Payment question on Contractors - discounts

[janet h]

I apologize if this is a repeat, but I could not find the exact discussion I needed.

In my practice I offer discounts for birthdays, referrals and packages. For those of you who have contractors, do you pay them the same for discounted sessions as you do for full rate sessions?

For example, I have a contractor whom I pay 50%. A regular session is $75. I pay her the same commission regardless if the session was discounted or not (she earns $37.50). My thought in the the past is why should she earn less on a discounted session when its my business and my discounts I offer. I see the "loss" on a discounted as a advertising/business expense that is mine, not hers.

Any feedback?

 

[C_LAYS]

That is the way it was when I was an IC. If the fitness club offered a discount, it did not hurt my income.

 

[Arafat]

That is why one should avoid paying on a % basis.

Pay a flat fee per service and the price-setter takes the hit on discounts.

But your IC contract should have a stipulation for discounts for dissatisfaction. That is 100% on the IC.

 

[$D@VI3$]

To flip the table a bit, I am an IC. If I offer a discount, both the business and myself split the discount session the same as we do a regular session. Likewise if the business gives a discount, I get a lower rate. But honestly, it doesn't bother me or the folks who own the business. I am happy to have the client, and it really is only a few bucks here and there. 'Course, it probably depends on the relationship you have with the IC....

 

[Adviser! :)]

As far as massage therapists go, in all my positions as employee and employer the pay rate has always been the same regardless of any discount extended to the client and if a % compensation is offered to ICs it is always based on the standard price.

I do know of some places that have a different policy and pay based on net revenue. Usually they are hairsalons that extend the commission policy of their stylists to their therapists.

If you are paying 50% on massages, chances are you are not covering your costs unless you run a very low key, low cost operation. In that case any discounts you extend are not only going to hurt your bottom line but probably lead to you losing money.

I second the opinion that a flat rate per massage time is the better way to go. And dissatisfaction, I guess my policy would be to let the therapist go unless the guest reaction was unwarrented and I decide to comp the massage anyway to preserve the relationship which would then not fall on the therapist and I would pay them.

 

[dynollis]

Keep in mind, one of the tests of being an IC is that you cannot be insulated from an economic loss by working under the contract.

If you get paid for no shows and/or cancellations and get paid the same regardless of your performance on an individual project/assignment/service, then you run no economic risk being an IC in such a situation. That alone could get you classified as an employee.

There needs to be greater repercussion an IC faces for poor performance other than termination of the contract for cause to protect the contracting entity from future claims.

If one of our Employees or ICs No Shows on a Hotel Guest, we are obligated to give the guest a comp massage. The employee runs the risk of getting fired - the IC is liable for their failure to execute as per the terms of their contract -- the run the risk of a loss by compensating us for revenue lost and the expense of the free service.

 

[banananose_89117]

If you get paid for no shows and/or cancellations and get paid the same regardless of your performance on an individual project/assignment/service, then you run no economic risk being an IC in such a situation. That alone could get you classified as an employee.

That would depend on the individual policy and contract. I would consider the possibility of being called in or not a sufficient economic risk. When called, I am willing and able to provide my services as requested at the aranged cost. If the contracting entity decides to change the conditions ie partially or fully refund the charge, they are doing that at their discretion for their own motives.

For example if the guest is paying $5000 in room charges but does not enjoy the massage, management might decide that the guest does not have to pay for the massage although it was not the fault of the therapist. Why should the IC carry that risk?

On the other hand if they are not happy with my services they are certainly able to terminate the agreement and of course if they can prove that the service was not according to contract they can pursue reimbursement and/or damages.

The contracting entity should implement a cancellation policy that allows time to reasonably cancel the contract with the IC.

I doubt that bearing the cost of management decisions as an IC (to comp or not to comp) without having influence on the decision-making process would make or break the IC status.

I'm curious how greater repercussions than termination protect the contracting entity from future claims?

 

[Crissy]

I would consider the possibility of being called in or not a sufficient economic risk.

The problem is, it is not up to you. You can be an employee working on 100% commission (which is common in the spa industry and in retail sales) and not make a "sale" or be called in all day. Same with the IC situation you described. Thefore the risk to both is the same - ie no risk.

If the contracting entity decides to change the conditions ie partially or fully refund the charge, they are doing that at their discretion for their own motives.

For example if the guest is paying $5000 in room charges but does not enjoy the massage, management might decide that the guest does not have to pay for the massage although it was not the fault of the therapist. Why should the IC carry that risk?

You misread my post. We have that happen often, but we never just take someone's word for it. We always get both sides of the story and have never found that a therapist should not be paid for a service performed, even in the face of complaints.

The "performance" I was referring to was related to timeliness and no showing altogether. If a therapist was egregiously late - or even just plain late with no good reason, if the client requests a discount or upgrade that comes out of the IC for not living up to the timeliness clause of their contract.

On the other hand if they are not happy with my services they are certainly able to terminate the agreement and of course if they can prove that the service was not according to contract they can pursue reimbursement and/or damages.

Only if your contract has a negligence clause and a damages clause. But that still does not address the IC test of economic risk. Employees can be sued for damages for gross negligence too.

The contracting entity should implement a cancellation policy that allows time to reasonably cancel the contract with the IC.

Termination for cause. Does not have to be written in to the contract as it is a basic tenet of contract law. But cancelling a contract does not have inherent economic risk because you are no longer doing the work and are no longer at risk.

I'm curious how greater repercussions than termination protect the contracting entity from future claims.

Consult an attorney. They can easily earn their fee by creating a proper document for you.

 

[ilovejustinbieber(:]

Thanks everyone for the great feedback. I surely need to reconsider my contracts and do another analysis on my profit margin. Lots of great stuff to consider...

 

[dokomo]

I don't know about the legalities, I'm sure R&R and others are right about that. Personally, though, being an IC means I get paid for the work I do. No shows are one thing, discounts are another (to me). The facility doesn't have control over a client who doesn't show up; but they DO have control over the discounts they offer clients, whereas the IC does not. To me, I do a massage, I should get paid whether or not the facility offered a discount to the client because *I* didn't choose to offer the discount.

I worked at a facility where packages and specials were available to clients, and the rate WAS cut a little. Personally, I would've been OK with it, if the package was good for the same therapist--that would've been a benefit to me, and I wouldn't have minded taking a small hit on that. However, it was simply a package where the client could see whomever they chose, and yet the MTs took the hit on it. (The hit was small, but it was the principle of the thing.)

I agree with not paying on percent. Pay a flat fee. The math is easier then anyway, no having to figure out what percent of what fee should be paid. Everyone's on the same page.

Just my thoughts
Hugs,
~Jyoti

PS: I have (finally) left the facility and now offer discounts to our clients when WE choose Yay!