What You Need To Know When Creating Compensation Plans

What you need to know when creating compensation plans

Determining what and how to pay your staff can be one of your biggest challenges for clinic owners! There are no rule books to follow, and it seems like everyone in the medical aesthetic industry does something different!

Developing effective compensation plans are important for several reasons such as attracting, motivating, and retaining talent, aligning employee goals with organizational objectives, rewarding performance, and ensuring fairness and equity within the organization. It is also one of the clinic’s largest expenses and when not done properly, can create massive profit loss for the clinic.

Therefore, before you get started, there are two things you first want to consider when thinking about each individual staff member:

1. What is their level of expertise & experience?

How long have they been in the business? Can they provide a variety of services? Do they already have an established, loyal clientele? What is their risk for the services they provide?
These are important questions that you need to have answers to before you can start creating a compensation plan for that staff member.

2. How profitable are they to you?

How much revenue do they produce each hour? Are they full time or part time? Are they consistency & dependability? Are they a good teammate or a clinic resource to others for training and education?

These questions allow you to assess your staff members before discussing the topic of compensation. Its critical to have justification or reasoning behind a compensation plan as it should reflect someone’s ability, capacity and expertise.

Now that you have the answers you need, your almost ready to start building the plans, however, keep these four rules in mind.

  1. Simplicity – It doesn’t have to be so hard! Make sure its easy to understand. If you get confused so will your staff!
  2. Wage + Commission – Is a combination the best option? It most likely is the best option for most staff as it allows staff to be invested in the business as well as creates motivation and incentive. Keep in mind that their overall total compensation should be less than 25% of the total revenue.
  3. Raises -Determine a timeline as to when your staff can expect to discuss potential raises. Think about implementing experience raises vs. yearly raises.
  4. Tier system structures can be very impactful for long term staff that are goal orientated and like to be challenged. Creating personal monthly growth targets that allow for an increase in their commission allow you to pay for performance while still maintaining a profitable margin. As the revenue increases, the pay most likely can as well.

Lastly, don’t Forget:

  1. Payroll will be one of your biggest expenses (behind your COGs ) so make sure you know the numbers!
  2. All staff are treated fairly but everyone is NOT equal. This means that not every staff will be paid the same but instead paid based on their experience, expertise, and value to the clinic.
  3. Stay the course! Try not to listen to what other clinics are doing or paying staff because it doesn’t matter to you. You need to create a compensation plan that is effective & profitable for your business, so it really doesn’t matter what other clinics are paying.

Although creating compensation plans can be stressful and overwhelming, if you keep these tips and tricks in mind, you will develop a solid foundation for creating stable, fair and most important, profitable plans.

Need help with the assessment and creating your own staff compensation plans? No problem-reach out! Were experts at developing easy to implement plans that allows for both staff and owners to be happy.

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