Posted: Sat Apr 09, 2005 10:49 am
Hi all,
I am in need of some help regarding my compensation package. I am a L&H licensed producer in WA state, specializing in employee benefit (medical, dental, etc) packages for employer groups. I also write some individual policies as needed.
The agency I work for was previously a one-guy operation, who brought me in to increase the book of business in preparation of bringing his son in so he could retire in 5-7 years, with probable partnership for me at that time. Now it looks like his son won't be coming in to the business at all, placing me in direct line for taking this agency over at a later date.
Our original compensation agreement was a $2k base plus 50/50 on commissions and bonuses, new and renewal (paying renewal commissions on group med/dental is common in my area). My boss has now indicated he wants to 1099 me on my commissions vs. keeping that part of my wage as W-2. He also now states that he can't pay me a 50/50 split and be profitable. He also wants to retain 100% on bonuses. I serviced and renewed all of his current book so far, which I attribute my base as being a CSR salary, more than anything. Of course that makes it pretty difficult to go out and actually produce my own accounts.
We also agreed that he would pay me base plus commission up to $4k per month, and then the next $4k in gross commissions I write after that, he will retain 100% of the commission up to $8k in gross commissions, so when I reach the $8k, I would be able to switch over to my 50% straight commission and receive no guaranteed salary. I do not have any additional benefits (med insurance, 401k, etc) other than paid holidays and vacation time, and a flexible schedule.
I know, without a doubt, that I will well exceed my total overhead cost (right now about $3k per month including my salary) to him given the time to do so. This last 2 months, I wrote approximately $2000 in gross commission new business for the agency. I currently have another $1k a month account in the works, plus some smaller ones. If I look at JUST the group med/dental/vision (no life or individual accounts included) part of his book, he is operating at about a 25% cost for his share of the overhead vs. his gross premium. That makes it hard for me to believe that he will make no profit at a 50/50 split, even on a W-2 basis, once my book of business is built up.
The last problem I have is that he is not a true go-getter, and frankly I think his business would be in some serious decline had I not shown up. He calls me a "technocrat" but in this day and age of employee benefits, there really isn't room to be anything else, because the marketplace here is very competitive. So, as such, he constantly accesses my knowledge base in order to renew and/or write his new accounts. In fact, other than making the initial contact with the last group written ($1100 a month in gross commission) and attending two meetings, I did ALL of the work...census info, the entire market search, proposal, and final presentation, plus all the application paperwork, and addressing the group's questions, and yet I stand to make $0 since it is technically "his" group, and in all seriousness, I don't think we would have landed that account if I hadn't been involved. I could have been out writing my own accounts with the time I spent on that one, but didn't want the agency to lose out. He did agree I should be paid something, but I don't want to do this again, and have my payment based on a discretionary case-by-case basis. I want to come to an agreement with him because I KNOW this will happen again, which is ok as long as we have a set reimbursement schedule for this type of scenario.
The other area of contention is "referral" business. He believes that if a group comes via referral from an existing client it is "his" automatically, regardless of who took the initial phone call and who does all the work on it (usually me!).
So here are my questions:
1. Considering we do not have a designated CSR (I am that for his accounts and my accounts at the moment), no other employee benefits other than my overhead (office space, equip, phone bill, employment taxes, etc) and my salary, is a W-2 based (vs 1099) 50/50 split out of the ballpark here?
2. Would we be better off doing a staggered commission by client type? I do quite a bit of cold calling to gain my accounts (Type A), then there is the referral based client that I write from start to finish (Type B), and then there are "his" clients that I end up working on (sometimes start to finish) due to his lack of "technocratic" knowledge (Type C). I was thinking in terms of 50% on Type A accounts, 30% on Type B accounts, and 10% on Type C accounts. Would that work, or something similar? Of course I am assuming all this as a W-2 wage.
What do most agencies do with these scenarios & what are truly fair commission splits?
