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The Future of Spa Compensation
Is it time to take a hard, honest look at your compensation plan? Wynne Business consultant Lisa Starr thinks so.
Consulting work has been busy this spring, now that the economy is improving spas are looking at their operations and trying to fine-tune for optimal financial results. That process inevitably leads to an examination of staff compensation, and how it is working, or not, for the business. It always surprises me how many spas are still paying staff under legacy plans that have been in existence for 30 or so years, and have little relevance to today’s business climate. This issue is fresh on my mind as I prepare for my three-hour workshop on compensation strategies at IECSC Las Vegas later this month; investing time and effort in a win-win solution has an enormous impact on the profitability of your spa operation.
Depending on where you are in the country, you may be facing this same daily challenge: how to keep staff justly rewarded for their efforts without compromising the ability of your business to earn a profit. That’s right; profit is not a dirty word, it’s the reason the business exists in the first place. I sometimes review the income statements of spas that show total labor expenses of between 60% and 70% of the revenue generated. Since the typical day spa has an overhead expense of approximately 35% to 40%, it doesn’t take a mathematician to realize that this situation is problematic; at best the business can break even on its core product, spa treatments. Sometimes spa owners try to rework compensation around the needs of their present staff, only to be left with a nonsensical plan when those staff members eventually leave employment.
The spa compensation issue is further clouded by the continued blending of spas with wellness-oriented therapies and businesses. Wellness providers such as acupuncturists, spiritual counselors and nutritionists may also work under a “fee for service” structure, but most are not employed at the same place for 40 hours per week. When we pull back from the U.S. and look at global precedents, most other countries pay beauty therapists a monthly salary plus small bumps of service and/or retail commission. Comments and details on this global perspective can be found in a recent blog post on the Global Spa & Wellness Summit website. The good news is that in the U.S. we are free to make up something new; hourly wages, team-based pay, points systems, sliding scales or whatever combination of these elements accomplishes your goal.
Beauty therapists should be given the opportunity to work in an environment that values learning and provides the tools and foundation required to reach their performance and earning potential, and the business should be able to have the cash flow needed to fund paid time off, contributions to health benefits, education stipends and other desirable components that go along with a “real job.” Solving the problem starts at the top, with courage to make a change that may be difficult but will be better for everyone in the long run. There is always a way forward, unless you are unwilling to change anything. Then, of course, we know what the result will be: the same as it has been every other year. —Lisa Starr