How to calculate a dealer scheme payout, with worked examples
Scheme disputes are rarely about the rate. They are about the base: which invoices counted, whether returns were netted, and whether the slab rate applied to every bag or only the bags above the threshold. This guide takes one dealer and one month through six common scheme types, with the arithmetic shown in full.
To calculate a dealer scheme payout, first fix the base: eligible invoices in the scheme period, net of returns, with value taken before GST. Then apply the formula for the scheme type. Per-unit: units multiplied by rate. Percentage: value multiplied by percent. Slab: find the slab reached, then pay its rate on all units (retroactive) or each slab's rate on the units inside it (incremental). Growth: pay on units above last year's base times the growth factor. Add any combo bonus whose minimum thresholds are met, then apply the cap.
The dealer used in every example
All figures on this page are illustrative. Take a cement dealer who lifted 1,200 bags in June at a billed price of ₹350 a bag before GST, so the eligible value is 1,200 x ₹350 = ₹4,20,000. Of the 1,200 bags, 350 were the premium grade. In June last year the same dealer lifted 1,000 bags. There were no returns unless an example says so.
1. Per-unit scheme
Formula: payout = eligible units x rate per unit. A scheme paying ₹5 a bag on all June lifting gives 1,200 x ₹5 = ₹6,000. Per-unit schemes are the easiest for a dealer to follow and do not move when the price moves, which is why cement, paints and pipes circulars favour them.
2. Percentage scheme
Formula: payout = eligible value x percentage. A scheme paying 1.5 percent of billed value gives ₹4,20,000 x 1.5 percent = ₹6,300. State in the circular whether value is before or after GST and before or after other discounts. On this dealer, taking value with 18 percent GST instead would make the base ₹4,95,600 and the payout ₹7,434, a difference of ₹1,134 from one undefined word.
3. Slab scheme: retroactive vs incremental
Take this slab sheet for monthly lifting:
| Slab | Monthly lifting | Rate per bag |
|---|---|---|
| 0 | Up to 500 bags | Nil |
| 1 | 501 to 1,000 bags | ₹4 |
| 2 | 1,001 to 1,500 bags | ₹6 |
| 3 | Above 1,500 bags | ₹8 |
The dealer's 1,200 bags fall in slab 2. What he earns depends on the payout basis, and there are three in common use.
- Retroactive, on all units. The slab rate applies to every bag: 1,200 x ₹6 = ₹7,200.
- Above threshold. The slab rate applies only to bags above the entry threshold of 500: (1,200 - 500) x ₹6 = 700 x ₹6 = ₹4,200.
- Incremental. Each slab's rate applies to the bags inside that slab: nothing on the first 500, 500 bags x ₹4 = ₹2,000, and 200 bags x ₹6 = ₹1,200. Total ₹3,200.
The same slab sheet produces ₹7,200, ₹4,200 or ₹3,200. A circular that prints the slabs and not the basis is the single most common cause of scheme disputes. Retroactive payout also creates a cliff. At exactly 1,000 bags the dealer earns 1,000 x ₹4 = ₹4,000. At 1,001 bags he earns 1,001 x ₹6 = ₹6,006. One bag is worth ₹2,006, which is why liftings bunch just above thresholds in the last week of the month. The incentive slab design guide discusses how to set thresholds, and the QPS scheme page covers the retailer version of the same ladder.
4. Growth over last year
Formula: threshold = last year's base x (1 + required growth); payout = (this year's units - threshold) x rate, if positive. The scheme pays ₹10 a bag on lifting above 110 percent of the same month last year. Base is 1,000 bags, so the threshold is 1,000 x 1.10 = 1,100 bags. The dealer lifted 1,200, so growth bags are 1,200 - 1,100 = 100 and the payout is 100 x ₹10 = ₹1,000.
A variant pays on all units once the growth condition is met: ₹3 a bag on all lifting if growth is at least 10 percent. The dealer grew (1,200 - 1,000) / 1,000 = 20 percent, so he qualifies and earns 1,200 x ₹3 = ₹3,600. Two things must be written down for any growth scheme. First, what happens to a dealer with no base, such as a dealer appointed this year: excluded, given a deemed base, or moved to a separate new-dealer scheme. Second, how a dealer whose code changed is matched to last year's lifting. Without clubbing of old and new codes, his base reads as zero and all his volume counts as growth.
5. Combo bonus with a minimum threshold
Formula: if every minimum is met, bonus = qualifying units x bonus rate; otherwise nil. The circular adds ₹8 a bag on the premium grade, provided the dealer lifts at least 300 premium bags and at least 1,000 bags in total in the month. Our dealer lifted 350 premium and 1,200 in total. Both minimums are met, so the bonus is 350 x ₹8 = ₹2,800.
Had he lifted 280 premium bags, the bonus would be nil, not 280 x ₹8. Had he lifted 350 premium but only 950 in total, it would also be nil. A combo bonus is a gate: check every condition before multiplying. Dealers who miss by a small margin will ask why, so the dealer-facing statement should show which condition failed and by how much.
