Staff recruitment and staff retention problems in Pilates Apparatus studios : Consider a combined employment and self employed contract for your staff.
In my recent article “Running a successful Pilates Studio business with a sale value at the end as opposed to a lifestyle business with little value other than perhaps some goodwill” I explained that:
“In my 20 years as a studio owner and more recently as a Pilates business consultant I regularly am asked to help studio owners to turn a lack-lustre or non-profitable studio into a money-making studio.”
When focussing on the reasons for the lack of profitability two themes constantly recur:
The studio is not generating sufficient revenue per hour
The studio cannot afford to be paying the going rate for its instructors
In this article, I want to suggest a solution that I have used in studio businesses that I am involved in. That is to find a way to pay Instructors a combined hourly rate that is more than competitive, but at the same time not exceed my rule of paying no more than one third to the instructor, of the revenue generated by one of my sessions.
Fully trained Pilates teachers value themselves more highly in my experience than any other type of fitness teacher or even a fully trained physiotherapist. I put this down to the fact that over 80% of Pilates teachers are self-employed and contract out their services, whereas for Gym instructors and group exercise teachers, the figure is closer to 50%, and for physiotherapists only about 25% are self-employed, the vast majority being employed.
This is relevant because psychologically Fitness instructors and Physios are more comfortable equating an hourly rate to a wage, than Pilates instructors are.
Here is an example – A physiotherapist who is employed is used to earning between £28,000 (Band 5) starting salary, £40,000 as a senior therapist at top of band 6, and a very few team leaders of specialist physios might at most earn a salary of £48,000 at the peak of their career. Convert this salary into an hourly rate on a typical (40 hours a week) full-time fitness industry employment contract for a Health Club and we have approx. £13.50, £19.00 and £23.00 per hour. Add 15% to cover paid annual leave and other employment benefits and we have £15.50, £22.00 and £26.50 - hourly rates that can be argued equate in self-employed terms, to salaries.
When I talk to Pilates teachers about employment in my studios in terms of working part-time maybe on a 50% contract – i.e. 20 hours per week the conversation goes really smoothly when I discuss in terms of a £30,000 - £40,000 per annum salary pro rata. BUT, when they go away and do their figures they will come back to me and regularly say that they hadn’t realised that this is only £14.50 - £19.00 per hour and there is no way that they will work for this. The going rate for a Pilates instructor with training to work in a studio is now £30.00 per hour and sometimes they ask for £35.00 per hour in affluent areas like Oxford and London. A popular instructor Facebook Group refuses to advertise posts that offer hourly rates below £20.00 per hour, even to the most junior Matwork teacher.
So the Pilates teacher is in effect believing their worth on a 20 hour a week contract to be £62,500.00 - £73,000.00 per annum pro rata.
These figures for most studios are simply unrealistic - even though an individual Pilates instructor might argue that they are only working 5 or 10 hours, for me the reality is that I am needing to employ somebody to teach all 40 hours - even if that is myself as the studio owner.
Let’s set a scenario where I, as the studio owner, am not an instructor and I wish to employ two Instructors to cover 20 classes a week and 20 Private one on one sessions. I have 6 Reformers and a small private classroom with Reformer, tower, chair, and Ladder barrel. My reports over the past year show that my classes ran at 80% capacity, and my private sessions at 85% capacity. I am in a competitive area and need to charge similar rates to my competitors to maintain these statistics. I am able to charge £17.50 per group class and £50.00 for a private class (after removing VAT this is £14.50 for the class and £41.50 for the private session. I know that on average I am generating a net return of £70.00 for a class, and £41.50 for each of 884 private sessions a year. The studio is generating net revenue of £73,000 for classes, and £37,000 for private sessions, and a total net turnover of £110,000 per annum (£132,000 inc VAT).
I am aware that already this turnover is less than I need to generate a reasonable profit for myself, and still invest in the company and get a return on my existing investment. So I will need to consider whether I can put up my prices, or increase my attendance levels. In the meantime using the one third of revenue for instructors, one third for overheads, and one third for profit/investment in the company; I only can afford to pay £36,000 between my two instructors. This is £17.30 per hour if they are self-employed, or taking benefits into account £15.00 per hour if employed. Half the figure that they are asking for.
Even at £15.00 an hour my Private sessions (returning £41.50 per hour) are not viable using the one third rule - I really need to up the price to £54.00 per hour (Net of VAT £45.00 per hour) and there is absolutely no way that I could pay £30.00 for a private session to a teacher - the cost of the private session would need to be £108.00 (£90.00 net).
The solution is to agree with the instructors to employ them on a combined contract of 10 hours a week employed and 10 hours a week self-employed. To be self-employed and fit into self-employment terms, when already employed in the club, the instructors need to show that for their self-employed hours they set their own rates, and are not reliant on me to deliver the customer. Ideally, they also have a cost associated with their work. I, therefore, programme their hours in pairs with a minimum shift of 4 hours in length without a break. For one instructor hour, one is employed and for hour two, self-employed. The employed hours are for classes and the self-employed hours are for private sessions. For employment I set a salary of £35,000 per annum £19.50 per hour, taking into account annual leave and bank holidays (I pay £30,00 for emergency class cover - either to these instructors or for cover from outside. This raises my average employment rate for a class to £22.00 per hour over the year). For the Self-employed hours, the teacher in alternate hours teaches private sessions - they set their own rates, take the money directly from the client and they pay me £9.00 per hour for each private that they fill (This is £7.50 to the business the other £1.50 is VAT). The Instructor is allowed to teach a private to whoever they like - it might be an existing class member, or it might be somebody they have recruited from outside. Given that the instructors are not VAT registered, they take home £41.00 from hour 1 and £19.50 equivalent from their employed hour the average is £30.50 per hour - we have met their perceived salary goal.
The economics of the club change as follows:
Net revenue from classes is £73,000, revenue from private sessions is £7,000 delivering a total net revenue of £80,000. The wage bill of £35,000 salaries + £1500.00 class cover = £36,500.00 I have covered my rules of no more than one third of staff costs to revenue and the instructor, provided they are good enough to fill their private sessions is beating their salary demand of £36,500 per annum pro rata. For their 20 hours a week, they have an annual income each of £31,720.00.
My view as a Pilates Business Consultant is that – “Where there is a will there is a way” - Food for thought ?!
N.B. Since 2012 I have not chosen to run any studios that I am involved with on a session basis as described above, although I have consultancy clients who do still choose to do this. Instead, I prefer a membership model which still uses the part employed, part self-employed system of employment BUT it is more profitable and smooths cash flow over the year.
Look out for the next article explaining this refined model titled: “Running any size Pilates studio on a membership as opposed to session fee model”
Chris Onslow - Pilates and Fitness Business Consultant
Chris Onslow, has run Pilates focussed businesses since 1998. He and his team specialise in supporting Pilates entrepreneurs and business owners. With a rich history of owning and running successful Pilates studios in the UK, and supporting others in Europe and the Middle East, Chris has broad expertise in maximising profitability and optimising operational efficiency. His agency provides top-tier advice on selecting new, pre-owned, and hireable Pilates equipment from renowned brands such as Align-Pilates, Balanced Body or Stott-Pilates/Merrithew. As the founder of Mbodies Training Academy, Chris continues to revolutionise Pilates education, offering premier online and hybrid CPD and qualification courses for Pilates apparatus instruction and special population CPD. Discover more about how Chris can support your Pilates Business or home exercise choices at www.pilates-consultant.co.uk