Pay Structures that Pay Off

Pay Structures that Pay Off

Pay structures that pay off is a crucial part of spa management. A poll of thirty salons showed that most owners or managers didn’t understand how their pay system affected their salon’s overall business model.  The standard response was, “We pay 50 percent commission like everyone else.”  Most of those interviewed felt that this meant that 50 percent of their expenses went to payroll costs.  Even more of those interviewed commented that they had never really given much thought to any other method of paying their staff.

What does a pay structure do to a salon’s business model?  Not only does a facility’s bottom line directly correspond to the method by which it chooses to pay employees, it also has an impact on how the business is managed from day to day.  For instance, a straight commission method of pay creates incentive for a stylist to build a solo clientele.  Given that a business can be adversely affected if several stylists or technicians leave taking their clients with them, this is the wrong message to send when offering employees incentives.  Straight commission also allows new employees to burn through clients without any concern for quality of client care, retention or the type of service promoted and performed. Commission pay further reduces the likelihood of package sales and can de-emphasize the importance of cross-selling to technicians within the salon offering other services.  A sound pay structure will emphasize and reward those behaviors that are best for the overall health of the business. 

Considerations of Services Performed 

Customer Satisfaction:  The bottom line in a customer service industry is the customer. Consequently the client’s approval of not only the quality of the service provided but also the quality of the overall service experience is of paramount importance to not only measure but also reward. Methods of client satisfaction measurement include tip tracking, customer surveys and brief exit questions at the checkout desk. 

Client Retention:  How soon after an initial appointment a client re-books, if their pre-booked appointment is kept and if the client returns to the facility and to that technician is good retention.  A client may be lost because of uncontrollable circumstances like moving, death, or another form of common attrition.  However, retention of clients is a fundamental concern and should be paramount when justifying marketing, advertising and other costs involved in attracting a new client to a salon or spa. 

Teamwork and Attitude:  The functioning of a well-run salon has much more to do with the big picture and the effort put forth by a friendly team than the productivity of one technician among many.  Rewarding professionalism, appearance, punctuality, and teamwork is crucial to the overall success of the business.

Goods Sold:  If a business could choose between a service that generates $5 per minute over a service that generates $1 per minute, which service would be the better choice?  A straight commission method of pay turns a blind eye to the type of good sold and simply rewards the technician based on gross dollar amount.  Similarly, a service that sells more homecare, promotes a package of services sale or results in future salon sales would be preferred over a service that would be only performed once and would lend itself to low retail returns.  

Referrals: Attracting new clients through traditional methods like advertising and general marketing efforts can be costly and slow to take effect. Rewarding employees on successfully generating client referrals, therefore, makes sense because it benefits the immediate bottom line of the business and most likely contributes to future sales.

Methods of Pay

Creating a new system of pay doesn’t need to be overly tedious or confusing. Go about the project as if creating a wonderfully delicious casserole.  The main ingredient needs to be some fundamental base pay.  A low hourly rate of pay is a good place to start. An hourly base reinforces the fact that an employee is technically “working” even when not with a client. Cleaning up, answering the phones, greeting clients and helping fellow team members are all general duties that are always expected when a technician is at work or “on the clock.”

After the base ingredient has been determined add the spices and complimentary items that make for a fuller flavor.  Make a list of behaviors that your spa would like to reinforce to employees as important and necessary to the success of the spa.  A standard method of pay might go something like this for a nail technician:

  • Base pay of $10 for hours worked or hours logged “on the clock.”
  • Commission pay of 20 percent for services performed.
  • Additional commission pay of 10 percent for add-on services that are a client after-thought and not a part of the original appointment.  For example, a hot oil treatment added on to a basic manicure.
  • Retail sales commission that varies from a set amount that is expected as a base sales amount rewarded at 5 percent all the way up to a 20 percent commission rate for private label items or those products for which the spa enjoys a higher profit margin.
  • A quarterly review process that examines subjective matters such as leadership skills and attitude alongside objective performance such as average ticket and retention rates to give the employee an overall assessment of where they stand as measured against regional and national averages and as compared to their teammates.
  • A group review of accomplished goals for the entire salon that each department or the staff as a whole is responsible for measuring and improving.  Allowing the team to set future goals and the means by which they are measured is a wise empowerment tool that allows for increased ownership of responsibility and enhanced overall performance.

This overall review must take place on a quarterly basis and be clearly communicated to each staff member. Mini reviews like weekly and monthly coaching sessions are also very helpful in determining where each employee stands and helps to work towards a higher standard of long-term comprehensive performance.

No matter the specifics of the pay system chosen, including variables that measure specific skill sets, behaviors and tracked goals will help keep employees on track.  Additionally the more employees feel responsible for the success and failures experienced in the business as a whole, the more thought and effort they will invest in the business, their team members and their individual performance on an everyday basis.

 

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