Adding Employees

Springboard Your Practice to the Next Level

By Cassie Sampson
[Feature]

As a massage therapist, you might decide to hire employees for many reasons. Perhaps you need reception or clerical help. Maybe you are so busy you would like to be able to refer clients to other qualified practitioners. You might want to diversify your practice’s offerings by adding an acupuncturist, esthetician, or other service provider. Adding employees can seem daunting at first, but if you do your homework and seek professional guidance, it can be exactly what you need to springboard your practice to the next level.

Employees Versus Independent Contractors

The first decision you need to make when expanding your practice is whether to hire people as employees or independent contractors. It’s important to choose correctly, both for ethical reasons and because there are steep financial penalties for business owners who improperly classify employees as independent contractors.

In beauty and wellness businesses—such as chiropractic clinics, salons, and gyms—it is common for people to work as independent contractors. One benefit to the business owner is that this arrangement can save money in employment taxes. On the other hand, hiring someone as an employee gives you a greater degree of control over his or her schedule, compensation, and quality of work.  

The existence of a contract stating someone is an independent contractor is not sufficient to prove to the Internal Revenue Service (IRS) that this is, in fact, the case. The IRS looks at three main factors when determining whether someone is an employee or independent contractor. The first is behavior. Does the individual set her own hours, select her own menu of services, furnish equipment and products that she chooses, and have the ability to contract her work out to other individuals as needed? If the answer to these questions is “no,” the individual may be considered an employee.

The IRS also will look at how the individual is compensated. Do clients pay her directly? Does she set her own rates? Does she have a risk of financial loss? Does she carry unreimbursed expenses? Has she made a significant investment (i.e., furnishing an office, marketing expenses, etc.)? If the answer is “no,” this person may again be considered an employee.

The last thing the IRS will examine is your relationship with the individual. If the work agreement is intended to be indefinite and without a specified time frame, this could indicate that she should be classified as an employee. 

If you aren’t sure whether the people you bring into your business will be classified as employees or independent contractors, you can complete form SS-8, “Determination of Worker Status” (available at www.irs.gov), at no cost, or consult a human resources professional or an attorney. It is always better to err on the side of caution than to risk fines for misclassified workers. Many businesses have had to close because of these significant, unexpected expenses.

Before You Hire

Marilyn Manning, a certified human resources professional, recommends you have the following items in place before you consider hiring. First, develop an employee handbook. It is wise to have a human resources professional or an attorney look over your handbook or help you write one. The handbook will guide your employment relationship, address issues before they arise, and protect you should you need to discipline or terminate an employee. Working with a professional is your best bet to make sure it is thorough and compliant with employment laws. 

In addition to handbooks, Manning also suggests you have job descriptions with expectations for each position. If you expect that employees will devote a portion of their time to answering phones, cleaning, marketing, and performing maintenance, that must be spelled out in their job descriptions. Clinics differ widely in what employees are required to do, and outlining expectations up front can help you avoid the “that’s not my job” argument later.

Before hiring, you need to research worker’s compensation insurance plans to find one that suits your needs, and understand the costs of taxes such as Social Security, Medicare, and unemployment. Also look into the cost of benefits you may wish to offer, such as health insurance or education reimbursement. Manning says this information will help you determine the actual cost of your employee and develop a compensation plan you can afford.

Compensation 

One of the most important decisions you’ll make prior to hiring is how you will pay employees. Thoroughly research your options in advance, because if you choose a compensation structure that is too generous or does not offer performance incentives for your employees, it can be difficult to change later.

The three common types of compensation structures are commission, fee for service, and hourly rate. Some businesses combine more than one type of compensation. Gratuities, bonuses, and benefits—such as health insurance or continuing-education reimbursement—also factor into the overall compensation of your employees.

In addition to a base compensation, you should also have a plan for pay increases and bonuses as a way to encourage employees, rewarding those who strive for excellence and represent your business well. These can coincide with quarterly, semi-annual, or annual evaluations; I prefer smaller but more frequent incentives to offer encouragement. For employees who see clients, bonuses can be based on rebookings, client-satisfaction surveys, the number of clients seen, and overall job performance. Administrative employees can add value to your business by reminding clients of appointments, suggesting rebookings and upgrades to treatments, and helping you manage supply costs, and can earn bonuses on their performance in these areas, as well as overall performance.

Commission

One benefit of using a commission model is that it is simple. If you decide to primarily hire massage therapists who perform treatments that do not include expensive products, this could be a good option. 

