Salon pay structures: which drive the best results?
How do you get your salon employees to consistently do enough of the right things at the same time, for long enough, to make a positive impact on your business?
Solve this challenge and you’re well on your way to a profitable and successful hair or beauty salon.
Management in its simplest form consists of two main elements: systems and leadership.
Good systems maintain a positive direction. And good leadership helps deliver the systems.
So how do you get your entire hair or beauty team to consistently produce great results?
4 steps to great results every time
Step 1: Be clear about what a ‘good result’ looks like.
Step 2: Now get your employees’ attention to help keep them focused.
Step 3: Next find out what it is that they want (rather than just give them what you think they want).
Step 4: Finally, give them the opportunity to earn it (whatever it is they want) by explaining everything they has to do to get the ‘thing’ that they want.
Your employee’s personal goals are key to salon success
Once your team member is focused on their personal goals they will see the relevance of working towards individual and/or shared goals and targets. The penny will drop in their heads.
The essential mix:
- You have your employees ‘attention’.
- You have explained what they are expected to contribute to the business.
- And you have associated that with the things that they are enthusiastic about (what they want).
The right salon pay structure and system
The most obvious way to give recognition and reward is through your salon pay system.
A good pay system should:
- reward based on individual contribution to the business
- give you the tools to give guidance and recognition
- be consistent in its message
- give everyone the chance to prosper
- most importantly it should protect the business financially
Associating key performance factors with salary (for example, client retention, attendance) means you have benchmarks with which to measure each employee’s performance which means:
- Clarity (as the employee understands what they must do)
- consistency (because you have set clear bench marks)
- which ultimately leads to trust
- and trust is vital to the success of your beauty, aesthetic or hairdressing business.
Service sales commission or bonuses?
A key element of a good pay system is recognition and reward usually in the form of sales commission and/or bonuses.
So which is best for your hair or beauty business?
Which will motivate, inspire and reward your salon team best?
Let’s compare paying service sales commission with bonuses to your employees.
Paying commission to your salon team: the pros and cons
First, let’s clarify what we mean by salon commission:
A commission is when you pay your salon employees a percentage of the services they carry out and/or the retail products they sell. In our industry commission is almost always in addition to their basic salary.
Service sales commission has been used for many years by hair and beauty businesses. It was originally designed to motivate people to ‘sell more’ and, of course, to guarantee the salon business owner a percentage on turnover.
In some cases it works well, but in today’s market it is often ineffective as a motivator, and also difficult to manage as part of your salon business structure.
Commission can be great for some teams but in some cases, it can reward the wrong behaviours – for example, by focusing on just sales rather than the client experience or quality of work. Because of this commission is not likely to promote best business practices.
Commissions can also be perceived by stylists and beauty therapists as unfair if you cap the commission percent at a rate the employee thinks is too low. If your employees leave because your commission percentage isn’t generous enough (at least in their eyes) commission payments could impact badly on your business growth and success.
Paying bonuses to your salon team: the pros and cons
What do we mean by salon bonuses?
Bonuses are payments you make to your salon employees that are not regular and are based on achieving goals you’ve set rather than a percentage of sales. Goals could, for example, be revenue targets met or retention goals hit.
Paying bonuses on top of a standard wage allows you to choose the behaviours you wish to reward.
- Achieve your client retention target and you will receive a (specific) bonus.
- Have a 100% attendance record and receive a (specific) bonus.
Bonuses keep a tight grip on salon costs
Bonuses allow you to control your bottom line better as you can pay multiple bonuses for different achievements, and so manage the costs.
In today’s market it is essential to give yourself every option to manage your business expenses whilst remaining in the driving seat when it comes to negotiating salaries.
Hitting the right balance with employee bonuses
But bonuses can become a negative if employees become complacent and start to expect bonuses every year for meeting goals that are easy to attain.
Rather than seeing them as an optional perk to be worked for, employees may start to consider them as a normal part of their remuneration, and feel entitled to a bonus. The answer is to calculate and structure each employee bonus carefully.
“If you hit the target every time, it’s too near or too big.”
– Tom Hirshfield
Commissions and bonuses in the hair and beauty industry
A good salon salary structure should be fair, flexible and help improve the quality of your client experience as well as your bottom line.
Today salaries are not just measured against the amount of money an employee takes. Instead, successful stylists and therapists should be focused and paid on their overall performance, including:
- the number of clients retained
- the numbers of retail units sold
- their average service value per client
- the overall client experience (reflected in client retention figures)
To help every beauty therapist, hairstylist, salon manager or receptionist become successful we must give them the best opportunity.
Loop HR’s automated software let’s you quickly and easily track, monitor and pay commissions and bonuses easily – it even does the calculations for you. Learn more here.