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If your trainers are employees, you are responsible for paying taxes and deducting employee tax contributions from pay checks. Independent contractors are responsible for their own taxes, marketing, scheduling and money collection.
The IRS typically prefers that businesses have employees rather than independent contractors because the government is then guaranteed to receive the accurate tax deductions. If you are operating in the grey (i.e. you collect the money and the trainers wear your uniforms but control their own schedule) and are audited, the IRS will most likely rule that the trainers should have been categorized as employees, and you will be responsible for back taxes. I encourage you to get advice and counsel from an employment attorney in your state to guarantee everything is legal.
Once you determine the arrangement that is best for you, how much should you pay your trainers? It depends on:
- How much overhead and involvement the business has compared to the trainer. If your business covers the cost of the facility lease, equipment, utilities, office equipment, marketing materials, etc., then the business can expect to take a large percentage of what the client pays. If the trainer is responsible for the majority of these expenses, then they can take a larger percentage of what the client pays.
- The goal of the personal training program. Is the program set up mainly to bring in a profit, to retain members or both? Some facilities are member-owned and not-for-profit. Because they are not profit driven, they can afford to pay the trainers a higher percentage of what the client pays. Some facilities make so much money on fitness club membership dues that the personal training department operates just to keep the clients happy by helping them get results so they will continue to pay their membership dues. Since these facilities cover all their overhead and still make a profit through membership dues, they can afford to pay their trainers a higher percentage. However, if the facility is profit driven and needs the personal training department to help cover some of the overhead of operating the business (i.e. personal training studios that do not collect membership dues), then the percentages that will go to the trainers will typically be lower.
- What the competition is paying. Find out what other business are paying trainers in your area and review current compensation survey results within the fitness industry to ensure your compensation package is fair.