You will need to consider whether you are paying commission on the regular price of service or the final price. For example, if a treatment is $100, but the customer has a $25-off coupon, will your employee receive commission on $100 or $75? You also need to decide if the products therapists use are included, or if you will deduct a product fee from their commission. This is typically only done if products are costly.

A mistake that employers sometimes make in implementing a commission model is placing too much importance on the percentage another practice in the area pays. If you think, “The spas in our area all pay 50 percent, so I have to pay 50 percent,” you could be creating a problem. If another practice pays 50 percent of the final cost of service after discounts, or frequently discounts services, subtracts product fees, and does not offer the benefits you plan to offer, its 50 percent could actually look like your 35 percent in an employee’s paycheck.

Fee for Service

A fee-for-service approach works well when you are offering services that have a higher overhead cost. For example, if you compare a $100 body scrub and wrap that uses $20 worth of products and laundry to a $100 Swedish massage that uses only $2 in products and laundry, you can see how a straight percentage could seriously eat into your profits on higher-overhead services. By the time you pay your employee’s commission, taxes, benefits, and supply fees for that service, you may find nothing left over for your business overhead. 

In these cases, the cost of a service is heavily related to the costs of the products, not necessarily the effort put forth by the therapist or provider. The fee-for-service model can protect you if you find your supply costs jump unexpectedly and you need to raise prices to adjust. An employee does not deserve a pay bump for a service simply because you need to raise prices due to overhead changes. 

Hourly Rate

Hourly pay is typically the best way to offer compensation to support staff, such as receptionists, who do not provide bodywork or related services. (While some businesses do pay service providers by the hour, it is often combined with a lower commission on treatments. This can be risky for business owners, especially during slow times.)

Hiring the Right Person 

Once you have all of your systems and plans in place, it is time to find the perfect employee to join your team. Popular places to look for employees are www.craigslist.org and other online job-listing services (ABMP offers a Classifieds page at www.abmp.com/members/career_development_classified_ads.php). Check with schools and business association websites. You might also get leads from Facebook if there is a page or group for massage therapists and other service providers in your state. You can consult with a human resources professional or an attorney for assistance in composing your job posting to make sure that it complies with employment laws.

Once you have posted your job listing and started receiving resumes, the real fun begins. If you have never been in a position to interview others, Cherie Sohnen-Moe’s book Business Mastery (Sohnen-Moe Associates, 2008) includes a great list of interview questions to get you started. When planning your interviews, be aware that there are certain types of questions you are not allowed to ask, such as those about family status, gender, nationality, race, religion, and others. If you aren’t sure if your questions are OK, ask a professional.

When I interview potential service providers, I typically schedule two interviews. During the first interview, if the question-and-answer portion goes well, I have candidates give me a general treatment so I can assess their overall style. The top candidates are invited to a second interview, which gives us a chance to get to know each other better. During the second interview, I have another staff member or trusted person receive a more specialized treatment to get another point of view and experience more advanced skills. 

When interviewing support staff, give them several different scenarios that could occur during their workday and see how they would respond. For example, you can ask how they would prioritize when trying to check out and reschedule one client, greet and check in a new client, and handle a ringing phone.

During the interview, it is helpful to have a job description on hand so candidates know exactly what duties are expected. Also, offer ample time for candidates to ask questions and tour your practice—the interview is also a chance for them to get to know you and decide if you would be the type of employer they are looking for. The best scenarios occur when each party can be honest and clear about their expectations up front. It’s also wise to take the time to call the references the candidate has provided. One of the best questions to ask is, “Would you hire this person again?”

Once you have selected the right candidate, a human resources professional or employment attorney can help you make sure the candidate has completed all the paperwork required by law, and an accountant or payroll company can make sure you are deducting and paying the proper employment taxes for the situation. 

Bringing employees into your business may seem like a lot of work at the beginning, but if you research, prepare, and consult with experts before hiring, the process will be smoother. While managing employees does change the dynamic of your practice, it is a great way to build and add value to it. 

 

Cassie Sampson has been a licensed massage therapist since 2005. She opened East Village Spa in Des Moines, Iowa, in 2008, and her team has grown from three to 14 employees in five years. The spa has been voted Best Spa in Des Moines three times because of her incredible team. Cassie is an instructor in the Business and Marketing program at Body Wisdom School in Urbandale, Iowa. Contact her at evdayspa@gmail.com.

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