by There are several special groups when it comes to ideas of compensation. These are groups or individuals who have a different pay scale or structure than the rest of employees. The majority of individuals in a company are on a simple hourly or salaried wage (typically referred to as exempt and non-exempt meaning exempt from overtime pay for salaried individuals or not exempt from overtime pay for hourly employees), which may include a modest bonus.
Special groups, however, are people not confined to that structure. Sales staff are one of the biggest groups typically, they are paid a smaller base salary with a generous commission structure.
Additionally, managers and higher-level employees, as they are leaders of people and help to direct and guide the business, typically receive a significantly higher salary and bonus (sometimes up to 50% of their base pay), which is different in comparison with their reports.
Finally, directors and C-level employees are special groups as well. These people are typically paid extremely well and receive major additional compensation related to the company’s performance such as equity in the company that appreciates as the company does better, a portion of overall profit, or a generous bonus tied directly to performance of the company.
Team Based pay
Team-based pay is an hourly or annual salary system. Some team-based pay structures may also include raises and bonuses that are tied to the success of certain team goals, emphasizing your employees’ contribution to the bottom line of the salon or spa rather than focusing on their individual numbers.
Pros of team-based pay
Payroll. As a business owner, you need to control your payroll expense percentage…but you can’t control a commission-based payroll. As the cost of doing business rises, straight and sliding scale commission are not sustainable long term. Team-based pay lets you control your payroll expenses.
Productivity. Team pay allows your salon or spa to reward each individual’s overall performance and contribution to the company by rewarding aspects like good attitude, high client retention, retail recommendations and sales, and consistency. As an owner, you probably obsess over open slots in your appointment book…. team-based pay helps your bottom line by making your whole team obsess like you do.
Motivation. Not everyone is motivated by money and not everyone is good at being a salesman. Creative and skilled service providers may be passionate about their work and the products they use but when it comes to “selling” those products, commission incentives give many stylists, therapists and technicians the choice to simply opt out if they do not feel comfortable pushing the sale. Team-based pay can make colleagues feel additional social pressure to meet team goals so they won’t be seen as a weak link by their peers.
Cons of team-based pay
Competition. If your employees are not motivated by money or social pressure, they may be motivated by competition. Although team-based pay can help alleviate some tension that may arise between employees in a competitive setting, it can also eliminate the motivating effect of competition (unless work teams compete against other work teams).
Free Riders. “Free rider” refers to an employee who simply collects a paycheck thanks to the hard work of other employees. A potential disadvantage of team-based pay is the potential for some low performing team members to free-ride on the work of other members and reduce the motivation of the group.
Retention. Some salon and spa owners claim that changing from commission to team-based pay had some of their best talent ready to quit. Others found they were paying out more than 50% of the average service price in salary payroll costs just as they had with their commission structure, but commissions were more evenly distributed among those who worked very hard and those who were just getting by. Changing to team-based pay may result in your top performing employees leaving because they can no longer set the amount of their paycheck based on their performance.
