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Profit From a Performance-based Pay Structure

By: Denise Dubois
Posted: November 29, 2012, from the December 2012 issue of Skin Inc. magazine.
performance-based spa pay structure

Editor’s note: This article is based on the presentation that will be given by author Denise Dubois during the Advanced Education Conference Program at Face & Body Midwest® on March 9, 2013. For more information, log on to www.FaceandBody.com/midwest.

Compensation is a combination of what you pay your employees plus the benefits you provide. The right benefits program not only allows you to maintain profitability, but it helps distinguish your business and its services from the competition.

The majority of skin care facilities operate using a straight commission compensation plan, paying between 35–65% on services. This involves skin care professionals being paid a percentage of their gross sales for the work they performed during a certain period of time. Decisions for raises are often based on emotions when feeling pressured, especially if the request comes from a busy service provider. In many situations, service providers are caught feeling stagnant with no motivation to change the way they do business. This can lead to poor morale and high turnover. It is not uncommon for service providers to earn low wages and, ultimately, leave the industry all together. Many owners are losing the battle with unnecessary profit losses and a lack of accountability for their team in meeting performance goals.

Fair and equitable

It is important to have a pay structure that is fair and equitable for you as a business owner, as well as for your team. Offering a performance-based pay structured system benefits both parties. It’s easy for service providers to get caught in a rut and put the blame on everyone else for their books not being busy. “The receptionist didn’t book me,” “The owner doesn’t advertise,” “Our location is bad” ... the excuses can go on and on. However, when you provide a structured plan for increased income—as well as what service providers have to do to get there—it shares the responsibility of growing professionally and definitely gets them engaged in their own growth. Now there is a career path that puts them in control. For the owner, having a structured system and setting goals takes the pressure off because compensation decisions are tied into productivity that you can both monitor and measure. It’s based on real numbers and progress—not emotions.

How to do it

Organize goals based on each department within your facility: esthetics, nails, body therapy and front desk. All service providers can have the same goals, while the support staff has a separate set of goals. They have the same pre-booking targets, but they also have gift card sales goals, upgrade/add-on goals—to fill empty time slots, and retail goals. Each department can be given four monthly targets for advancement in pay, as well as a retail goal to maximize their earning potential.