Show Me the Money – Guide for Cosmetic Practice Compensation

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practice compensation plans

One of the most asked questions at the Aesthetic Medicine Symposium, is “how much do I pay nurses and estheticians?” For a nurse working in a hospital environment, the answer is very straight forward, however when you are hiring nurses for a private clinic, all things are not equal, and nor should the compensation.

You should have a clear idea and budget on what you are going to pay for each role in your practice. And you need to stick to this range, don’t overpay, and don’t underpay. Getting this right is important. I like to slightly overpay the current market average in my area for each role.

Remember, when you are hiring nurses, you are not competing with the local hospital. You are competing with other private practices. The benefits of working for you include: no shift-work, no nights, no evenings, no Sundays, most Saturdays off (and if they do work, it is usually a half shift).

If you are not sure what the local going compensation rate is in your area for estheticians, you should contact a nearby esthetician school, or contact other nearby spas. For nurses, you may contact other private practices. Also, be aware, some people are just overpaid, and regardless of their experience, they are not candidates for you based on this fact alone. I’ve had nurses that were paid hospital rates at private clinics apply for jobs at my practice. Unfortunately, they have priced themselves out of the market, and even though they had the experience I wanted, I could not afford to hire them. I should also mention, the times where I did pay an uncomfortably high salary, those people never worked out, and I needed to replace them within 2-3 months, or they left after a year because they expected a big raise. So, this is a case where you don’t necessarily get what you pay for. You can also check out popular local online job boards (Craigslist, Indeed) since they often disclose how much they pay for each role.

Compensation Structures

It’s a good idea to understand the expectations of how estheticians and nurses in your local area expect to be paid. This does vary from city to city, and state to state.

Generally speaking, nurses are ok with an hourly rate similar to what they would get at a private clinic. At least for the first 6-12 months.

Estheticians on the other hand usually expect to be on a base hourly rate plus commission. The base rate will vary from state to state, but the commission rate is usually 10% of what business they bring in. Sometimes the commission increases with more profitable procedures, like cosmetic laser and skin tightening procedures. In those cases, it may be 15 or 20%. Again, a good place to find out what is being paid in your area is by contacting the closest esthetician school.

However, do not overpay up front. It is very difficult and demotivating to reduce someone’s compensation. You are better to pay a lower rate and give a bonus for exceptional monthly revenues than to overpay to the point they are not motivated to get more patients into the practice for procedures.

If you are new and don’t have many patients, you may pay a hiring base hourly rate, until you have built up a bigger patient base.

Bonuses

You want to reward behavior that you find exceptional and discourage behavior you do not want. Every practice wants more revenue, so you need to have a plan to encourage that behavior. If someone is on commission, then their compensation is tied to what they do. I would also recommend having a quarterly practice revenue goal, where a bonus is paid to everyone.

There is some discussion in regards to the effectiveness of paying a bonus after the results have occurred, but every employee will accept a bonus whenever it is paid! The timing will determine its effectiveness and be an incentive for future behavior.

You have a couple of options when creating a bonus program: it can be random “on-the-spot bonus,” or a clearly communicated bonus that is tied to a performance Role KPI (Key Performance Indicator). You can also combine them. I started with an “on-the-spot” bonus for a year, then switched to a Role KPI bonus afterwards. What you don’t want to happen, is have your team members come to rely on or expect the bonus. If they do, you will no longer have them focused on generating more procedure revenue for your practice.

It is important, that when you are creating a bonus program, you make it a one-time event, this allows you to make changes if you didn’t get the behavior you wanted, which is generally more revenue for the practice.

