Salaries are the highest expense in the budget for most fitness facilities and can run 50 percent or more of total revenues. This does not leave much afterwards to pay business overhead and still generate a profit. That is why how you set up your compensation packages is so important, especially for your personal trainers.
Several questions arise when determining how to pay personal trainers, but the main two are: should you hire trainers or should they be independent contractors, and how much should you pay them?
Let’s first take on the topic of employees vs. independent contractors. In the past, most personal trainers were independent contractors. Slowly, many facility owners brought the training department in-house and made trainers employees. Owners reasoned that they supplied the facility, the equipment and paid the overhead for things such as utilities, meaning they were absorbing the cost of doing business rather than the trainers. So, owners began hiring trainers at less per hour, noting that the owners were absorbing the business costs, so the owners should expect a larger cut of the clients’ fees.
Bringing the training department in-house also allowed owners to gain more control and standardization over the personal training department. An independent contractor situation can seem unprofessional and confusing to clientele.
In addition, the IRS has strict guidelines for who should be considered an independent contractor or an employee. According to the IRS, you should hire trainers as employees if:
Your business establishes and evaluates program recommendations and training techniques
Your business markets the program, books appointments and collects money
Your business sets policies and procedures and schedules meetings
The position is an integral, daily part of the business—a service you offer regularly
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.
Once you decide how much you can pay your trainers, you have many options for structuring the compensation packages:
Straight percentage of revenue
Sliding scale
Tiered Plan
Hourly/Salary
Here is how each of those work:
Straight Percentage of Revenue. In this structure, you decide on a percentage that goes to the trainer and a percentage that goes to the business. For example, if you set it up so that 50 percent of the fee goes to the trainer and 50 percent to the business, then the trainer will receive $30 of a $60 session payment.
Pros:
Your risk is lessened since you only pay trainers when they generate revenues for your business.
It is an easy system to calculate payroll
Cons:
In many states, if your trainers are employees, they cannot perform administrative duties or complimentary sessions with no pay. So you will need to develop a wage for when they are not with paying clients but are conducting business within your facility.
This system often forces the trainer to work long hours to obtain a full work day. For example, they may train a few early morning clients, have a couple of hours off, then see a few lunch clients and then experience another lag time and then have to train a few clients after work and evening clients to make up a full eight hour day. This can quickly lead to burn-out.
This system can get tricky if you offer packages with different rates. For example, if one client purchased 10 sessions at $60 per hour and another client purchased 20 sessions at $58 per hour, the trainer would make a different rate for different clients. You would need to ensure you have a good system for tracking training sessions and various rates.
Sliding Scale. In this system, you pay the trainer more based on their performance. For example, let’s say the average client fee is $60. The trainer pay may be as follows:
One to five sessions per week equals $17 per session for the trainer
Six to 10 sessions per week equals $18 per session for the trainer
11 to 14 sessions per week equals $19 per session for the trainer
15 to 20 sessions per week equals $20 per session for the trainer
21 to 24 sessions per week equals $21 per session for the trainer
25+ sessions per week equals $22 per session for the trainer
Pros:
This system rewards the trainers who are performing more for your business. They receive a higher hourly wage.
It encourages trainers to get more clients and work more hours because they would have the potential to make a greater hourly wage.
Cons:
This system can be a nightmare to manage when completing payroll since trainers’ rates will change week by week depending on how many sessions they complete.
Tiered Plan. Under this system, clients pay different rates depending on the experience level of their trainer. For example:
For a certified fitness trainer, the clients pays $38 per hour and the trainer gets $18 per hour
For an advanced fitness trainer, the clients pays $48 per hour and the trainer gets $24 per hour
For an elite fitness trainer, the clients pays $58 per hour and the trainer gets $29 per hour
For a master fitness trainer, the clients pays $68 per hour and the trainer gets $34 per hour
Pros:
Within this system, you can afford to pay your veteran trainers more because the client is paying more. Therefore, experienced trainers are happy because they have a higher earning potential, and business owners are happy because they can pay the trainer more and it doesn’t cut into their profit margins.
It offers a wonderful stepping stone scale for trainers to aspire to and a plan for earning a higher income
Cons:
It can be difficult to create the criteria for who qualifies for which stage. For example, establishing what is most important—degrees, experience, sales success, personality, years with the company.
