---
title: "Design a Good Compensation System and Employees Will Work Hard Without Complaints!"
description: "In the fast-moving consumer goods (FMCG) industry, distributors play a crucial role in connecting manufacturers with end consumers. A well-designed compensation system can help distributors build a motivated sales team and gain a competitive edge. This article provides detailed guidance on designing compensation packages for sales managers, supervisors, and representatives, emphasizing the importance of fairness, flexibility, and timely incentives."
author: "路胜贞"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-02-15"
language: "en"
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# Design a Good Compensation System and Employees Will Work Hard Without Complaints!

> In the fast-moving consumer goods (FMCG) industry, distributors play a crucial role in connecting manufacturers with end consumers. A well-designed compensation system can help distributors build a motivated sales team and gain a competitive edge. This article provides detailed guidance on designing compensation packages for sales managers, supervisors, and representatives, emphasizing the importance of fairness, flexibility, and timely incentives.

**Click the image for details**
The FMCG industry is full of changes and unpredictability. Distributors are the key link between manufacturers and terminals, playing the vital role of connecting upstream and downstream relationships, converting manufacturers' products into cash and market share, bridging the last mile between terminals and consumers, and returning cash to manufacturers.
A well-designed compensation system for distributors makes it easier to build a spirited and invincible sales team, gaining a dominant position in market competition.
However, the FMCG industry is one where compensation is generally lower than in real estate, capital operations, and software.
Paying far more than the return is a true reflection of the FMCG industry. Therefore, designing a relatively fair, inclusive, reasonable, and easy-to-manage compensation system is more conducive for distributors to foster teamwork and win the market in the special year of 2017.
**No Empty Promises, Tailor to the Person**
The talent in a distributor's team mainly includes sales personnel (sales managers, business supervisors, and sales representatives) and back-office staff.
The compensation for each type of staff consists of four parts: fixed base salary, commission, benefits, and year-end bonus. Setting different compensation structures according to the characteristics of different talents helps tailor to the individual, ensuring that compensation matches the position and that the position matches the value, thereby maximizing the work enthusiasm of each role.
**1. Compensation Design Tips for Sales Managers**
Sales managers allocate sales targets, plan expense distribution, set network development indicators, plan and execute the distributor's marketing plans, supervise sales expenses, and evaluate, track, and assess the performance of sales personnel. They are both the brains of the distributor and the primary executor of market strategy. **A good sales manager must not only take on the task of overall performance planning but also be responsible for channel expansion, terminal maintenance, and team building. Therefore, the quality of the incentive system for sales managers basically determines the quality of the distributor's market performance.**
**1) Base Salary Design for Sales Managers:**
Sales management is a role that emphasizes process and results. However, the base salary is a fixed component, not primarily performance-based, but rather a basic guarantee for the sales manager's time and experience, without incentive effects.
Generally, in the FMCG industry, setting a base salary of 2000–6000 RMB for sales managers is common practice, but this design needs to be determined based on the distributor's own operating scale and profitability.
Of course, when the base salary cannot be high, it should be reflected in commissions, benefits, and dividends. This helps build the sales manager's sense of belonging to the distributor.
**2) Commission Design:**
Commissions for sales managers can be based on annual sales volume, net payment collection, or company net profit, typically 1–3% of the total task volume within the managed scope or region. This can be settled monthly or paid quarterly.
**3) Benefits Design:**
Benefits cover a wide range, including phone bills, living allowances, office expenses, travel expenses, vehicles, social insurance, and holiday benefits. This should be set according to the distributor's strength; the more the better, but if not possible, do your best.
Phone bills are usually provided as a phone allowance, ranging from 200 to 500 RMB. Travel expenses are often reimbursed based on actual expenses or included in the year-end bonus. Other expenses can be designed by the HR manager, referring to industry standards and considering actual conditions.
**4) Year-end Bonus:**
The year-end bonus is an affirmation of the sales manager's overall performance, including year-end dividends, year-end bonus, or year-end profit commission. This is directly linked to sales performance. If a low-wage system is adopted, a dividend system must be adopted. If a high-wage system is adopted, the value of the sales manager is reflected through year-end bonuses and year-end profit commissions.
