When spa owners are faced with the prospect of giving a raise, they need a compelling compensation system that encourages staff performance and career growth, while ensuring the business stays profitable. Does this sound like a pipe dream, dear Spa Owner? 

Let's face it, a fair compensation model that rewards both the spa business and the service provider's career path is way past due in the spa industry. From experience with my own spa business as well as working with spa owners all over North America, the traditional straight commission payment models have caused spa owners financial stress and difficulty leading their teams. And while it seems like a simple system to implement, the math just doesn't add up for the spa and it creates individualism and poor team culture amongst staff.

This is where I introduce spa owners to an hourly wage performance-based pay system because it not only benefits the spa owners but also their employees!

A performance-based hourly wage pay system provides an objective measurement of compensation and gives all parties a boost; clear earning potential and career pathway for service providers, increased staff retention for leadership, and a manageable fixed expense cost for owners. It's a system that "bakes in" success and growth for everyone.

Read on to find out why switching to hourly wage based on performance unlocks your team's motivation and business growth.

Why is it important for spa owners to consider including performance when setting up their hourly pay system?

With the cost of living continuing to rise and employees needing a living wage, those exceptional spa candidates have been hard to attract and existing staff are looking for ways to increase their earning potential. They're contemplating whether moving to a different spa or going Solo is beneficial for them. I know spa owners are feeling like they're being held over a financial barrel at this time of entrepreneurship but it's not going away anytime soon. 

But the solution can't be all about paying higher wages. Spa businesses need a way to compensate their team in a way that doesn't continue to hemorrhage company money or enable poor-performing staff. Besides, the toxic cycle of recruiting, hiring, training, firing/quitting is time consuming, expensive and crazy-making. 

Ready to explore this alternative pay structure that supports esthetician's career goals, support business goals, and increase employee retention? Let's dig in! 

What does performance-based hourly spa compensation look like?

This is a big topic that I spend hours teaching and coaching other spa owners, but I'll outline it here for you so you can see the overall beauty of this type of spa pay structure:

1. Do your research for different hourly models for paying employees, such as hourly plus small commission, performance-based pay, or team-based pay. What's going to work best to resolve all your issues? Each is slightly different in terms of team and leadership buy-in. Whichever way you go, it needs multi-levels of performance expectations.

2. Create a performance-based pay scale that clearly outlines the pay range and what's expected at each level. Note, you'll need spa industry benchmarks to get your expected KPIs right for each level. If they're too far away, they lose motivation. If it's too easy, they move up in pay too fast without supporting the business's financial goals.

3. Track the team's KPIs every single month, provide feedback from the previous month, and use them to create the next month's sales goals. This can feel like a bit of a time-drain at first but it's critical you have monthly 1:1's to keep everyone focused on the goals - strong career growth & spa business sales.

4. Commit to ongoing training and coaching to help employees increase their KPIs. Business metrics are probably new to your staff so take the time to teach them how their KPIs affect their earning potential. This is non-negotiable in your leadership. If you stop coaching/training you'll start seeing numbers fall off and team motivation wane.

The win-win spa pay structure 

The outcome of shifting to a performance-based hourly compensation model? No dreading pay reviews or dealing with unmotivated staff. Instead, you can feel confident knowing you can reward those who work hard because your compensation system protects the spa growth and supports team members' personal leadership.

If you're struggling with motivating and rewarding your staff, you're not alone. Many spa business owners find it difficult to develop a system that works for everyone involved. Want to chat in depth about what it would look like to change your current compensation model to a performance-based one? Apply for the "Spa Systems in a Day" VIP day!

Want more? Here's a few other podcast episodes I think you'll enjoy:

My Spa Leadership Non-Negotiables
Employee VS Independent Contractor: Which Spa Model is Best?
Should Your Spa Team Also Be Your Social Media Managers?