Commonly Found Types of Pay in the Spa Industry
This 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 facility.
Commission:
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!