning, monitoring, appraising, rewarding, and improving performance in support of the business strategy.

Performance measurement

The appropriate measure to evaluate the employee results; it includes expectations (goals and quotas) and the ability to track the actual accomplishment.

Performance percent

Achievement relative to an incentive measure, most commonly quota. Also known as attainment percent.

Performance period

The time span over which the performance is measured for incentive purposes.

Performance sharing

An incentive plan design in which performance is defined in terms of selected criteria (for example, quality, customer satisfaction, responsiveness, profit, and so on). Standards are established and incentive awards are contingent upon meeting these standards, typically at the business unit or organizational level.

Pick list

A list of options sourced from your existing data. Add a pick list as a field type in tables or as an object in reports. Either way, you need to select a data source and column to pull your data from.

Piece work

Work for which an incentive payment is made. The payout depends on the number of pieces produced or operations completed.

Pipe

(Symon, Varicent ELT & AI): A pipe is a workspace where you can perform data transformation, analytics and specify the source and destination. There are two kinds of pipes; Big pipe and Standard pipe.

Plan alignment

The extent that a sales compensation program is aligned with the key business objectives of the company. Also refers to the extent that sales compensation plans for different job roles are aligned to motivate teamwork across sales roles.

Plan eligibility

The requirements that must be met in order to participate in compensation plan.

Plan participant

A person covered by an incentive compensation plan.

Plan summary

This summary includes responsibilities for the role, goals, earnings curve, mix strategy, and incentive elements.

Premium

An amount added onto the base wage to pay extra for time such as weekend work, the graveyard shift, or being away from home.

In an international context, premium refers to an incentive paid to expatriates for undertaking a foreign assignment; typically 10 to 20 percent of base pay and continuing month to month for as long as an employee is an expatriate.

Product

Varicent specific function that captures company products and product families that can be used in the incentive compensation rules.

Productivity

Any index measuring the efficiency of an operation, usually involving a ratio of outputs to inputs or costs. Rewards frequently are tied to productivity- related measures.

Progressive incentive formula

A rewards program in which the incentive payout rate increases as performance exceeds predetermined levels. For example, nonlinear sales commission formulas.

Prorated

A proportional calculation of a goal or a rate. Often used for new hires, leaves of absence, or transitional plans.

Q

Quota/Quote/Target

The expected level of attainment assigned to a participant for the primary sales measures. Quotas are generally annual, but may be subdivided into quarterly or monthly quotas and prorated based on product seasonality.

Quota rate

The rate that is applied to the volume measure for incentive purposes. Quota rates differ from commission rates in the following way: A quota rate is determined by target amount divided by quota. For example, if the sales reps quota is 3 million and the target amount is $50,000 then the quota rate is ($50,000 / 3 million).Each point of attainment (volume of the measure/quota) is multiplied by the quota rate to calculate incentive earnings. It is usually used for large dollar volume measures, where a commission rate would be too small.

R

Ramp up

The time sales representatives or other commissioned payees require getting up to speed in their role in order to be ready to achieve sales results. The “ramp up” period may include guarantees or draws during this time period or may have special rates applied. For example, when payees are paid a higher commission rate in the early months and are then worked down to the normal commission rate over a specific period of time.

Ramped rate

A rate that changes with volume attainment for the measure.

Recovery

Removing a commission or bonus earned, due to cancellation of an order, return of a product, split of a sale, a clerical error, or other conditions.

Regressive incentive

In a regressive incentive formula, the incentive rate declines as performance exceeds pre-established levels.

Remuneration

The sum of the financial and non-financial value to the employee of all the elements in the employment package (salary, incentives, benefits, perquisites, job satisfaction, organizational affiliation, status, and so on) and any other intrinsic or extrinsic rewards of the employment exchange that the employee values.

Return on assets (ROA)

The ratio of net income to the total assets of an organization. A key financial measure, ROA may be used as a criterion in incentive plans.

Return on capital (ROC) or return on capital

The ratio of net income plus after-tax interest on long-term debt to shareholders’ equity with the long-term debt. A key financial measure, it often serves as a criterion in incentive plans.

Return on Capital Employed (ROCE)

Return on capital employed establishes the relationship between the profit and the capital employed. It indicates the percentage of return on capital employed in the business and it can be used to show the overall profitability and efficiency of the business.

Return on equity (ROE) or return on shareholder equity (ROSE)

The ratio of net income attributable to common shares to shareholders’ equity. Often used as a measurement in incentive plans.

Return on net assets (RONA)

The ratio of net income to net assets (total assets less current liabilities). This financial measure may serve as a criterion in executive incentive plans, especially at the business unit level.

Return on sales (ROS)

The ratio of net income to net sales. A key financial measure, ROS may be used as a criterion in incentive plans.

Revenue

Amount of money the company earns from sales. Revenue often differs from bookings, depending on GAAP (generally accepted accounting principles) requirements.

Revenue Performance Engine (RPE)

Varicent’s Sales Performance Management strategy that links crucial business processes and breaks down barriers across strategy, planning, and execution.

Roll Up

Used to identify that a payee (or subordinate) reports to or results are shared “rolled up” to a supervisor (or manager). For example, a roll up may represent crediting, such as, a payee’s sales credits roll up to a manager; thus, the manager gets credit for subordinate sales. Also referred to as a hierarchy.

