Labour cost planning

There is a service company.

Currently the owner of the company rewards every workers a basic salary and a revenue sharing scheme calculated based on a certain percentage of ‘Sales Turnover’ generated—-$9,000 + (10% x Sales Turnover).

Recently, one worker receives better offer from a competitive company and want to resign. The owner of this company promise he will change the compensation scheme because good staff is hard to come by.

There are 2 plans that he considers:
Plan A: increase basic salary by 20% the ‘Sales Turnover’ sharing
percentage by 10%. —-$10,800 + [10% x (1.1 x Sales turnover)]

Plan B: It proposes a new plan calculating labour payment based on the number of service sessions accomplished. Employees work 5 days/ week, 4 weeks/ month, 8hrs/ day, 0.5hrs/session. Assuming 40 sessions generates a sales turnover of $60,000—– $11,000 + ($100 x number of service sessions)

*Those cost formulas is calculated based on specified details given in the study case.

The question is:
a. Which scheme the company should change into, in order to better retain good
quality workers that can be expected to produce high performance.
b. From a reliable source, the competitor has a cost structure of Total Labour Cost = $12,000 + (5% x Sales Turnover). Do you think your chosen plan in question a can stop competitor from “stealing” your valuable workers? Comment on their compensation schemes. You may use a Sales Turnover amount of $60,000 for comparative calculation.

I have an idea of choosing plan B. After using sales turnover of $60,000 apply to cost formula. I have total labour cost for each plan:

Current scheme: $15,000
Plan A: $17,400
Plan B: $15,000
Competitor’s: $15,000

In term of cost, I think it makes sense to choose a competitive cost as competitor (should not spend more). And salary based on number of sessions can encourage employees to work harder.

However, my classmates argue that higher salary from plan A makes the employees happier and they will surely work harder???

I’m quite confusing because my thinking is not best explained by using management accounting terms (only by logic). And I also notice the basic salary from 3 schemes of the company are lower than competitor’s.

Current scheme: $9,000
Plan A: $10,800
Plan B: $11,000
Competitor’s: $12,000

Please help me with the plan decision and better explanation for it. Thanks in advanced.