How Much is Your Spa Team’s Gratuity Costing You?

 5293331-stressedTips to help you recoup some of your expenses


Spa profits are already slim but when you start adding all the gratuity credit card processing fees, they get even slimmer.


Have you calculated how much your team’s gratuity credit card processing fees are costing you?

Well, it is time you did.  This amount adds up to thousands of dollars per year, and it’s all coming out of your pocket! 


As a spa owner, you need to add up how much the entire compensation mix package equates to. Here is an example for you:

Commission                                        45%

Gratuity                                               15%

Gratuity processing fees                      5%

Product cost                                        10%

Benefits                                                 5%

Grand Total                                          75%


How much is your profit rate?    _____%   (probably not enough)


Here is what you need to do:

  1. Calculate how much credit card processing fees are costing you on monthly basis in a dollar amount.
  2. Share the situation with your team.
  3. Present them with the following options:

 Option A. You can stop accepting gratuity on credit cards.  If the client wants to give a gratuity, it can only be in cash. (This option is not good from the guests’ stand point or from the therapists’ stand point). Many people do not carry cash; therefore, therapists may not receive a gratuity and guests will leave feeling bad. 


Option B. Continue accepting gratuity on credit cards, but pass on the cost of the processing fee to the therapists.  Begin withdrawing the credit card processing fee of 5% from the gratuity payout.  This is the best option.


Option “B” is win/win situation.


This will help you cut back on expenses as a business owner and align the therapists’ compensation payout some.


Another point worth mentioning is “when to payout the gratuity”.  In working with one of our clients, I discovered that she settles the gratuity payout on a daily basis. Many times, this causes her to pay out cash from her own pocket!  Are you doing that?  If so, you need to stop, NOW!


 A daily gratuity payout process presents two problems:

1.  As a business owner, you should not have to reach into your own pocket for cash; especially when the gratuity was placed on a credit card.  This is a double negative for you.


2.  Therapists end up spending their gratuity rather than saving it or seeing it as a significant part of their compensation.


Best practice:  Gratuity left on credit cards should be paid with the regular payroll.  Indicate the amount of gratuity on a separate line, deduct your credit card processing fee and pay it with the commission payroll.


We found that this method helps the therapists save their money and have a better handle on their finances.  It’s also good for the business owner because it reduces the amount of accounting you need to do and simplifies the entire credit card gratuity process.


We have implemented this method in many spas and it works great!  

Try it.  We hope you find it helpful. 


Thank you for sharing your success stories and best practices with us. 

Keep sending them, we love hearing from you!

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