Six must-knows about Team-Based Pay compensation

May 17, 2012 | By Neil Ducoff | No Comments

Pay is always a hot-button issue. With the news about JCPenney Salons eliminating commission, the rumors are flying fast and furious. Don’t be motivated by fear when it comes to your pay system. Separate fact from fiction, starting now:

  1. The right pay system is about more than just a dollar figure. It’s about fostering a positive culture where your staff works as a team and is dedicated to helping the business grow. They enjoy coming to work every day — and you do, too.
  2. You can’t achieve consistent bottom-line profits when your payroll percentage is a variable and ever-growing expense. You won’t grow when you are held hostage to commissions. If a salon/spa/medspa’s service payroll exceeds 40 percent of gross revenues (service and retail), it has a payroll problem.
  3. Team-Based Pay is a pay system; it’s not a religion. Team-Based Pay is an hourly and/or salary program, which ties a team bonus to the achievement of critical numbers, such as revenue, gross margin, client retention and productivity. Just doing hourly/salary is NOT Team-Based Pay. Individual growth is tied to overall performance – not just the employee’s ability to generate revenue. A Team-Based Pay system is designed to reward the right behaviors and performance – those that support the company’s goals and culture.
  4. An employee’s compensation should be based on more than just specific tasks. Successful compensation programs take into consideration a wide variety of skills and behaviors: attitude, technical skill advancement, attendance, teamwork, retail recommendations, integrity, cooperation, and customer service.
  5. No pay cuts or hour reductions. Successful pay conversions are executed with integrity and fairness.
  6. A successful compensation system must meet five non-negotiable criteria:
    • It must fit the financial reality of the business.
    • It must be controllable, not a large “fixed percentage” of revenue.
    • It must encourage and reward the actions that are consistent with the vision and culture of the business.
    • It must give clear guidelines and pathways for individual growth.
    • It must inspire and reward team and the attainment of the company’s overall performance and revenue goals.

Does your pay system make the grade? If not contact Bruce Hourigan at 800.417.4848 x203 and learn more about how team-based pay can help improve your bottom line.

Categories: Compensation

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