Replies to This Discussion

Permalink Reply by Jennifer on February 13, 2012 at 6:50pm

Hi there!  I'm actually mulling this over right now as well...It seems it is difficult to follow IRS guidelines for independent contractors in our business...if you are the owner of the business, you provide the clients, choose the price of the services, take payment and then pay the "independent contractor" (IC), that seems to be more of an employer/employee situation.  If the person you are hiring is going to be basically running there own business out of your business, that seems to be more of a rental situation to me--and that's how the IRS definition of IC sounds!  I'd like to have IC's working for me just to save the hassle of taxes and all of that good stuff that I haven't researched yet.  I'm working on all of that. It seems as an owner you have a lot more control over quality of service, staff, consistency, etc. if you hire employees.  The thing is a lot of owners and Esti's don't really know the difference, it's so gray!

It also seems like there should be some official contract signed that states what each party is providing for the other and perhaps a probationary period in the beginning (I think 3 months is a good amount of time for that!) where either person can end the "relationship" for any reason, with no worries of covering unemployment, etc.

As for pay, I've been watching some webinars, etc. and it seems like a lot of spa consultants suggest a tiered system...in that way, you could hire a new employee with little to no experience @ Tier 1 and give them goals to reach for them to move up to Tier 2, etc.  That way, if the price of the service changes (either for a special or if there is an overall price increase) the tech gets paid the same regardless.  That way they are not upset if the owner is running a special (they are getting the agreed to payment) and they don't get an automatic raise if the owner increases the general prices.  Sometimes a tech hasn't earned that extra percentage of every dollar, right? 

But how much to pay?  I'm uncertain.  It seems to vary so much in my area.  I wish I knew what other competitors do, but I don't really know many other spa owners in the area well and they might not want to share that info.  But I do think that I will use the tier method and not hire anyone @ the top tier until they have earned it, no matter how good their resume looks.  That way they have somewhere to go, up!  And then if they cap out @ the top tier, my plan would be to have bonuses for certain goals, possibly other benefits.  Right now I am a one woman show who has added one Esti for my overflow of perhaps 4 to 12 hours per week.  We are word of mouth only right now, working on adding a front desk, more staff and then kicking up marketing.  It's scary!  and exciting!

I, like you "Elements to wellness" (your name? :) think this is a great topic and such a tough and tricky one!  We have to think how pay motivates good employees (I think a good environment is actually the most important!) and how to grow with great staff.  I was at the end of a "bait and switch" situation in pay, promised one thing when I was hired and then told I was "paid way too much from the beginning"!  My boss was probably right (she didn't do her homework and the industry was changing), but I felt like I was disrespected and not motivated b/c I was never going to get paid more than I started with 6 years earlier?  I don't want any of my staff to ever feel that way! 

Okay, I hope we get some replies on here, your topic is great in my opinion!  :)  Look forward to hearing some thoughts from other great Esti's/owners out there!  Please share!

Jennifer :)

Permalink Reply by Christine Cochrum on February 20, 2012 at 2:41pm

My wellness spa has been open for 3 years and we've always had our service staff as independant contractors. However recenly our attorney advised us that since we are growing so fast that we are no longer flying under the radar of the IRS. We treat our IC's as employees - we book their appointments, set their schedules and provide all supplies so essentially they are all employees. We set them up originally as IC's to save some money, however we are now going to switch them over to employees and we are trying to figure out what we can pay them and stay competetive in the industry. I've tried to get ideas of what other places pay their employees, but NO ONE is willing to talk about it.

As IC's we paid them $30-$32 per hour with a $3 bonus for requests. We decided not to do commission so if we decide to run a promotion the therapists don't take the hit. I know that Massage Envy pays about $15 per hour and we are thinking of lowering the rate to $27 but keep the $3 (non-taxed) bonus. Plus we will now be offering paid vacations as well as health insurance (most of which the business will pay).

 

So I'd love to hear from any business owners and tell me if I'm paying too much or too little. We have an amazing team and I'd hate for them to leave over a few dollars. But the bussiness needs to make money, we ended 2011 with a loss and I know I need to light a fire under their butts about selling retial as well, but that is a whole different post.

Permalink Reply by Morgan Miller on February 20, 2012 at 8:14pm

Hey Christine,

I was in the same situation as you a few years ago (which is why I wrote this post, as it effects so many of us "newer" business owners)

I started out as an independent contractor for 5 years and when I moved to my own location 5 years ago, that's how I paid my therapists.

My team and the positive atmosphere has grown exponentially since making everyone an employee. Those who couldn't handle the change, left.

What is your cost per treatment? It should be close to 40%. And what do they get if they do just a wax service (since it isn't an hour service?)

I'm not quite sure wehre people get the 50% commission, as I most commonly hear, but THERE IS NO WAY A BUSINESS CAN SURVIVE IF THEY ARE PAYING OUT 50% OF EVERY SERVICE. That leaves 50% to pay the owner, insurances, taxes, payroll, products, equipment, rent, utilties, extras and everything else that goes in to running a business.

I see a lot of businesses advertise that they pay health insurance, but honestly I don't know any business that pays for all of the health insurance (not even Banks or large corporations pay your health insurance)

We transitioned from doing independent contractors to now employees. We are based on a 5 week sales tier. Their commission is based off of their total sales, (sales meaning what the client pays). The commission tiered scale starts once they maintain $251 or more in sales per week.

I believe we are going to hire another esthy and pay them hourly ($9 hour). Realistically, if you do the math (with a facial lasting one hour and then prep and finish time being typically 30 mins before and after..they are receiving $18, plus an average $10 tip = $28 per facial) Once they reach $700 in total service sales anything after that they will get 45% commission.

I think too many spas are quick to offer higher commission without having the therapist earn it and trust me, this causes big problems - therapists act entitled. and as you know, whether they are IC's or Employees-they won't take care of your supplies, products or equipment. Therapists break things and don't fess up to it, etc.

We try to keep the energy positive and use good motivation.

We also don't give commission on product sales anymore. I used to but if you think about it, after paying for shipping, the product cost and then then commission, you're really only making about 20% which is not even worth it to sell retail. I now use retail as an incentive - sell $1000 worth of product and receive 1 paid vacation day of your choice. top monthly seller receives a free massage certificate...there are so many different incentives you can do, and it makes the bookkeeping much easier than having to figure out a $2 commission or whatever it comes out to.

A side note - a good friend of mine is a psychologist and she was apalled when I told her how a therapist came to me and said she wouldn't work for less than $40/hour. Her exact words were, "and how long did she go to school? I have my masters degree in psychology and I don't even make that" So there is a lot to be said about our industry and people thinking they should be making more than what they are worth.

I know my post may offend some, but I ahve been in the industry for over 10 years now and get very frusturated with the lack of respect, lack of motivation, lack of dedication towards a business. And the business is expected to build a book for the tehrapist...my question, I always ask at interviews - What are YOU prepared to do to build your book?