Service Sales Targets, Performance Pay & Bonuses

Deciding on the best pay system for your salon spa or barbershop business can be daunting. There are many pay models; most revolve around commission.

Ian Egerton, creator of Loop hr has spent over 30 years studying incentive options across many industries and evolving salon pay systems to better serve todays businesses and employees.

The best pay systems serve the needs of the business and the employee equally.

Keep it simple is our motto, but with so many elements to consider, such as:

• Legal compliance
• Paying a fair wage
• Employee feeling valued and rewarded
• Setting and communicating targets
• Tracking progress
• Complex calculations relying on many factors
• Tight deadlines to turn payroll around
• Protecting the bottom line

Realistically, the best we can hope for is make it look simple on the surface! Which is why after years of development, you can now manage the entire process of target setting, pay, incentives and payroll as well as performance management, all within one system, Loop HR.

Our pay systems offer multiple pay and incentive options, ranging from basic pay to multi-level service commissions and multiple bonus options to drive specific behaviours and/or results.

Performance Pay

For an employee you would offer base pay and maybe commission. Commission pay structures typically use lower basic pay rates, meaning the target is lower and easier to achieve and the quicker commission kicks in.

The Loop HR Performance Pay and Bonus structure is different, we recomend a fair base rate plus three bonuses relative to the income and target thresholds.

Let me explain:

Performance Bonuses

Performance bonuses are designed to drive sales using a combination of fixed value bonuses and a percentage of income (low-level commission) to incentivise team members to achieve specific financial goals and to continue to drive on to the next or higher level.

Personal Bonus

After setting base pay use one, two or all three bonuses as drivers. Personal Bonus: A fixed sum, approximately 1% of the annual salary, paid on achieving the initial target. The same (initial) target is used as the threshold for the following two targets.

Performance Bonus

Once the initial target is achieved this second bonus kicks in, here Loop HR will calculate a percentage of all service sales above target. We recomend awarding 15% of net sales income but this, like all the figures are fully editable.
Super Bonus

A third bonus kicks in on achieving a specific target, this target is set at 20% above the initial target. All pre-populated figures are based on carefully crafted modelling, but are fully editable.

The bonus paid for achieving the Super Bonus target can be any value you are comfortable with, but we suggest the same as the Personal Bonus.

Visualise how your pay structure will work using the View sales versus pay examples within Loop HR.

Setting up your Performance Pay system

[1] From the navigation select Business > Employee [2] Remuneration (at this stage you would be in Base pay, ensure you have added a base pay rate to allow Loop HR to help you forecast financial targets).

[3] Click Service Targets & Commissions [4] then Performance Bonuses.

Within Loop HR screen, scroll down to see the first target.

As you have already entered a base rate of pay, the system will forecast financial targets. Targets are broken down into daily weekly and monthly (or whatever your pay cycle is, e.g. 4 weekly).

[5] The Target can be changed, just click in the box and add your own figures if you wish. [6] Benchmark, set the number of clients you expect the employee to see in a day [7] forecast an Average Sales Value, which if you have set up Loop hr as VAT/TAX registered, will show as the Gross value depicting the value a client will pay.

Bonuses

With the targets set you can focus on employee incentives! Bonuses are the drivers used to encourage continued effort.

There are three bonus types within the Loop HR Performance Bonus system. The pre-populated percentage settings are thoroughly tested and work well to protect the business. However, you can change the figures to suit your needs (for example use a lower Personal Bonus and a higher Performance Bonus):

[8] Personal Bonus – a set value relevant to the salary level, paid on achieving an initial target. The typically calculation would be around 1% of the annual salary (20,000 annual salary = 200 bonus)

[9] Performance Bonus – a percentage of all sales above the initial target (the initial target is point 5 above). The percentage defaults to 15% but this can be higher or lower, however if it is higher you need to manage costs you may need to lower the Personal and Super Bonuses).

[10] The Super Bonus target percentage of income (above initial target in point 5) shows 20%. It works like this: if the initial target is £5000 (to achieve Personal Bonus) the team member must achieve +20% (= £6000) before being eligible for Super Bonus payment.

[11] Super Bonus – a set value, typically the same as Personal Bonus, paid on achieving 20% above target (unless changed as in point 10 above).

Sales Performance Graphic

Example Performance Pay Bonuses

A graphic like this is generated for every revenue producing team member using their specific employment terms and targets; therefore, you can share this graphic with the team member to demonstrate how the employee can earn higher levels of income (when sharing with your team member, you may wish to toggle off the display costs).

Team Bonus

There are further incentive options available with Team Bonuses, Manager and Front of House bonuses, see this article for more details.