Thanks, and sorry my post is so long winded!
Tami
I am in need of some help regarding my compensation package. I am a L&H licensed producer in WA state, specializing in employee benefit (medical, dental, etc) packages for employer groups. I also write some individual policies as needed.
The agency I work for was previously a one-guy operation, who brought me in to increase the book of business in preparation of bringing his son in so he could retire in 5-7 years, with probable partnership for me at that time. Now it looks like his son won't be coming in to the business at all, placing me in direct line for taking this agency over at a later date.
Our original compensation agreement was a $2k base plus 50/50 on commissions and bonuses, new and renewal (paying renewal commissions on group med/dental is common in my area). My boss has now indicated he wants to 1099 me on my commissions vs. keeping that part of my wage as W-2. He also now states that he can't pay me a 50/50 split and be profitable. He also wants to retain 100% on bonuses. I serviced and renewed all of his current book so far, which I attribute my base as being a CSR salary, more than anything. Of course that makes it pretty difficult to go out and actually produce my own accounts.
We also agreed that he would pay me base plus commission up to $4k per month, and then the next $4k in gross commissions I write after that, he will retain 100% of the commission up to $8k in gross commissions, so when I reach the $8k, I would be able to switch over to my 50% straight commission and receive no guaranteed salary. I do not have any additional benefits (med insurance, 401k, etc) other than paid holidays and vacation time, and a flexible schedule.
I know, without a doubt, that I will well exceed my total overhead cost (right now about $3k per month including my salary) to him given the time to do so. This last 2 months, I wrote approximately $2000 in gross commission new business for the agency. I currently have another $1k a month account in the works, plus some smaller ones. If I look at JUST the group med/dental/vision (no life or individual accounts included) part of his book, he is operating at about a 25% cost for his share of the overhead vs. his gross premium. That makes it hard for me to believe that he will make no profit at a 50/50 split, even on a W-2 basis, once my book of business is built up.
The last problem I have is that he is not a true go-getter, and frankly I think his business would be in some serious decline had I not shown up. He calls me a "technocrat" but in this day and age of employee benefits, there really isn't room to be anything else, because the marketplace here is very competitive. So, as such, he constantly accesses my knowledge base in order to renew and/or write his new accounts. In fact, other than making the initial contact with the last group written ($1100 a month in gross commission) and attending two meetings, I did ALL of the work...census info, the entire market search, proposal, and final presentation, plus all the application paperwork, and addressing the group's questions, and yet I stand to make $0 since it is technically "his" group, and in all seriousness, I don't think we would have landed that account if I hadn't been involved. I could have been out writing my own accounts with the time I spent on that one, but didn't want the agency to lose out. He did agree I should be paid something, but I don't want to do this again, and have my payment based on a discretionary case-by-case basis. I want to come to an agreement with him because I KNOW this will happen again, which is ok as long as we have a set reimbursement schedule for this type of scenario.
The other area of contention is "referral" business. He believes that if a group comes via referral from an existing client it is "his" automatically, regardless of who took the initial phone call and who does all the work on it (usually me!).
So here are my questions:
1. Considering we do not have a designated CSR (I am that for his accounts and my accounts at the moment), no other employee benefits other than my overhead (office space, equip, phone bill, employment taxes, etc) and my salary, is a W-2 based (vs 1099) 50/50 split out of the ballpark here?
2. Would we be better off doing a staggered commission by client type? I do quite a bit of cold calling to gain my accounts (Type A), then there is the referral based client that I write from start to finish (Type B), and then there are "his" clients that I end up working on (sometimes start to finish) due to his lack of "technocratic" knowledge (Type C). I was thinking in terms of 50% on Type A accounts, 30% on Type B accounts, and 10% on Type C accounts. Would that work, or something similar? Of course I am assuming all this as a W-2 wage.
What do most agencies do with these scenarios & what are truly fair commission splits?
Thanks, and sorry my post is so long winded!
Tami