Commonly Found Types of Pay in the Spa / Salon Industry



Commonly Found Types of Pay in the Spa IndustryThis simple analysis of compensation plans comes from many sources including, spa owners, managers, service providers and other spa employees in every area of the industry. We have conferred with “consultants,” interviewed and surveyed spa professionals willing to share their ideas. The results are as follows:Room Rental:The term ‘room rental’ comes directly from the salon industry where the stylist was able to rent a “chair” in a busy salon. However in many states now it is prohibited in the spa industry. The therapist in this arrangement is an independent contractor booking their own appointments, and collecting the money for their services. They pay “rent” to the owner/landlord each month and may share some common services (laundry, restroom and possibly a receptionist) with others service providers renting in the space. The therapist works as many hours as he/she wants and keeps all they make less the rent they pay each month.From the owners perspective there are many advantages such as being able to predict the monthly income as it is not tied to the number of services. The risk is minimal and the operation requires little oversight. The disadvantages can be most evident financially as there is very little opportunity to increase revenue/business other than increasing the rent. There are also multiple businesses operating within one establishment and that can make it difficult to create a brand or consistent level of service.The benefit to the therapist in this arrangement is the freedom to manage their own schedule all while building their own client list. Being your own boss may also present some challenges for the therapist such as fluctuating income and the need to do their own marketing and advertising. There is also the possibility of direct competition within the mission:Commission based pay has become the most common form of compensation in the industry. The rate of pay can be determined by skill level, length of service or the market. Owners and managers have found this method easy to manage and that it facilitates an eagerness to work by the providers. The trouble arises when the spa raises service prices thereby increasing the payroll as well. Making a profit becomes difficult. There are many instances where the highest commissioned employees are booked more often than the lower commissioned increasing the cost per treatment. This competition for bookings can also create a very competitive environment that does not encourage team work and often results in high turnover. The effect of the rate of turnover on the spa can have a devastating outcome.With the exception of a high rate of pay, we find little advantage for this pay structure for the provider. Because the pay rate initially looks good to the provider they rarely will look at the long list of disadvantages. Those who choose this type of career are often caring, sensitive and want to be generous with their time and knowledge. This environment typically facilitates competition for clients, no benefits and little opportunity for growth. ?Salary / Hourly with Profit Sharing:This option is becoming more popular as owners want a cohesive team and long term employees and are seeing the benefit of the staff having a personal investment in the operations. Profit Sharing can sometimes be called team bonuses, but whatever you call them, they are just the right mix of teamwork and motivation. They allow the whole team (usually front desk, housekeeping, everyone but ownership is included) to split a portion of the net profit, the larger the profits the larger the bonus.As we are focusing on pay systems for service providers, pay systems for retail sales are not being discussed here.With consideration for the intention the owner had when he or she decided to open a spa, this option offers many advantages. There is often a true feeling of team work and the client feels included resulting in increased loyalty. Employee retention is high facilitating a consistency of service and control of quality. The risk is most evident when business is slow as we are paying while the providers “wait” for clients.Our providers also enjoy the “team spirit” and for many a feeling of security. They have a level income throughout the year and the competition is reduced as they are contributing to the success of all. We are able to recognize the provider with pay raises and increased education opportunities. Where the challenge may arise for the provider is accepting a “lower pay rate” per hour as they may not be able to see the benefits as compensation. Reality Check: A quote from a spa owner:“Switching from commission-based pay to a salary or hourly rate should not affect your weekly pay. It should just level it out over the full year and also make you eligible for performance reviews and raises. If we add to that gratuity and retail commission, nothing much has changed. “Profit sharing or team bonus when added to the employee’s compensation is like gasoline on the fire. Now every time the Spa is busier, you get a higher bonus, everyone does! It gets busier by working as a team! Referring clients to other providers makes the whole operation busier. By referring clients to the newer (less expensive) provider, the spa makes more and the bonus gets bigger. Everyone shares in the bonus; the Receptionist now has the same incentive to make sure the client is treated well. We all start looking for ways to do things more efficiently, and not just in our own job, we are all looking throughout the whole operation and making suggestions. The team experience makes the Spa a very nice environment to work in and a very nice environment for our clients.”Every spa, spa owner, manager and provider is not the same. Matching the intention and goals with the pay structure will insure that our businesses survive and that both employers and employees win! ................
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