Proper Salon Spa Compensation Plan

Compensation Must-Do
Christopher Brazy

You KNOW you should stop overpaying your staff. You know you NEED to if you ever hope of making a penny for yourself. Now when times are tough is the best time to make the dreaded switch-over with your staff. Do it and thrive. Fail to do so and go under with the other spas that pay out more than they bring in.

Get Ready
First off, if you happen to be on a high percentage, you will lose your staff, BUT THAT’S OK. Really, it is. It really, really is. It’s a shame, but it necessary. THAT PAY IS PUTTING YOU OUT OF BUSINESS. And changing pay will worry staff and they will leave (even if it’s just a different way of doing basically the same thing). Please, realize your worth, realize your situation, and realize you HAVE to make a change.

Bringing new staff in, or having them ready in case everyone “jumps ship” wouldn’t be a bad idea. Again, you need to watch for staff talking, old ones that are against the idea and plan on leaving will spoil the new ones in about 1 minute.

Common Sense
You would think that someone should be concerned with how much their paycheck IS. In our industry they’re concerned with how much of the pie they’re getting (what %). I try to educate people and be very straightforward with them. With new hires, people tell me they made 60% …I ask “how much was your paycheck?” They say $280 per 40 hour week (tips included). I show them that they were working for $7/hour ($280 divided by 40). So this setup (hourly, fee per service, whatever) is more. They ALWAYS get stuck on the percentage (they’ll even figure out the percentage if you’re on a fee/service setup). YOU need to keep educating them and showing them what they are making HOURLY (on average), tips and retail commission included.

Attitude is KEY
You must have confidence and believe in your compensation plan. If you don’t buy it they won’t. They will SMELL your fear, your uncertainty, your desperation. That’s why we spoke on the philosophy of it for a bit in “stop being the lowest paid person in your spa,” to get your mindset in the proper place. But if you’re an owner in todays economy that shouldn’t be too hard to accomplish.

Don’t get too technical
We initially moved from a % to a fee/service and explained all the benefits. Instead of figuring out the money that came in, deducting coupons, deducting package discounts, etc. we figured staff was really making about $20/hour, so we setup a fee/service plan based on that and now they don’t have to worry about who has a discount or who is in a package, it’s always the same pay. Some staff stayed, some quit (we went into too much detail and it looked like we were defending our position), then the ones that stayed quit. However anyone new that came on, and wasn’t aware of the previous setup they had no problem with it at all.

When new hires ask about pay, just say this is our compensation plan and we’re very happy with it. Don’t be too defensive or explain too much, it’ll make you look desperate and make them think something is fishy. Like accepting tips (you should say “thank you” and that’s it), just say “here it is and we feel it’s very fair.” That’s it.

Baby Steps
IF you feel you can’t accomplish this move but need to do something, try this for a baby step in the right direction.
The least you can do if you’re on a percentage deal is to deduct any discounts/promotions before figuring out their cut.
Or you can keep your staffs pay but instead of figuring it out as a percentage, set it up as a fixed fee. So instead of 50% for an $80 massage, just pay $40/massage. Now you can do a few things. First, raise your prices. Since your staff isn’t tied to the price via a % this is pure additional income for you.
You can also associate fees to be deducted from their pay. Let’s say a linen fee (it costs us $1/sheet to clean them) or a product/backbar fee. You could subtract the merchant transaction fee from the service and/or tips.
Years ago when we first moved from the % setup to a fee/service we figured all those expenses and discount coupons in and lowered it from $30 (half) to $20 and told them “whenever there’s a discount you don’t have to worry about it, it’s already figured in.”

Probably the best answer is an hourly setup (with a tight watch on how you schedule!). So instead of arguing about coupons and charges, say this:
“We’re going to help you out during these tough times by giving you a steady income you can rely on, an hourly setup of $10/hour (or whatever) PLUS tips AND retail commission” (up their retail pay for goals met) …so they should still be making $20/hour. Put that way, who would turn down $20/hour?

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