Spa: A Comprehensive Introduction | Chapter 8.8 | Compensation and Benefits

Compensation and Benefits

Spa employees are commonly compensated in one of two ways: a traditional employer-employee arrangement or the less traditional, but still common, contracting spa–independent contractor relationship. According to the ISPA 2007 Spa Industry Study, only 18 percent of U.S.-spa employees (42,500) are contract workers, while the rest are traditional employees, either full-time (117,100 or 51 percent) or part-time (73,100 or 31 percent).

Compensation

In the employer-employee arrangement, the employee works for a spa full-time, part-time, or on-call. The employer provides a set compensation, outlines working hours and conditions, provides uniforms, provides benefits, and arranges for the payment of payroll taxes. Employees are expected to follow the spa’s policies and procedures. Employees typically receive benefits in addition to regular compensation. These benefits can include medical insurance, dental insurance, 401K plan, paid time off (vacation, sick days, personal days), use of spa facilities, and discounts on services and products. Spa employees can receive all, few, or none of these depending on the structure of the spa.

Independent contractors are not employees. They are responsible for paying all applicable taxes and generally have more freedom in their working hours and schedules than employees. Independent contractors are often expected to provide their own supplies and uniforms. It is understood that independent contractors will follow spa policies and protocols and support the mission and philosophy of the spa when acting as its representative.

The decision to engage in an employer-contractor versus an employer-employee relationship is not arbitrary. The U.S. Internal Revenue Service (and the IRS equivalent in many other countries) has very strict rules about what constitutes a contractor-employer relationship that most spas would have great difficulty meeting. The consequences of working under a contractor-employer agreement when one can’t meet the IRS test for an independent contractor can be literally devastating to the spa and threaten its existence.

Several possible wage structures may be used by spas to compensate employees and independent contractors. These include:

Commissions on Services. The person is paid a specific amount agreed upon at the time of hire, when a service is provided. Commission can be a percentage of the value of the service provided or a fixed dollar value commission for the service.

Hourly. An employee (not an independent contractor) is “on the clock” and paid an hourly rate whether providing a service or not. Hourly employees may be expected to perform other duties to assist with the spa’s daily operations. In some cases, an employee’s hourly rate may vary according to the function they perform. For example, many spas have a training rate that is lower than the employee’s rate when performing his or her core function.

Hourly Plus Commission. An employee receives an hourly wage for time worked plus an additional commission when providing a service. The commission and/or hourly rate may vary with the service performed.

Contracted Wage. Cruise ships and seasonal resorts may require spa professionals to sign a contract that outlines the obligated time commitment of employment. The specified time may also include a base minimum salary.

Commission on Retail Sales. A person may earn additional income from selling products or supplies to guests. These products typically complement the service that the guest received. Commission structures vary depending on the department or the work environment. They can be set as a percentage of the item’s retail price, or set on a scaled percentage based on total retail sold by the individual or a group of individuals.

Bonus. A bonus may be offered to staff, above and beyond other wages. This may be in the form of extra days off, a percentage of retail sales, or a percentage of services performed by those with excellent performance.

Tips/Gratuities/Service Charges. Most spas have tip policies to assist guests during their spa visit and provide consistency in spa practices. Tips may be included in the service, in which case a percentage of the service charge is contributed to the staff member’s wage per service. Alternately, tips may be at the guest’s discretion and either added to their service voucher or paid directly in cash to the staff member at the conclusion of the service.2

Managerial level employees of a spa are typically paid a salary, rather than an hourly wage.

Benefits

While benefits packages are most commonly offered to full-time employees, some spas may offer benefits to part-time and on-call employees to enhance the attractiveness of working for a particular spa.

In addition to typical benefits such as medical insurance, 401K plans, and paid vacation and sick time, spas may offer any of the following to employees:

  • Payment for continuing education, either in full or through an annual dollar allowance. Continuing education may be defined by the spa and generally covers professional skill development and learning new skills or techniques.
  • Use of the spa’s facilities, such as trading services with other professionals, using the fitness or pool areas, or attending workshops.
  • Free or discounted services, meals, products, and supplies.
  • Seasonal resort or cruise ship benefits may include room and board and travel expenses to/from the resort or ship.3
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