6. Returns and credit notes
Suppose 250 of the 1,200 bags are returned in the first week of July and a credit note is raised. Net June lifting is 950 bags. On the retroactive slab the dealer is now in slab 1: 950 x ₹4 = ₹3,800 instead of ₹7,200. The return of 250 bags reduces the payout by ₹3,400, far more than 250 bags at ₹6, because it drops him a slab. The total-lifting minimum for the combo bonus also fails. The rule to state in the circular: lifting is counted net of returns, and returns are netted against the period in which the original invoice fell.
7. Applying the cap
Now stack the components the way a real circular might. The dealer is covered by the retroactive slab scheme, the incremental growth scheme and the premium combo bonus, with no returns.
| Component | Working | Amount |
|---|---|---|
| Slab scheme, retroactive | 1,200 bags x ₹6 | ₹7,200 |
| Growth over last year | (1,200 - 1,100) bags x ₹10 | ₹1,000 |
| Premium combo bonus | 350 bags x ₹8, both minimums met | ₹2,800 |
| Total before cap | ₹7,200 + ₹1,000 + ₹2,800 | ₹11,000 |
| Cap: 2.5 percent of eligible value | ₹4,20,000 x 2.5 percent | ₹10,500 |
| Payout | Lower of ₹11,000 and ₹10,500 | ₹10,500 |
The cap removes ₹500. The dealer's effective earning is ₹10,500 / 1,200 = ₹8.75 a bag, or 2.5 percent of value. Caps can be per dealer, per scheme or on the total of all schemes, and as a rupee amount, a per-unit amount or a percentage of value. Whichever is used, it needs to be in the circular and on the dealer's statement, because a cap discovered at settlement reads as a deduction.
The order of operations
- Fix the base: period by invoice date, eligible products, value before GST, quantity net of returns, clubbed codes combined.
- Check that the dealer is eligible for each scheme.
- Calculate each scheme on its own formula and basis.
- Check minimum thresholds before paying any combo bonus.
- Add the components, apply the cap, pay the lower figure.
- Deduct anything already settled for the period and keep the working.
Doing this for every dealer, every month
The arithmetic above takes ten minutes for one dealer. For several hundred dealers, with thirty circulars live and different eligibility on each, it is where spreadsheets fail, as the comparison of scheme calculation software options describes. A dealer scheme engine holds each of these scheme types as configuration and recalculates as invoices arrive. On Unotag the dealer sees the same working shown here: progress on each scheme, schemes he is earning on and schemes not yet qualified, the next target and the invoices counted. The examples printed in a client's circulars are reproduced by the engine as automated tests before go-live.
To check slab arithmetic on your own numbers, use the QPS scheme calculator or the rebate calculator. For the tax side of settlement, see the GST guide for trade schemes, and confirm the treatment with your advisor.
Key takeaways
- Fix the base before the formula: period, eligible products, value before GST, quantity net of returns, clubbed codes.
- One slab sheet gives three answers. On 1,200 bags: ₹7,200 retroactive, ₹4,200 above threshold, ₹3,200 incremental. Print the basis in the circular.
- Growth schemes need a rule for dealers with no base and for changed dealer codes; combo bonuses are gates, so check every minimum first.
- Apply the cap last, and show it on the dealer's statement along with the invoices counted.
Frequently asked questions
How do you calculate a dealer scheme payout?
Fix the eligible base first: invoices in the period, net of returns, value before GST. Then apply the scheme formula: units times rate, value times percentage, or the slab rate on the stated basis. Add growth and combo components that qualify, then apply the cap.
What is the dealer incentive calculation formula?
For a per-unit scheme, incentive equals eligible units times rate per unit. For a percentage scheme, eligible value times percentage. For a growth scheme, units above last year's base times the growth factor, multiplied by the rate. Slab schemes apply the rate of the slab reached.
How is slab incentive calculation done?
Find the slab the dealer's total lifting falls in. On a retroactive basis, multiply all units by that slab's rate. On an incremental basis, multiply the units inside each slab by that slab's rate and add them up. The circular must say which basis applies.
What is the difference between retroactive and incremental slab calculation?
Retroactive pays the reached slab's rate on every unit from the first. Incremental pays each slab's rate only on the units within it. In the worked example, 1,200 bags earn ₹7,200 retroactive and ₹3,200 incremental on the same slab sheet.
How do you calculate a growth incentive over last year?
Multiply last year's same-period lifting by one plus the required growth to get the threshold. Subtract the threshold from this year's lifting and multiply the excess by the rate. A base of 1,000 bags at 10 percent growth gives a threshold of 1,100 bags.
Are returns deducted when calculating a dealer scheme?
They should be. Lifting is counted net of returns and credit notes, netted against the period of the original invoice. A return can drop the dealer to a lower slab, so the payout falls by more than the returned quantity times the rate.
Is dealer scheme incentive calculated on value with GST or without?
Normally on value before GST, but the circular must say so. The same percentage on a GST-inclusive value gives a visibly higher payout, and an undefined base is a common cause of disputes between the dealer and the commercial team.
How is a cap applied in dealer scheme calculation?
Calculate every component first, add them, and compare the total with the cap in the circular. Pay the lower figure. The cap may be a rupee amount, a per-unit amount or a percentage of value, per scheme or across all schemes.