Have you ever asked yourself, “How should I pay my coaches and employees?” I suspect you have. The consideration of hourly versus salary is one of the most daunting challenges gyms and fitness centers face.
Here are some pros and cons of paying hourly instead of salary and of course there’s always the straight commission method as well.
1st Pro: SPEED – As the owner you have the ability to change your costs much faster when paying hourly. If for any reason you need to cut payroll you can simply cut hours and reduce your cost.
1st Con: LOYALTY – If you must cut costs as mentioned above, your coaches lose their trust in you AND their dedication to your gym. If you are able to provide a salary, the coach has security in their job, begins to treat it more like a career and will be loyal to you and your gym. – Nick Berry, Fitness Revolution
2nd Pro: CLARITY – The starting wage for hourly employees is usually much more straightforward given the local market. – Michael O’Koomian, MOK Capital Advisors
2nd Con: CONFUSION – It can be difficult to determine a starting salary. There are formulas to use and this is also something which a bookkeeper or accountant should be able to provide assistance.
You can also approach your employees with a starting salary with a promise to revisit in 30, 60 or 90 days. By starting low, you won’t be overpaying but they have a sense you care because you are working to provide them with a steady reliable paycheck.
You can also keep steady salaries low but add in corporate goals to achieve quarterly bonuses. This way you’ll only have the additional cost of the bonuses if the coach earns it and therefore affords you the revenue to pay her/him. A great place to get started thinking about corporate goals is The Great Game of Business by Jack Stack and recommended to us by Dean Carlson of Get Fit NH.
3rd Pro: FREEDOM – If you pay your higher level managers a salary but your coaches are only there to implement their programs and do not have responsibility outside of showing up to work directly with your member, the coaches may enjoy this freedom over the security of a regular salaried pay check. This also ensures your members are getting the programming they want and need as well as the encouragement from a friendly face on a daily basis. Frank Nash of Frank Nash Training Systems
3rd Con: LIMITING – When paying by the hour, your employees may only train or work when they are on the clock. For salaried employees you can add other administrative tasks, especially for those employees who have an added incentive for a quarterly bonus. Adding these tasks to a salaried coach reduces the need for administrative overhead positions, thus cutting other costs in the organization.
While coaching several gyms on profit improvement this past month, I have found that this decision is one of the biggest factors influencing continual profits. Consider all the pros and cons closely, and contact me at Shannon@NetBooksAccounting.com if you would like further direction.
Shannon has been consulting with small businesses for nearly 10 years. After 2 years in public accounting she saw a need to work for small business owners to teach them how to grow financially healthy businesses. She has built on her Master of Accountancy degree from Manchester University by becoming a Certified Profit First Professional and a Certified QuickBooks ProAdvisor. When she’s not meeting with entrepreneurs or assessing their businesses she enjoys time with her husband and 2 children serving in their community, playing and watching sports, marveling at nature or reading a good book.