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Period Type Parameter Examples


The examples in this section illustrate the effects of specifying different combinations of measurement period and attainment period for a sample monthly incentive rule that uses a rate table to calculate the commission. The following figure illustrates the data used in the examples that follow.

16_RTsample.gif

Measurements and Rate Tables: Scenario 1, Good Practice

In this example, the following period type parameters are specified:

Period Type Parameters: Scenario 1, Good Practice 

Period Type Parameter Value
measurement period month
attainment period quarter

This scenario pays commission on the monthly revenue, and the pay rate is determined by the quarter-to-date performance. This scenario pays appropriately.

17_RTsample_1.gif

The following table lists the calculations that occur for this incentive rule for the four sample months, January through April. Commissions are appropriate to the generated revenue (neither overpaid or underpaid).

Scenario 1 Commission Calculations



Attainment

Measurement Revenue

Commission

January

=2500/6000 = 41.67%

2500

1st tier =2500 X 5% = $125 commission

February

=(2500 + 3000)/6000

= 5500/6000

= 91.67%

3000

1st tier = 500 X 5% = $25

2nd tier = 2500 X 10% = $250

total commission = $275

March

=(5500 + 1800)/6000

= 7300/6000

= 122%

1800

rest of 2nd tier= $500 X 10% = $50

3rd tier = $1300 X 15% = $195

total commission = $245

April

= 3500/7000 = 50%

3500

1st tier = 3500 X 5% = $175 commission

Total Commissions January through April

= $820

Measurements and Rate Tables: Scenario 2, Bad Practice

In this example, the following period type parameters are specified:

Period Type Parameters: Scenario 2, Bad Practice


Period Type Parameter

Value

measurement period

quarter

attainment period

quarter

This scenario pays commission on quarter-to-date revenue each month, and the pay rate is determined by the quarter-to-date performance. This scenario overpays, by paying on the January revenue three times, and the February revenue two times.

18_RTsample_2.gif

The following table lists the calculations that occur for this incentive rule for the four sample months, January through April. Commissions are not appropriate to the generated revenue, as commissions are paid multiple times for January and February.

Scenario 2 Commission Calculations



Attainment

Measurement Revenue

Commission

January

=2500/6000 = 41.67%

2500

1st tier =2500 X 5% = $125 commission

February

=(2500 + 3000)/6000

= 5500/6000

= 91.67%

5500

1st tier = 3000 X 5% = $150

2nd tier = 2500 X 10% = $250

total commission = $400

March

=(5500 + 1800)/6000

= 7300/6000

= 122%

7300

1st tier = 3000 X 5% = $150

2nd tier = $3000 X 10% = $300

3rd tier= $1300 X 15% = $195

total commission = $645

April

= 3500/7000 = 50%

3500

1st tier = 3500 X 5% = $175 commission

Total Commissions January through April

= $1345

Measurements and Rate Tables: General Guideline Summary

To summarize, when you create an incentive rule that uses a rate table, be careful about the period versions that you specify. A secondary measurement rule can calculate year-to-date revenue on a monthly basis (attainment period=month). To use this kind of measurement with a rate table in an incentive rule, you would use an annual quota (quota period=year).