Analysis provided by Francis Acunzo, chair of the Aesthetic Business Institute Advisory Board of Directors and CEO at Acara Partners, and John Powers, PhD, Executive Director of the Aesthetic Business Institute.
Questions on provider compensation and benefits offered to service providers are frequently asked by those in the aesthetic medical industry. The March Aesthetic Business Institute’s Flash Poll helps bring some clarity and understanding to compensation in this area.
1) Employees vs. 1099 Contract Labor
Key Stat – 86% of service providers are employees of the practice.
Best practices in the industry affirm that in the vast majority of cases, service providers at a medical aesthetic practice should be employees of the practice and not 1099 contractors. “If you think you want to pay someone as a 1099 contractor, double check the 20-Factor Test that the IRS has put together before you make your final decision,” Acunzo added.
2) Methods of Compensation
Key Stat – 51% of practices use a combination of compensation methods for their service providers.
There was no definitive type of compensation for service providers in the aesthetic medical industry. While 51% of practices claimed that they used a combination of payment methods, another 19% compensate their service providers hourly, 16% use commission, and 14% utilize salary.
3) Determining Appropriate Compensation
Key Stat – 45% of practices surveyed utilize negotiating directly with a service provider employee to determine their compensation.
“It is always best practice to establish compensation levels for the employee positions within your practice, developing ranges for a position based upon a person’s years of experience and education,” Acunzo stated. “Also, beware if a candidate tells you that they will bring a large amount of business to your practice. This promise doesn’t pan out 90% of the time and you end up overpaying the provider. If you want to compensate a provider for what they bring to your practice, they should be required to submit a list (legally acquired) of their clients prior to their start date in which the practice will pay higher commission for that group.”
4) Commission for Providers
Key Stat – 61% of practices pay commission to providers for services performed, while only 11% base this commission on upselling/new sales generated.
A majority of practices offer commission to providers for services performed, but Acunzo is suggesting a different approach. “Commission to a provider should always be for what they sell, not what they provide as services,” Acunzo added. “Their wages should sufficiently compensate them for the services they perform, but you also want to give them incentive to sell additional services and products.”
5) Benefits for Service Providers
Key Stat – 69% of practices provide health insurance benefits to their service providers.
Most practices offer paid time off (76%) and health insurance benefits (69%) to their service providers. Less than half also provide a 401(k) plan (43%). Many respondents also mentioned that they offer service providers free or discounted products and services from the medical spa. “Many aesthetic practices provide unlimited complimentary procedures or services to their staff. Be careful with this, because it can become costly through the provider’s downtime and use of consumables.,” Acunzo said. “Instead, it is better to identify a dollar amount that a provider can receive on an annual basis and couple this with a discount for products.”