What’s the Right System for Your Spa?
By Alexander Menrisky
Published in Pulse magazine’s June 2014 issue
A compensation system can make or break a business. Given how payroll, in many cases, represents the biggest expense in any spa or business, it is crucial then that spas get their compensation structure right from the very start.
“The compensation structure is an essential part of the profitability and performance of any spa business,” says Vivienne O’Keeffe, president of Spa Profits Consulting Inc. based in Vancouver, British Columbia in Canada. She stresses three things every spa director must know to create the most effective structure they can: the culture they intend to create, the philosophy of the business and a keen understanding of contribution margins.
There are many compensation structures spa directors can employ, each with its own advantages and disadvantages. According to O’Keeffe, structure should depend largely on the nature of work and the budget, although there are other details to be considered.
In terms of the pros and cons, she notes that offering hourly and commission-based compensation can help ease staff members’ fear of financial instability, but there’s a risk for commission-only work to undermine a spa’s team concept, especially when employees are independent contractors. On the bright side, commission allows for better motivation in sales, according to Heather Pleasants, marketing and PR director at Toppers Spa Salons Inc., based in Philadelphia, Pennsylvania.
Toppers Spa Salons makes use of a wide variety of compensation structures for its 33 percent full-time and 67 percent part-time staff. The full-time spa director positions are salaried, while front desk staff members receive an hourly wage.
Therapists, aestheticians and nail techs work on a fee-for-service pay model, while hair stylists receive a commission percentage. Pleasants notes that Toppers Spa Salons has altered its compensation methods several times, trying a sliding scale commission percentage, fixed commission percentage (both without the ability to increase and with a review process allowing for increase), hourly and fee for service. These changes have primarily been made to help manage costs and motivate staff members.
Spa Mio at The M Resort-Spa-Casino in Henderson, Nevada, offers three different compensation plans based on its positions. The spa’s staff consists of 55 percent full-time, 29 percent part-time and 16 percent on-call employees. Compensation-wise, 69 percent of Spa Mio’s employees are commission-based and 31 percent work at an hourly rate. The spa offers therapists and aestheticians a flat rate per treatment based on the retail point of the service, while the salon staff works on a 45 percent commission.
Creating an Effective Compensation Plan
O’Keeffe notes that it is difficult to follow a step-by-step process to create an effective compensation structure, as many factors, such as spa philosophy and values, return on investment and competitive landscape, must be taken into account. “It is very challenging to change an existing spa’s compensation structure as there are many emotions and issues to be dealt with,” she says. “As the spa landscape changes, as we have seen in the last 10 to 15 years, compensation structure will also change.”
Kate Wind, assistant spa and salon manager at Spa Mio, especially stresses the importance of creating a competitive compensation system. “One of the biggest factors in creating an effective compensation plan is to ensure it is competitive with others in the market,” she says. “Before creating a compensation plan, I shop around to see what others are offering. This provides a good basis to start and allows you to learn from others’ mistakes.” O’Keeffe also advises spas to pay attention to both local and national competitive markets.
That being said, it is important to always remember to takeinto account your own spa’s details before jumping into popular trends. O’Keeffe stresses that one of the biggest mistakes spas often make is failing to consider overhead and operating costs when designing a plan around “the hearsay pressure of the going rate.”
“You want to have a sensible compensation plan that is profitable for the spa and salon while keeping the team members happy with their checks,” Wind says. “It is important to have some good projections of business to test the compensation model.”
To create this balanced model, Wind seeks feedback from other spa and salon directors in the area, and pulls from past experience, noting what has worked before for the spa within its own budget. Toppers Spa Salons has also made use of consultants, and has engaged team member “task forces” to report on and reflect successful models.
“We believe the key to any successful employment program compensation structure is to first and foremost listen to our team members and look at our business,” Pleasants says. “Both are essential for a successful program and you cannot have one without the other. Both the team members and the business need to be fed, nourished and nurtured in order for our business to grow.”
In addition to a compensation plan, many spas choose to offer additional rewards for their high-performing staff, both to recognize excellence and encourage growth and sales.
Toppers Spa Salons offers discounts on all spa and salon products and services, and also sponsors staff members’ trips to and participation at conferences and expos. Pleasants is particularly excited about the new marketing/PR program, which provides a custom-made marketing package through ocal press and events for new stylists and therapists to help build their business at their Toppers location.
“All marketing collateral, as well as advertising, can really launch them in our spa/salon,” Pleasants says. “We also promote cross-marketing among all the departments in the spa to ensure maximum exposure to all of our clientele.”
Sometimes, however, old-fashioned monetary incentives work best. Wind has seen retail sale success by adding an additional 10 percent commission to products sold, while Spa Mio has seen additional success with free product or gift card program of up to US$5,000 a year for full-time employees taking relevant coursework in hospitality, business, beauty and other related fields.
“We are always looking for new ways to incentivize our team members. I suggest working with your retail vendors to set up product incentive programs because it benefits both parties,” Wind advises.