Staff Bonus Plan

STAFF BONUS PLAN

Customer Service Representatives (CSRs) have evolved from primarily clerical employees who follow producers' specific directions to today's highly skilled, educated insurance professionals holding a wide variety of account responsibilities. Despite correspondingly higher levels of base compensation, the problem of how to provide CSRs with incentives or bonus compensation persists.

If management elects to implement a CSR bonus program, the plan should encompass a number of goals:

• Department growth
• Department profit
• Teamwork within departments
• Rewards for individual performance

Bonus plans can't depend entirely on individual performance, since the agency must be profitable and growing to afford bonus payouts. Teamwork should be promoted to prevent selfish behavior and ensure that the agency continues to work toward simplifying operations.

The following program offers a way of meeting most of the agency's goals:

Part 1. Establish a gross commission goal for the department. The goal should be realistic and achievable. This year, a realistic total commission goal for a Commercial Lines department might be 110% of last year's gross commission level. By setting a total commission target, existing business is retained and new accounts are captured. If the commission target is exceeded, a bonus of up to 7.5% of compensation will be paid to the CSRs.

Part 2. Calculate the latest year's level of employee productivity for the department (total Commercial Lines commissions divided by all Commercial Lines personnel, excluding producers). A target level of employee productivity should then be set approximately 5% to 10% higher. If the target level of productivity is reached by the department, a bonus of up to 7.5% of compensation will be paid to the CSRs.

Part 3. Review each individual employee at least annually with a standardized employee evaluation form. The form should include at least 10 or 15 areas of performance (such as work load, timeliness, accuracy, and knowledge), scored on a one-to-five scale (one being low). The employee's average score will determine the amount of bonus for each of the opportunities noted in Parts 1 and 2. The scale in this table can be used as a basis for a bonus compensation plan:

Table: Commercial Lines CSR Bonus Program-Compensation Bonus

Average Growth Productivity Total

Ranking Bonus Bonus Bonus< 3.0 0% 0% 0%

3.0-3.4 2.5% 2.5% 5%

3.5-3.9 4.0% 4.0% 8%

4.0-4.4 5.5% 5.5% 11%

4.5-5.0 7.5% 7.5% 15%

If the department hits both the total commission target and the productivity target, and the employee is ranked very high on his or her individual performance, the CSR could receive a total 15% bonus. If individual performance is average (a ranking of 3.0 to 3.9), the CSR will receive a 5% to 8% bonus only if the agency hits both of its department goals. Any CSR performing at a less-than-average level would receive no bonus regardless of agency performance. The agency need not hit both of its targets for a bonus to be paid. Either target could be reached without the other, and the bonus paid on that target only.