Budgeting Pay-out Ratio

What drives the pay-out ratio?

Typically , everyone points to salaries but the main driver is commissions and bonuses. If the commission scheme is not reviewed each year, unsurprisingly, it can often appear overly generously. It can reduce profitability and is difficult to reign in as naturally no one wants to be paid less but the scheme can be tweaked so that the compensation is fair to both the consultants and the business owners. I recall generating a new scheme for 30+ consultants , speaking to them individually to explain the need and impact. A good scheme results in stronger productivity and unity. A bad scheme hampers the company's profitability and cash flow position. It's important to get the balance correct.