It can be difficult to effectively explain the differences to clientele without downplaying the skills of the newer trainers.
It can create a negative hierarchy among the training staff similar to the medical community. This can sometimes interfere with the team atmosphere.
It can be difficult when trainers are away or sick for client coverage. For example, “I paid for an elite trainer and my sub trainer is only a certified trainer. I want a refund.”
People often ask us what we think is the best system. Of course, we believe our system is the best or we would be doing something differently. Here is how our system is set up:
Shifts. Within our system, trainers are scheduled for shifts, and we try to balance their shifts to avoid burnout. For example, we may only schedule them for a few opening shifts and a few evening shifts. That way, they only have to wake up really early a few days a week and they only have to stay late a few days a week. They also do not have to be in the facility 12 hours to actually earn an 8 hour day. This type of balance helps to promote longevity in the industry.
Guaranteed hours. We only hire full-time trainers who are willing to commit to a minimum of 30 hours per week (ideally 40 hours per week). This ensures a certain level of professionalism and makes it easier to manage your team. Would you rather have 20 trainers each only working 20 hours per week or 10 trainers each working 40 hours per week? Obviously it is a lot easier to manage 10 people than 20. At 20 trainers, you have doubled your work but the revenue is the same. Under our system, our trainers are guaranteed a certain level of income each week.
Two different wages. When our trainers are training a paid client, they may make $17-$25 per hour based on their experience, years with the company, credentials, etc. When they are not with a paid client, they are paid an administrative wage of about $9-$10 per hour.
Salaried vs. hourly. After a year of training with us, we can review trainers’ actual revenue generation and place them into a salaried or set hourly position, meaning they get paid the same regardless of what they do for us. So, if they were able to generate $100,000 in personal training revenues, we should be able to pay them between $40,000-$50,000 in salary. Many of our trainers appreciate the stability of a salaried position; it makes it feel like a real career and helps to eliminate the instabilities and ups and downs of many trainers’ pay checks.
Benefits. We offer paid time off benefits, health allowance, performance bonuses, educational allowances and other perks to add to their entire compensation package.
Even though we think this system works best for us, every system has its pros and cons. For our system, the pros are:
We have great employee retention because we offer stability and balance to a trainers’ career.
The business is in a position to make a greater percentage and profit by paying salaries. For example, offering a trainer $30,000 per year is a good starting salary, and many will accept this gladly. However, offering a trainer $15 per hour would be frowned upon by even a starting trainer even though $30,000 per year based on a 40 hour work week is $15 per hour. It’s the same thing, but $30,000 guaranteed per year sounds a lot better than $15 per hour.
Trainers appreciate the additional benefits and perks.
And the con is:
Structuring your business this way is a bigger risk for the business. For example, what if you have guaranteed certain shifts, wages and salary but can’t fill the trainer with paying clients? Then, the business is taking a loss. Fortunately, we have been doing this long enough to know that we can fill a trainer with clients really quickly so it is not a big risk for us anymore. We also have enough positive cash flow to allow the business to float the ups and downs of the personal training industry instead of the trainer having to weather these lower and higher income months.
Our system may not be the best system for a new personal training business that may not have a constant influx of new clients or enough positive cash flow to absorb the initial losses. Businesses in this position should start with what they can offer. For example, you may start a trainer at 20 hours per week with a paid training wage of $20 per hour and an administrative wage of $8 per hour. Once you can get them to 70 percent full capacity, you can increase them to 30 hours per week and ultimately to 40 hours per week. After a year, you can review how much revenue that has generated for your company and then decide whether a salary option might work.
BIO
Sherri McMillan, M.Sc. has been inspiring the world to adopt a fitness lifestyle for over 20 years and has received numerous industry awards including 2010 CanFitPro International Fitness Presenter of the Year, 2006 IDEA Fitness Director of the Year, 1998 IDEA Personal Trainer of the Year, & 1998 CanFitPro Fitness Presenter of the Year. As a fitness trainer, fitness columnist for various magazines and newspapers, author of five books and manuals including "Go For Fit - the Winning Way to Fat Loss", "Fit over Forty" & "The Successful Trainers Guide to Marketing", featured presenter in various fitness DVDs, and international fitness presenter, she is a spokesperson for Nike, and PowerBar. She can be reached at www.nwFitnessEducation.com or www.BusinessofPT.com
