Executive Group Travel Blog

How Much Should We Budget For A Sales Incentive Program?

[fa icon="clock-o"] Mar 14, 2015 2:15:00 PM [fa icon="user"] Marci McCormack [fa icon="folder-open'] Incentive Travel


When planning an incentive program the first step is setting a budget for the trip. 

Many companies who are new to incentive travel struggle with what is the right amount to invest in their incentive program each year or each quarter.  Currently the average incentive travel trip for US companies costs $4,000 per employee attending.  The lowest possible budget to run a successful incentive trip is $2,000 per employee and some of the most luxurious trips can cost up to $8,000 per employee.  Most programs run between 3-5 nights and almost all require a majority of the attendees to fly to the trip destination. 

5 Steps to Budgeting for Your Next Incentive Program:

When deciding on the right budget for your company there are many factors that go into planning.  We have put together a 5 step process that touches on these factors and helps you decide whats best for your business.

Step 1: ROI 

  • In order to put together the right amount to invest in your next incentive trip it's important to outline revenue projections, sales targets, and gross margin.  With the right projections you can easily put together the incremental difference you will bring in from hosting your incentive trip.  Depending on your program's eligibility requirements your budget would only increase if your employees sell more! 

Step 2: % of Compensation

  • For a program based on annual targets, expect to budget 2-3% of your "winning" employees total compensation.  For a program based on quarterly sales numbers then expect 4-5% of compensation during that time.  These are general guidelines in the industry but they can range drastically depending on each companies specific compensation plan.  We recommend companies take the average % so if their top sales rep makes $225,000 per year then the budget would be $5,625 for them and if the lowest compensated rep make $140k per year then their budget would be $3,500.  This would make your average budget for the trip $4,560 per employee. 

Step 3: Program Eligibility Requirements

Step 4: Overall Budget

  • Once you chose your program eligibility requirements then you will have a better idea for your overall budget.  If you decide to go with top 15% or top 20% of sales reps then you will easily be able to multiply the number of reps who will attend times the per employee budget.  If you choose to go with percent above quota then it will be a little more difficult.  We recommend you looking at last years sales quota numbers to see how many employees would have been eligible and increase that number 20% (also take into account % increase in head count).  From here we recommend outlining both the minimum and maximum number of potential employees attending and multiply those by the per employee budget.  This will provide your company with a minimum and maximum budget so they can plan out for that expense.                   

Step 5: Tax Implications

  • One thing that is important for your accounting team to look at is the tax implications for the company and the employees.  With incentive travel, the fair market value of the trip needs to be reported on the employees W2 and subject to state and federal tax withholding.  Some companies will put additional costs to covering the tax expense for its employees while others will leave that expense to the employees responsibility. 

Next Steps:

Once you've put together a preliminary budget the next step is finding the right destination and the right hotel option that works within that budget.  The major costs that affect a budget for an incentive program are flights, airport transfers, hotel rooms, final awards dinner, on-site gifts and daily activities. 


 Questions about your budget?