“On-the-Spot” Bonuses

For nurses and the receptionist (patient care coordinator) who are not used to getting paid a commission, I like to give them a good hourly salary and give “on-the-spot” bonuses for great work or revenues. For example, if we make an extra $5,000 in revenues in one month, I may bring everyone together to congratulate then on the great effort, and give everyone a $100 cash bonus or gift card to their favorite store. If one person was responsible for that extra revenue, I would only give that person a bonus. In a case like that, I may bring everyone together and explain to everyone that this person was responsible for creating an extra $5,000 in practice revenue. I would say to show my appreciation, I’m going to give them a $500 bonus. I’d also reiterate to all, that for the practice to be successful, we need everyone helping to generate more procedure revenue, so I can give out more bonuses.

Performance Bonuses

Alternately, your bonus payout can be tied to achieving a Role KPI. In this case, make sure you only pay out a bonus, if you hit a practice revenue goal. You certainly don’t want to be losing money by paying a bonus. I like to top out the bonus to no more than 10-15% of the net profit (after expenses). This way, if you made a mistake with bonus, you shouldn’t need to reduce or eliminate it. Remember, nothing is more demotivating for someone, then having money taken away.

Every team is different, and what bonus structure motivates one team, may demotivate another. You should also understand what motivates each team member. For some, it’s having a consistent pay-check, for others it’s working Monday-Friday in a private clinic, and for others it’s the opportunity to make unlimited commission. Once you understand the motivations of each team member, you will be in a better position to create a compensation plan that works for them all.

When paying a bonus, always communicate to the team why it is being paid out, give an example of a specific behavior or situation that created the bonus, tell them you value that behavior, and thank them all for their hard work and hitting the goal. For example, the conversation may go something like this: “I want to bring everyone together in the office for a quick meeting. As you all know one of our core values is providing exceptional customer service. It looks like you all smashed that value, since last month we had an increase of $5,000 in revenues! It looks like we had several patients refer their friends to the practice, and that resulted in the additional business to the clinic. As you know, we all succeed, only when we work as a team, and as a small token of my appreciation, I want to give you all $100 cash bonus for taking the time to remind every patient of our referral program. Thanks again, and I’m excited to see how this month will turn out!”

As you can see, I tried to tie in at least one of the clinics’ core values (working as a team), along with a role KPI (telling every patient about our patient referral program). I was clear that the bonus was directly related to the additional business we received from referrals, and that this is something that they are doing correctly, and should continue to do. Always thank them for the behavior you want to see, but don’t make it sound as though the bonus will continue for the next month. If the following month was successful, I would pick another KPI, and focus on that (maybe on the percentage of consultations that result in bookings).

As a last point, please check with your accountant on how to properly handle any bonuses you pay your team so you don’t run afoul of the IRS.

Benefits

Unless your team members have spouses with health benefits, this may be something you want to offer your team. The challenge with small practices is that you usually only have 3 or 4 employees, so it’s very hard to have a group policy specifically for you.

If you want to offer medical benefits, you should check out the benefits that may be offered by large associations that you are a member of. These may include:

  • State medical association
  • AMA (American Medical Association)
  • Medical association related to your Board Certification (ie AAFP, AAD, ASPS, etc)
  • Chamber of Commerce
  • Faith-based insurance providers

As well, there are other options for small group insurance coverage, like Blue Cross / Blue Shield. However, these often require a minimum number of employees and may require a percentage to participate in the program.

This may change, but you can no longer legally give your team members an “allowance” to buy health insurance. Some clinics give a “lifestyle” bonus, that can be used for anything (i.e. gym memberships, yoga classes, etc.), so check with your attorney for the correct wording.

Summary

I hope the above tips have given you some ideas on how you can create your own compensation program for your team members. Since no two practices are the same, you will most likely have a blend of some of the above, and other programs for your own unique practice compensation program. Remember, the key is to motivate, not demotivate; and most of all, keep it simple!

The material was taken from the IAPAM’s Aesthetic Practice Start-up Workshop. Always check with your accountant and/or attorney on the correct way to pay your team (and you). They will be aware of the current State and Federal regulations.

If you have some other ideas on practice staff compensation strategies, please feel free to share them below!

 

 

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