TREX Variable Pay & Bonus Programs 3

Question 1

Which of the following BEST describes a 'draw against commission' arrangement?

Accepted Answer

An advance on future commissions that must be repaid from earnings

Answer

A draw against commission is an advance payment that is offset against future commission earnings, ensuring reps have income during ramp-up periods.

Question 2

Under WorldatWork Total Rewards principles, which factor is MOST critical when selecting metrics for a variable pay plan?

Accepted Answer

Metrics must be within participants' line of sight and influence

Answer

Line-of-sight (the degree to which employees can see how their actions affect the metric) is essential for a variable pay plan to motivate behavior change.

Question 3

A company funds its annual bonus pool based on a percentage of operating income above a hurdle rate. If operating income does not exceed the hurdle, what is the pool?

Accepted Answer

Zero — no pool is funded

Answer

A hurdle-rate funding model only generates a bonus pool when profitability exceeds the minimum required return; below the hurdle, the pool is zero.

Question 4

What is the key distinction between a 'spot bonus' and a 'project bonus'?

Accepted Answer

Spot bonuses recognize immediate one-time contributions; project bonuses reward completion of a defined initiative

Answer

Spot bonuses are ad hoc awards given immediately for exceptional acts, while project bonuses are pre-defined awards tied to completing a specific project milestone.

Question 5

Which scenario represents an unintended consequence of a poorly designed sales commission plan?

Accepted Answer

Sales reps manipulate deal timing to maximize commissions within a period

Answer

Commission plans that reward bookings within periods can incentivize 'sandbagging' or deal timing manipulation rather than steady productive selling.

(TREX) WorldatWork Total Rewards Certification Practice Test

(TREX) WorldatWork Total Rewards Certification Practice Test

TREX Variable Pay & Bonus Programs 3