Commissions can be an amazing driver and motivational tool for staff that can really help the business achieve their targets and goals.
However, it can often times be difficult for a business to decide on a standard commission structure or to know what will work best.
Having worked with thousands of salons, I found that one of the most popular questions from managers and owners was on commissions and the best ways to use organise them in the business.
What is the industry averages with commissions?
Services- 0%-10% if on a salary
30% -50%+ if on a commission only basis as this is the only payment type in that case.
Retail- Generally around 5%-10%
Retail – 5%-10% on retail
Services – 5%-25% but only when a minimum of 500 euros/pounds is hit for the month.
This is often tiered in a basic structure such as:
500 – 750 = 5%
750 – 1000 = 10%
Anything over 1000 ranges from 15-25%
Top 5 Tips & Considerations With Setting Commission Structures
1. When do you want to pay out commissions? Weekly, Monthly or Other?
Most common payment time for commission seems to be monthly but this can vary from business to business.
2. Aiming for the 3 wages ratio.
Each staff member should be bringing in at least 3 times their wages per hour in order to cover overheads and business costs. Some businesses have larger costs than others so you can bear this in mind when setting this figure as a target.
3. How many commission structures will you need?
Do you want a standard across-the-board commission on service and retail? Or perhaps you would like a junior and senior level depending on experience? This can be a nice reward for staff that are with you for longer periods of time and/or have more experience.
For example you may have 3 scales (And for each scale there is an increase in commission level):
Junior: 1-2 years
Intermediate: 2-3 years
Advanced: 3 years plus
4. You might prefer to go with a standard commission for retail & service. But for selective treatments that are of a higher price point (or perhaps a bit more challenging to book), you could have a more generous commission. This would encourage staff to promote and upsell to achieve the higher scale!
5. Tiered commission structures work amazingly well! So for example…..
For a monthly commission:
0% up to 3 times your salary ex – €1500
5% up to €2000
10% for any amount after that
This means that when I achieve €2000, I would be encouraged to push myself a lot more because anything over that amount, then the 10% starts kicking in!
So ideally a good jump in the % has the biggest effect on increasing sales.
Another great way to motivate your staff is by having an overall team incentive that they can reach. And if the team meet their target, then they win a communal prize (Maybe a team night out or something else that they might enjoy).
This could be a great way of encouraging a positive team environment where they all want each other to achieve as much as themselves.