For some salaried employees, such as sales reps, you may wish to represent a commission paid in addition to the base salary. At this time, LivePlan has no automatic calculator to build commission payments based on a percentage of your sales. Instead, you'd manually calculate the percentage you'd like to pay, and enter these amounts into your forecast.
There are two important assumptions to consider before setting up commission entries in your forecast:
Base salary and commission require separate entries. For each employee or group of employees who will be paid commission, you will need to create two Personnel entries in your forecast: one representing the base salary and one representing the commission.
Even if your base salary is direct labor, the commission will be regular labor. Commission payments are usually considered to be operating expense. So, even if you are considering your employees' base salary to be direct labor, we recommend using a Regular Labor entry to represent their commissions.
(For more details, read What is the difference between direct labor and regular labor?)
Creating the base salary entry
- In the Forecast tab, click Personnel. Click Add Personnel:
- Choose Individual or Group of employees. Choose either a constant number of employees, or varying numbers. In this example, we've named this entry Sales Rep Salary to help us remember which of our two entries represents the base salary. Click Next:
- Click the button for Direct Labor. Then click Next:
- Enter the base salary details. For this base salary entry, we recommend using either Constant amount or Varying amounts over time. Click Next:
- Select On-staff employees, which will cause LivePlan to calculate employee-related expenses on this base salary. Click Save & Close to save the entry.
Creating the commission entry
Remember, you'll want to make manual calculations to arrive at your commission payment amounts. It can be helpful to use your revenue forecast as a basis for these calculations. For more on creating revenue streams, read Forecasting your revenue streams.
- Click the Add Personnel button once again to start a commission entry:
- Match this entry's settings employee to your base salary entry - choose Individual or Group of employees, and if it's a group, enter the same number of employees. In this example, we've named the entry Sales Rep Commission to help us remember which of our two entries represents the commission. Click Next:
- Click the button for Regular Labor. Then click Next:
- Depending on how your revenue streams are set up, you may wish to use either Constant amount or Varying amounts over time for your commission payments. If your revenue streams are set up as constant amount entries and the revenue is the same amount each month, you can set up your commission entry the same way:
- Alternatively, if you have your revenue streams set up as Varying amounts over time entries and your revenue amounts are different each month, you'd then want to set up your commission payments the same way. You'd enter your manually-calculated commission amounts for each month of the plan:
- If you would like LivePlan to calculate employee-related expenses such as taxes on the commission payments, select On-staff employees. Click Save & Close to save the entry:
With these entries in place, the Personnel page of your forecast will now show the base salary and commission as separate lines, as shown below. Employee-related expenses have calculated against both the base salary and the commission. Since this sample entry represents a group of five employees, the table now shows the total amounts paid to the entire group:
Please note that this kind of entry will have the affect of doubling the Head Count row of the Personnel chart, as shown above. Our example was for a group of 5 employees, but because we needed two entries to represent the salary and commission, the head count now shows as 10 employees.
For most types of businesses, this head count display shouldn't create issues in the plan. The head count won't display in or vary the calculations of the plan's financial statements.
More on personnel:
- What is the difference between direct labor and regular labor?
- Changing the Burden Rate for employee-related expenses
- Understanding head count details for personnel
- How can I represent part-time personnel in my forecast?
- How do I locate my salaries and wages in the Profit and Loss?