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Spa Tips & Gratuities

 

A question submitted to Spas2b:

How should we be handling gratuities at the front desk? We are accepting tips on our new credit card chip machine and print off a report at the end of each day that shows daily tip totals. The credit card companies charge us their normal fees on the tip – so we are being charged for credit card tips.  Should we be disallowing tips on credit cards due to these fees we are charged?  

Our Response:

Yes, this is a concern, and to add to that, did you know tips are a taxable income and need to be handled as such?  But that is a whole other blog altogether!

There are a few schools of thought on credit card fees:

  • Not accepting tips at all on credit cards is one option, but this can actually cause a loss in tips for your staff – ugh – because the client may not have cash on them;
  • Another is collecting the percentage you pay to the CC company, back from your staff (getting “buy-in” through communication with your staff is key here); and
  • The other is absorbing the cost as a part of doing business.

I would recommend that you decide which of these options is best suited to the business by projecting what these averages might look like on an annual basis. If you have calculated approximately what this will mean in costs per year, you will then be able to decide if you need to collect back from your staff.

You also have to remember that sometimes what staff feel is fair, is not always fair to the business, we all know how costs can mount. If you do decide to absorb, make sure this perk is known by your staff.   Leslie Lyon

 

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About Leslie

Spas2b Inc. is a full service Spa Development company, specializing in Online Spa Management Distance Learning Courses, Spa Business Manual Instant Downloads & Resources, and Spa Consulting Services.
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8 Responses to Spa Tips & Gratuities

  1. Sherry says:

    We are a very busy spa and salon and here is how we handle the credit card tip issue.  Oh ya we see up to 4000 per month and have a large staff.  We put out a sign nicely done that read effective June 1, 2011 gratuities will no longer be accepted by credit card.  Please leave cash or swipe you debit card for the gratuities.  None of guest minded when they new the reason behind it and the money we have saved on merchant fees is incredible

    • leslie says:

      Thank you Sherry – I like your idea of notifying clients in advance and I’m very happy to hear your solution has been so rewarding for you and your staff.

  2. Jacquie says:

    This is interesting, we do allow tips charged on credit cards. We do run everything through our payroll – tips are taxed. It shows as a seperate line item on their paycheck. My question is, what about all the spa receptionists, how do others split tips for the whole team, or are just the therapists receiving 100% of their tips?
    Much appreciated…

    • leslie says:

      Thanks for your comments Jacquie. It’s a good question, and one that doesn’t have an easy answer! We see everything from a no-tip mentality for front desk staff; to a percentage pooling of tips for front desk from service staff; to a good-will gesture toward staff who aid in the sale; to a small percentage of total retail sales allotted to front desk staff. I do believe they need to be recognized if they are great closers or refer guests to sales staff who end up making a sale on a regular basis. If I was asked what my preferred method of compensating front desk staff would be, I would say a designated percentage of total retail sales. This of course means they’ll require sales skills training, just like everyone else, and you as the Manager will need to develop a set criteria outlining “penalties” or “disqualifiers” for those front desk staff who don’t perform. As well, peripheral funds, just like with your spa professionals who excel in retail, should be set aside for the front desk sales stars too. Love to keep this conversation going and hear what others have to say!

  3. Glen says:

    Another option is to offer cash back on credit card sales.  This allows the person to still offer a cash tip to the operator.

    • leslie says:

      Yes! A very sensible option. So if you can script your front desk staff on how to handle this little “work around” when necessary, this is a great solution, thanks Glen!

      • Glen says:

        Only issue with this work around is you need to keep massive amounts of small cash on hand. Plus your book keeper I’ll get a little nuts!

        • leslie says:

          Yes, it will be a viable solution for some, but not all, as fewer people and businesses are holding onto cash. I’m not opposed though, to educating/conditioning our clients with signage, and verbal communcation, to think about this “tipping point” in advance of their appointment. Find a nice way to communicate “cash grats only” and see how it goes. Remember though, that if these grats are controlled at the front desk, it is the businesses responsibility to treat them as income. And staff are expected to also act responsibly and declare their “behind closed doors” taxable tips.