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Can Your Salon/Spa Go NO TIPPING?
January 9, 2022 | By Neil Ducoff | 3 Comments
Is it time to become a no-tipping salon/spa?
It’s totally understandable if your knee-jerk response is, “NO WAY would I ever eliminate tipping.”
But if you’re still reading, then you’re probably intrigued by the idea of going no tipping. So maybe, just maybe, you’re open enough to learn what it takes to become a no-tipping salon/spa.
FACT: Without question, any salon, spa, barbershop, etc., can go no-tipping — and not blow up your business in the process.
Is tipping “professional”? That’s a decision you must make to define your company’s image and brand. Personally, I feel the industry can do massively better without tips. Why? Because not only has tip reporting and credit card processing become increasingly difficult to manage — it’s become an entitlement. Like a pebble in your shoe, tipping has become an irritation.
So, if you’re tired of dealing with tip reporting, paying taxes on tip income, paying credit card processing fees on tips, and distributing cash tips (that are still taxable income to employees) … it may be time to go no tipping.
The three absolute critical components of a successful no-tipping policy are leadership, communication, and culture.
Even with the best intentions, without engaged leadership, full transparency, and a well-defined culture, a no-tipping transition can be disruptive. And if executed poorly, it can and will cause turnover.
To maintain fairness, salons/spas that succeed in going no-tipping must revamp their pricing and compensation. Why? Because asking service providers to give up substantial tip income for professionalism is a BIG ASK.
Here is our six-point “must do” list to become a no-tipping salon/spa:
- Completely rethink service pricing. As mentioned earlier, expecting service providers to give up substantial tip income for professionalism is a BIG ASK. Tips cannot be eliminated without a significant price increase to offset the loss of tip income.
- The basis for all service pricing begins with your calculating what it costs to deliver one hour of service in your company, then adding your desired profit margin.
- To factor in tip compensation, you must increase your cost per service hour enough to offset the elimination of tip income.
- A BIG jump in service prices: Be prepared to implement new service prices that are 20% – 40%+ higher.
- If you pay commission, expect a more significant price increase. A 20% price increase won’t be enough. Again, it’s the cost per service hour + tip offset + desired profit margin.
- If you’re on Team-Based Pay, you already have more control over payroll costs versus service prices, so a smaller price increase can work.
- Don’t freak out: The biggest fear for both owners and service providers is losing clients. Remember, when clients tip, they’re already paying or exceeding your new “no tipping” pricing.
- Your goal to go no tipping is to simplify checkout for clients.
- In the process, you’re eliminating tip reporting, credit card fees on tips, and distributing cash tips.
- And if you have an ATM, you can get rid of it.
- Communicating your “no-tipping policy” to clients: Scripting is crucial. Clients must be informed that the service price now reflects what they were paying when tipping separately.
- Communication and scripting are the only effective ways to help clients get comfortable with no tipping. And they get used to it quickly.
- Live your “no tipping” policy: The IRS sees tipping as a fact of life at salons and spas. So much so, the IRS may question the absence of reported tip income on both company and employee tax returns.
- Your no-tipping policy should be boldly stated on your website, print literature, and simple signage at the front desk and entryway.
- Stay the course: Yes, some employees will miss that wad of cash in their pocket at the end of the day. Others may have to be reminded that their pay rate was adjusted to offset the elimination of tips.
- And yes, there will be clients that still want to tip. This is where integrity, scripting, and client communication are key.
Here’s my challenge to you: The industry’s understanding of “charging what you’re worth” and how to properly price services to cover expenses and create profit needs to be addressed.
No-tipping salons/spas stand out from the crowd. They make a statement about professionalism with a BIG exclamation mark.
Not until the industry as a whole pulls the curtain back on the fundamental challenges of tipping in salons/spas can it be ready for an honest discussion on whether tipping is professional or not.
It will not be an easy discussion — which is why it hasn’t happened.