Rolling period

A time frame of the current period and a specific number of prior periods.

Rule

One of a set of assigned behavior within software. Consist of a set of conditions.

S

Sales alignment

The extent that a sales compensation program is aligned with the key business objectives of the company. The term also refers to the extent that sales compensation plans for different job roles are aligned to motivate teamwork across sales roles.

Sales compensation

Monetary amounts paid to sales staff, representatives, or sales management that varies in accordance with accomplishment of sales goals. Sales compensation formulas strive to establish direct incentives for sales.

Sales contest

An event entailing a short-term sales effort to maximize results for a nonrecurring purpose in an effort to win a prize. Usually short in duration, such contests are designed to supplement the regular sales compensation program, not replace it.

Sales crediting

A process that determines which participants receive credit for a sales event and how much will count. For companies with complex selling processes, it is best practice to credit multiple positions to encourage teamwork and avoid channel conflict.

Sales event

An occurrence for which sales are potentially counted for compensation purposes.

Sales excellence

Individual sales performance that is in the top percentile among all individuals whose performance is being measured. The top percentile is determined by the company, but it usually ranges from 100 to120 percent.

Sales incentive leverage

The relationship of the elements in the compensation plan expressed as a percent. It may be salary and incentive relative to Target Total Compensation, or commission and bonus relative to Target Incentive Compensation. Also known as leverage.

Sales incentive mix

The relationship of the elements in the compensation plan expressed as a percent. It may be salary and incentive relative to Target Total Compensation, or commission and bonus relative to Target Incentive Compensation. Also known as incentive mix.

Sales Order Value (SOV)

The value of the sales order. Also referred to as Contract Value.

Sales Performance management (SPM)

A form of business software to manage the processes around quotas, territories, incentive management, forecasting, modelling, and analytics.

Shipment date

The date an order is shipped by the company or channel partner.

Short-term incentives

Rewards based on the attainment of short-term results of 12 months or less; for example, net income. Also see annual incentive.

Single-measure plans

Incentive plans based on a single measure (financial or productivity) of performance.

Small-group incentive

Any incentive program that focuses on the performance of a small group, usually a work team. These incentive programs are most useful when measurable output results from the group efforts, with individual contributions difficult to separate out.

Source

The origin. For instance a source data table is the table from which data is derived and sent to a target.

Special Performance Incentive for Field Focus (SPIFF)

An added incentive amount for selling certain items such as overstock, out- of-season, or obsolete. Also known as Special Product Incentive Fund.

Split claim

If responsibility is shared between two or more participants on a specific sale, the sales credit may be split up.

Strategic business unit (SBU)

A subunit of a larger organizational structure (division or subsidiary, for example) that is viewed as a contributor to the overall success of the

enterprise. Many incentive plans are designed around the accomplishment of SBU financial results.

T

Target

The destination. For instance, a target data table is the table which data is sent/migrated from a source.

Also see Quota: The expected level of attainment assigned to a participant for the primary sales measures. Quotas are generally annual but may be subdivided into quarterly or monthly quotas and prorated based on product seasonality.

Target cash compensation (TCC)

As it relates to sales compensation, the total cash compensation (including base salary and incentive compensation) available for achieving expected results.

Team incentive

Any incentive that focuses on work teams or larger sets of workers operating as a unit. Based on predetermined objectives being met to qualify for a payout.

Territory

A territory can relate to accounts, customers, geography, products, and more. Also see assignment.

Threshold

The minimum level of performance that must be achieved before an incentive can be earned.

Tier/ Tiering

A method used when different rates are applied when performance numbers fall between a low and high value.

Total incentive compensation

(TIC)

The expected total incentive compensation for commission and bonus at 100 percent attainment of all measures or goals.

Total remuneration

The sum of the financial and nonfinancial value to the employee of all the elements in the employment package (salary, incentives, benefits, perquisites, job satisfaction, organizational affiliation, status, and so on), and any other intrinsic or extrinsic rewards of the employment exchange that the employee values.

Total target

compensation (TTC)

The expected total compensation including salary, commission, and bonus at 100 percent attainment of all goals.

Tools

An aid to build your pipe to add data, predict, prepare and lean data in Varicent ELT.

True-Up

The process of equalizing payments or overpayments based on what a payee has been paid in the past versus what their current period performance indicates what they should be paid (or paid back); i.e., quarterly true-up or annual true-up.

U

Upside

The earnings potential when all goals have exceeded the plan attainment (100 percent) amount. Plans that have a great deal of upside are considered highly leveraged.

Upside potential

For sales compensation purposes, the upside potential, or leverage, is the amount of increased incentive opportunity, in addition to target incentive pay, that management expects outstanding performers to earn.

V

Varicent ELT, Varicent AI, Varicent ELT

This is a product name, always capitalize. Always use Varicent AI or Varicent ELT when mentioning the product name. Each is it’s own product with different levels of access to tools, blueprints, etc. Varicent ELT is the common product.

Variable

commission

Commission rates in a particular incentive plan are not constant and may vary based on the salesperson’s performance or on the measurement used.

W

Weight

Refers to the relative importance of a measure or factor used to determine a credit or payment amount.

Windfall

An unusually large sale that yields exceptional earnings for a participant. Because the salesperson had little or no involvement in creating the sale, a windfall is sometimes excluded from normal incentive compensation treatment.