‘Targeted unit rate with turnover in units’ deal mechanism

Description

A mechanism where the earnings are an amount per unit volume, but the size of this amount depends on the level of turnover achieved.

Example

A deal for which the earnings are £0.50 per unit if turnover is less than 500,000 units, £0.65 per unit if turnover is greater than or equal to 500,000 units but less than 750,000 units, or £0.80 per unit if turnover is greater than or equal to 750,000 units.

Configuration approach

Within DealTrack, you will be required to:

• Configure one or more turnover bands, with a turnover target and a per unit rate for each, as illustrated below:

• Select one or more items for each dimension that has been configured for you as included items for the deal.

DealTrack will select matching turnover lines for the deal, based on:

• The supplier to which the deal belongs.

• The user’s dimension item selections.

• The start and end date of the deal.

• The currency of the parent scheme.

To calculate an earnings result for the deal as a whole, DealTrack will compare the total for turnover units across the matching turnover lines with the turnover targets that have been configured for the deal to determine which turnover band, and therefore which per unit rate, applies.

To calculate an earnings result for each matching turnover line, DealTrack will multiply the per unit rate that applies to the deal by the entry for turnover units that applies to the turnover line.

Optional settings

You will be able (but not required) to use the ‘Mechanism details’ area of the deal configuration page to:

• Untick the Retrospective? tick box.

• Tick the Separate target and earning turnover? tick box.

Retrospective vs Non-Retrospective

For a deal that uses the Targeted unit rate with turnover in units plug-in, the Retrospective? tick box is ticked by default. When the Retrospective? box is ticked, the earnings will be calculated with the achieved rate applied retrospectively, or ‘back to zero’. 

If the Retrospective? box is unticked, DealTrack will instead perform a non-retrospective calculation that involves applying each of the achieved rates to the turnover that ‘belongs’ to the corresponding turnover band. 

Consider for example a deal that has turnover bands as follows:

If the total for included turnover is 18,000 units, DealTrack will calculate the earnings as:

• £2.50 per unit x 18,000 units = £45,000 if the Retrospective? box is ticked;

• £2.00 per units x (15,000 units - 10,000 units) + £2.50 per unit x (18,000 units - 15,000 units) = £17,500 if the Retrospective? box is not ticked.

The above example shows how the deal level result for earnings would be calculated for a non-retrospective deal that uses the Targeted unit rate with turnover in units plug-in.

To calculate an earnings result for each of the included turnover lines for such a deal, DealTrack will use the entries for turnover units from the included turnover lines to apportion the deal level result for earnings and derive an earnings result for each of the included turnover lines.

Separate target and earning turnover?

For a deal that uses the Targeted unit rate with turnover in units plug-in, the Separate target and earning turnover? tick box is unticked by default.

When the Separate target and earning turnover? box is unticked:

• You will be required to configure a single set of dimension items as included items for the deal, where the set of included items contains at least one item for each dimension that has been configured for you.

• DealTrack will:

  • Use the set of included dimension items, in conjunction with the start and end dates of the deal and the currency of the parent scheme, to select a single set of matching turnover lines for the deal;

  • Use the set of matching turnover lines, in conjunction with the turnover bands that have been configured for the deal, to calculate the earnings.

When the Separate target and earning turnover? box is ticked:

• You will be required to configure two sets of dimension items — one for target turnover and one for earning turnover — where each set of included items contains at least one item for each dimension that has been configured for you.

• DealTrack will:

  • Use the two sets of included dimension items, in conjunction with the start and end dates of the deal and the currency of the parent scheme, to select two sets of matching turnover lines for the deal – one for target turnover and one for earning turnover;

  • Use the target turnover lines to determine which turnover band, and therefore which percentage rate, applies to the deal;

  • Use the earning turnover lines to calculate the earnings for the deal;

  • Assign earnings to all of the earning turnover lines and none of the target turnover lines.