**2. Compensation Design Tips for Business Supervisors**
Market share, inventory, stock pressure, wholesale classification, margin distribution, quarterly, monthly, and daily task breakdowns; discussing politics, society, life, listening to customers' gossip and emotional entanglements—**a business supervisor is both a smooth operator who pleases customers and a comprehensive talent who can lead the team, divide work reasonably, and achieve sales targets. The compensation design for business supervisors should focus more on motivating their enthusiasm in the work process.**
**1) Base Salary Design for Business Supervisors:**
The base salary for business supervisors in the FMCG industry is almost the lowest among all industries, generally between 1800 and 3500 RMB. Excessively low wages are one of the main factors causing instability among business supervisors.
However, the nature of the work also makes many distributors unwilling to raise basic wages, instead using commissions and benefits to stimulate the work enthusiasm of business supervisors.
**2) Commission Design for Business Supervisors:**
The commission for business supervisors needs to be determined by the distributor based on the actual situation of the enterprise, with commission rates ranging from 0.3% to 10%.
In FMCG, piece-rate commissions are common, with amounts ranging from a few cents to a few yuan, depending on the product's turnover frequency and difficulty, reflecting the incentive nature of more work, more pay.
For enterprises with relatively loose management, bonuses or position allowances can also be adopted.
**3) Benefits Design for Business Supervisors:**
Given relatively low wages, benefits should be fully guaranteed. Benefits for business supervisors mainly consist of communication allowances, full attendance allowances, travel expenses, living allowances, office allowances, vehicle allowances, and seniority pay. Currently, social insurance and basic guarantees are not well implemented for most small and medium-sized distributors, and benefit conditions are very limited. This is also a basic reason for the instability of business supervisors. However, within their capabilities, distributors establishing standardized and attractive benefit systems is conducive to employee stability and the establishment of the enterprise's own image.
Phone allowances can be fixed at 50–200 RMB per month. Entertainment expenses are usually linked proportionally. Vehicle allowances are mostly a few to dozens of yuan. The rest can be left to the HR manager to design.
**4) Year-end Bonus Design for Business Supervisors:**
Linking the income of business supervisors to the distributor's overall performance is also a common practice. Year-end bonuses for sales supervisors can take the form of year-end dividends, fixed bonuses, material rewards, or sales commissions. The year-end ratio and method should be determined based on the distributor's own scale, profitability, and the expected incentive value. This part is mostly designed by the distributor themselves, and it is difficult for others to intervene.
**Commissions must be paid promptly; this is the most direct reflection of the distributor's credibility in the eyes of business supervisors and a key link in stimulating their enthusiasm.**
**3. Compensation Design for Sales Representatives**
Sales representatives are responsible for a series of trivial tasks: traveling through streets and alleys to sell to terminal owners and purchasing managers, cutting boxes, organizing shelves, making displays, on-site promotion, distributing expenses, copying orders, and handling expired products. **The pressure on sales representatives is increasing, and over time, it can lead to numbness and lack of enthusiasm. Whether sales representatives are happy or not, and whether their attitudes are positive or negative, directly determines the speed of market development and the quality of customer relationships.**
**1) Basic Salary Design for Sales Representatives:**
Sales representatives are the position with the lowest entry barrier, worst treatment, and least stability in FMCG. They are either fresh graduates entering the industry or experienced representatives with rich terminal resources. Regardless of their background, they share common conditions: low fixed wages, poor benefits, and being the most easily overlooked position.
In the FMCG industry, the wages of sales representatives are generally below 2000 RMB. If measured by individual input-output ratio, the average salary in this industry is far lower than that of sales personnel in other industries. This is why the sales representative profession has high turnover, the highest job-hopping rate, and the lowest loyalty.
**Therefore, the compensation design should basically focus on ensuring terminal stability and channel stability.**
If the distributor, due to cost risk considerations or affordability, is unwilling to raise the basic salary of sales personnel, then incentives must come from commissions. This increases the expectations of sales personnel, prevents them from feeling their value is not recognized, and avoids dampening their enthusiasm, which in turn could affect the distributor's control over terminals.
