As a SPA consultant, I am often asked my opinion on the best way to structure adding therapists to practice. Massage and SPA owners have the option to hire employees, work with independent contractors or rent a room in their practice for a flat fee. Each option has its pluses and minuses to consider before making a final decision. What might work well for one facility can be a disaster for another!
When working with a client to determine the best structure, I ask a few simple questions:
- Do you want the new therapist to work specific hours that you set?
- Do you want the new therapist to work in a specific location that you determine?
- Do you want the new therapist to represent your brand, including providing them business cards or a uniform?
- Are you going to tell the new therapist when, how, and how much they will be paid per therapy?
- Are you going to dictate what types of therapies the new therapists can offer?
- Do you need a guaranteed income from the space the new therapist will be using?
- Do you have an accountant?
- Are you familiar with state and national laws regarding employees? (Worker’s comp, federal taxes, vacation pay, etc.)
The answers to these eight questions can go a long way in helping to direct the decision-making process by identifying important aspects of the relationship between the business and the worker. Typically an employee is subject to the business’s instructions about when, where, and how to work. On the other hand, independent contractors usually determine how much they will charge and what hours they will work. Independent contractors also tend to be responsible for their own expenses, including advertising, equipment, and training.
Several “yes” answers on questions 1 -5 indicated the business owner prefers an employee. However, there may be a few hurdles to overcome if they have also answered “no” on questions 7 and 8. Any business owner venturing into the world of employee management needs to be well educated regarding applicable State and National employment and tax requirements. A good accountant can provide a wealth of information on these subjects. “I didn’t know” isn’t a good excuse, and the fines for violating the requirements can be brutal.
More “no” than “yes” answers on questions 1-5 indicate that an independent contractor or renter situation may be the best fit for a business. If the answer to number six is “yes,” the owner may want to lean toward renting. Independent contractors are just that, independent. There is no guarantee how much they will or will not work, so there is no guarantee how much income they will generate.
Renters are a great way to create consistent income for a treatment room, but you have to keep it rented, and renters are not typically the best way to grow your business. They are a business inside your business, with their own rates, hours, and procedures. It can be a good idea to use renters to diversify available services convenient to clients, such as renting to a counselor or an acupuncturist.
When choosing to rent, you will need to determine whether to rent a room monthly or daily. I encourage owners to avoid hourly rentals unless there is some extenuating circumstance (i.e., a good friend needs the space on rare occasions). Hourly rentals require too much work to track and manage. If renting monthly, you can offer a space furnished or unfurnished, charge a bit extra if it is furnished. On the other hand, a daily rental should be offered furnished only because the room will need to be rented by more than one person to maximize the space. By furnishing the space, renters are not disrupted if someone moves out and someone new moves in. I recommend limiting daily rentals to 2, 3, or 4 days per week at a minimum. If someone is renting more than 4 days, they should move to monthly, less than 2 days. They probably aren’t that invested. Plus, who wants a different person rolling in every day. It is way too much to manage!
It can be difficult to determine which situation is the best for your practice; however, with research and proper analysis of your goals, you can pick the best suits your needs. Be sure to check out the IRS’s Independent Contractor or Employee page for application forms and information.