Money Matters: Employee Wages And Incentives

Like other retail sales and service businesses, indoor tanning salons rely on their employees to contribute to the salon’s financial success because staff members are the frontline to customers. Individuals with good personalities and solid work ethics truly can increase salon sales by making customers feel more comfortable, secure and happy which means they will be more likely to spend money in your salon and become a loyal client. The question is: How do you find those happy, hardworking employees who will impact your business, and— more importantly—how do you keep them?

Let’s be honest. Money matters. To an employee, salaries and hourly wages play a big role in job satisfation. Employees want—and deserve—to be compensated for their hard work.

First and foremost, competitive wages are extremely important in the salon setting. Nearby salons and similar retail businesses are bound to be competing for the same pool of workers, and logic dictates the potential employee will choose the position that offers the best compensation. To ensure that wages remain competitive, owners need to factor in what these other salons are paying their employees, as well as what the minimum wage requirements are in their state.

Often, the starting pay for new employees is closer to minimum wage with the opportunity for pay increases to occur according to the salon’s overall compensation plan. These base-pay increases can include general increases, cost-of-living/labor increases, promotion increases, step increases and merit increases.

In a salon, promotion and merit increases are the most popular forms of increase because they are based on performance. With a promotion, that employee will move into a different position within the salon—such as from salesperson to manager—and as such, is deserving of a higher pay grade. The size of the increase is generally influenced by the difference between the old and new pay ranges, and the pay of other workers in similar positions. A merit increase, on the other hand, does not require an employee to be given a new job title; rather, the employee is deserving of a higher wage because of the time and effort put into the current job. Because the other three types of increase are not consistent with the idea of pay for performance, they are diminishing in popularity.

The actual hourly pay is only one component of competitive wages. Because it is not the nature of the salon business to pay a high dollar amount per hour, many salon owners choose to offer incentives to their employees to enhance their overall earnings.

By definition, an incentive is a reward earned for completing specific tasks or meeting certain objectives, and in the world of sales, commission is the most common incentive. Basically, an employee gets a monetary reward for selling a product or service, which allows employees to supplement their income based on sales performance—in essence, it gives them the opportunity to determine their own earnings. The more they sell, the more money they make.

In addition to increasing an employee’s bottom-line wages, incentives play a huge role in motivation.

The prospect of earning a reward for a job well done is a great way to ensure that employees maintain a high level of productivity while at the salon, which translates to more sales. Similarly, many salon owners find that commissions and bonuses are a very effective way to determine which staff members are top salespeople—and therefore, the top earners for the salon—versus those who are not really contributing to the profit of the business.

In the tanning salon setting, where many of the sales involve relatively small-ticket items— such as lotions and tanning packages— commission and incentive systems can be quite flexible. Most often, commission is a paid percentage of the products and services sold.

This can be per sale, or can be for a particular amount sold; ultimately, it’s up to the salon owner to design a system that works best for the salon and employees.

Salon owners should keep in mind that incentives do not necessarily have to be cash or percentage rewards. There are many types of non-monetary rewards that make a position more attractive to an employee. Perks like free tanning and lotions are commonly associated with a job in an indoor tanning salon. They can be very attractive to salon employees who would probably be paying for these services and products even if they were not an employee.

Similarly, various rewards can be designed to boost morale and show appreciation for staff in a fun manner. From rewards of recognition and acknowledgement—such as plaques, employee of the month awards and newsletter mentions—to gifts like movie tickets and gift certificates, these types of remuneration efforts have a more personal impact and make employees feel appreciated. This increases their level of job satisfaction and encourages them to continue their efforts.

Ultimately, salon success is dependent on keeping good employees content with their job, because happy employees will bring in the big bucks. At the same time, it’s important to understand that productive, qualified workers will come and go. It’s just the nature of the retail sales business. But by giving employees what they need—good salaries and wages—and what they want—competitive commissions and incentives—salon owners increase the chances their employees will be happy and will stay to work as hard as ever for the company.

Be sure to read “Talking Shop With Salon Owners & Operators: Employee Earnings” on the next page to see what our panel of salon owners and operators from across the country are doing in regard to employee salaries and incentives.

Salon Owners And The Federal Minimum Wage Hike: How Will It Affect You?

The first minimum wage increase in 10 years took effect July 24, which the Economic Policy Institute (EPI) says will directly affect 5.6 million employees while 7.4 million low-wage workers will experience a spillover effect. That’s 10 percent of the nation’s work force—so it’s especially important that salon owners and operators who employ hourly workers understand the wage hike and consider how it will impact their business.

The Fair Minimum Wage Act of 2007 is a series of three increases that ultimately will push base pay to $7.25 an hour over a two-year period. This past summer’s increase was the first in that series and raised pay from $5.15 to $5.85 an hour. The federal minimum wage, which was first enacted in 1938, hasn’t seen an increase since 1997, despite other rising costs across the nation—in fact, minimum wage was at a 52-year low when adjusted for inflation prior to July’s increase. However, 33 states currently have minimum wage laws establishing higher wage floors than the federal $5.15 level. Several of these states are in the midst of phased-in minimum wage increases of their own, and some index their wages to inflation. The federal phased-in hike will in some cases surpass state minimum wages and in some cases not.

By September 2009, the number of states with minimum wages above the federal level will be down to 12, with several states tied with the federal rate of $7.25. So what does this mean for business owners? On the negative side, the wage hike may force employers who pay many of these low-wage workers to raise the prices of the products, cut back on employees’ hours or let some workers go. According to the National Restaurant Association, the last minimum-wage increase cost the restaurant industry more than 146,000 jobs, and restaurant owners put off plans to hire an additional 106,000 employees.

On the other hand, others say the effect on the economy will be negligible. A PNC Economic Outlook survey done in April reported that three out of four small- and middle-market business owners said raising the minimum wage would have little or no impact on their businesses.

Ultimately, the federal minimum wage hike can affect all business owners who hire hourly employees—but to what extent is unknown. A salon owner’s best bet, then, is to maintain awareness of the minimum wage increases and evaluate the effect on their individual business.