**2) Commission Design for Sales Representatives:**
Commissions can be task-based: after completing the task, a reward of 300–800 RMB or more can be given, depending on the distributor's strategic goals for a period. During the distribution phase, it can be based on the number of outlets; during the sales phase, it can be based on sales volume. Of course, the task design should reflect achievability—a task that a salesperson can accomplish with effort.
Alternatively, commissions can be based on the enterprise's net profit, provided that the profit is positive. For distributors with unstable business, using net profit commissions can be seen by sales representatives as the boss drawing a big pie, which may have a negative effect.
If the enterprise is profitable, using net profit commissions with a relatively high commission rate, around 30% of the profit from the task completed by the sales representative or lower, is reasonable.
However, similar to commissions for business supervisors, for sales representatives, information is not transparent, and grassroots sales personnel find it difficult to grasp the distributor's profit situation. Therefore, this design is often not favored by salespeople, and its incentive effect is limited.
Of course, for salespeople, piece-rate commissions or sales-based commissions are also feasible. The piece-rate commission ratio is designed based on product price and turnover speed: low-priced products have lower commissions, fast-moving products have lower commissions, and vice versa. Especially for small and medium-sized distributors, the piece-rate system is the easiest to operate.
**3) Benefits Design for Sales Representatives:**
The benefits design for sales representatives mainly focuses on motivating daily business enthusiasm. In addition to conventional social insurance, communication, lunch allowances, travel allowances, and entertainment expenses, competitive rewards can be added, such as sales star, monthly champion, outstanding employee, and enterprise advanced worker.
**4) Year-end Bonus Design for Sales Representatives:**
This is mainly reflected in red envelopes and annual commissions. Especially for enterprises with stable teams and good development momentum, setting up certain dividend opportunities can further stimulate the enthusiasm of sales representatives. However, for many small and medium-sized distributors, this may be out of reach, but these benefits can basically show the strength of a distributor.
In addition to sales personnel, there should also be compensation design rules for back-office staff. The work of back-office staff is equally important as that of sales personnel. For example, a warehouse manager is related to the distributor's inventory turnover speed, while a copywriter or planner is related to making products known to consumers or driving the atmosphere in the store, ultimately converting to cash. The role of finance is also self-evident.
However, the work results of back-office staff are difficult to measure with piece-rate or hard indicators like sales personnel. In this case, the compensation standard basically considers only two factors: the distributor's affordability and industry norms.
Part of this compensation design is left to the HR manager, and part is flexibly controlled by the distributor. But no matter what, it boils down to basic fixed salary + bonus commission + benefits.
**Having a Good Compensation System Also Requires Flexibility**
The above rules apply to most distributors, but there are significant differences among distributors. Distributors can be divided into start-up distributors, small distributors, medium distributors, and large distributors.
For start-up distributors, fixed salaries are often lower than market rates, but there are exceptions for resource-based entrants into the FMCG industry who have higher strength and can quickly organize a team and attract talent by offering higher basic wages than peers. If a distributor lacks financial strength and wants to maintain flexibility in bonuses, they can consider an option model for key employees or ordinary staff to boost morale and give them a goal and expectation.
**Here, we need to eliminate an unrealistic tendency to draw big pies.** No matter how good the options are, if they cannot guarantee the basic living needs of the team, they will not have an incentive effect, because at this time, future expectations often depend on trust in the distributor, which depends on the distributor's personal character and credibility. Sharing the small profits earned in the early stages of entrepreneurship is the biggest test of a distributor's credibility.
**A major reason why the FMCG team is prone to losing morale and falling into chaos is that some distributors only consider their own profits and losses, neglecting the growth and income of the team.** Especially in the FMCG field, the employee team relies on resource accumulation, experience, and personal connections. **Therefore, regardless of size, building one's own mindset is often more important than the compensation system.**
**The above suggestions are a systematic compensation design, but managing people's hearts is the most difficult. Therefore, in implementation, distributors should not be rigid and should dare to break the fixed compensation design mindset.** Especially when dealing with employees with special skills, they should have the courage to break the framework. For special positions or special talents, they should dare to pay higher salaries than the same position. The compensation system should suit most people, but also consider some special cases. The FMCG industry itself is one that requires daring to think and act, constantly breaking conventions.
**Wishing all distributor friends a prosperous 2017, with easy team management and booming business!**
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