PRODUCER CONTRACTS AND COMPENSATION CHECKLIST
I. Elements in the agent-producer agreement
a. Employment status - employee vs. independent contractor vs. owner
b. Assignment of product line responsibility
c. Remuneration
d. Ownership of business written
e. Ownership of agency
f. Employee benefits
g. Selling expenses
h. Time commitment
i. Compliance with agency rules and regulations
j. Authority on applications for insurance
k. Handling collections
l. Training and development
m. Fidelity bond
n. Solicitation of existing agency business
o. Record keeping - production schedule
p. Military service
q. Termination of agreement
II. Compensation principles
a. Equilibrium where
...Producer's financial and other incentives are equal to or greater than what he expects or his alternatives. ...Producer's financial and other incentives are equal to or less than his economic value to firm.
b. Direct incentives; indirect incentives; non financial
c. Money - satisfier or dis-satisfier
III. Analysis of Direct incentives
Fixed salary - useful when:
- Non-selling activities exist
- Stability needed
- Team selling exists
- Cyclical business
- Big ticket
- Deterrent to over-aggressive sales needed
- Control needed over salesperson
Commission - useful when:
- Results needed immediately
- Rewards needed immediately
- No artificial limits required
- Simple administrative plan
- Attracting aggressive salespersons
- Requiring long hours
- Direct relationship to budget needed
Bonus - useful when:
- Rewarding team
- Recognizing long range accomplishments
- Sustaining motivation
- Recognizing non-sales factors
- Limits needed on incentives
- Strengthening role of sales manager
IV. Other forms of financial compensation
- Fringe benefits
- Vacations
- Holidays
- Pensions
- Group L & H
- Investment plans
- Selling expenses
- Sales contests
V. Forms of financing new men
- Advance (loan)
- Subsidy
- Salary
- Line of credit
VI. Analysis of your individual plans
- Changes recently installed - why?
- Changes contemplated - why?
- Measurement factors
- Equity
- Responsive to short and long-range plans
- Motivate
- Generate right product mix
- Profitable to both employer & employee
- Retain producers
- Tied to performance