Whether you run a small boutique fitness studio or oversee a franchise of fitness clubs, the great debate is on your mind: what instructor payment model is best for you? From keeping it simple with a flat hourly rate to inventive models of profit sharing, every studio has to establish a compensation arrangement with their instructors, and the choice you make can have a huge impact on your business.

Without instructors, there is no fitness business, and even in an age when online classes are increasingly popular, the consumer still ‘falls in love’ with their favorite instructors. Sometimes it is incredibly challenging to find instructors who are skilled, charismatic and reliable. When you do find them, how you compensate them will significantly impact how loyal they are to your studio.

Below we have distilled the debate on how to pay instructors by outlining the popular instructor payment models, the business pros and cons and best practices on how to retain your teaching talent.

There are two widely used compensation models: flat rate and paid per head.

What is a flat-rate model?

The flat-rate model can either be an hourly wage or an agreed-upon rate per class. Hourly rates are usually applied when the instructor is an employee and paid per class when the instructor is an independent contractor. Whether or not fitness instructors should be employees or contractors is a hot topic of discussion.

Flat-rate — hourly wage

Business pro: Simplifies your financial payroll projections and keeps financial expectations clear with instructors. Minimizes negative instructor competition.

Business Con: Does not financially incentivize instructors to recruit students to classes.

Common mistake: Paying your instructors only for the minutes they are teaching the class. Instructors are “on” the minute they walk through the studio door. Your clientele knows who they are, will ask them questions about the facilities and want to chat because, well, instructors are like mini-celebrities. Your instructors are working and representing your business from the moment they arrive to when they leave the building and should be paid for their time before and after class.

Best practice: When you sign a new instructor, let them know that you would like them to arrive 15 minutes before class and stay 15 minutes after to build client relationships and assure them they will be paid their regular rate for that time.

Flat-rate — wage per class

Business pro: Simplifies your financial payroll projections and keeps financial expectations clear with instructors. There is no hassle with staff clocking-in and out. Minimizes negative instructor competition.

Business Con: Does not financially incentivize instructors to recruit students to classes.

Common mistake: Forgetting, not having time for, or not being willing to give your instructors a raise. We all respond to positive reinforcement and just like other professional industries. Fitness teachers have the right to a review process and potential raises. Implementing instructor reviews will motivate your team to prioritize teaching at your studio, perform well and remain loyal staff members for months (hopefully years!) at your studio.

Best practice: Set up an annual review with your instructors and use this opportunity to give and receive feedback. Thank your teachers who have shown improvement, dedication and professionalism with a raise. A proactive approach to rewarding excellent teachers will give your studio a good reputation in the teacher community and you will have a better applicant pool of instructors in the future.

What is a pay per head model?

With a pay per head model, instructors are paid an agreed-upon dollar amount per student that attends class. This amount varies widely in the industry and some business owners keep it simple by paying the same amount to the instructor per head regardless of what kind of pass the client redeems. Another way to do it is to pay the instructor one amount for clients who are studio members and another amount for “discount” clients who are redeeming a pass from a promotion.

Pay per head

Business pro: Encourages instructors to market their classes and recruit clients.

Business con: Makes financial payroll projections less certain and creates financial instability for instructors because class attendance is unpredictable. Creates a negative competition between instructors. Can create a scheduling nightmare if instructors do not want to teach certain class times.

Common mistake: Using this model when you do not have consistently full classes during all class times. If your studio is not yet selling out the majority of its classes, the pay per head model creates a competitive, resentful vibe in your staff. Not all class times are created equal – a 10:30 a.m. class will hardly ever have the same turnout as 6:30 p.m. class. If you think that competition is a good thing because it stimulates instructors to work harder to get good class times, pause and reconsider. This is not the inspirational kind of competition. From the instructors’ point of view, this could be a matter of financial survival and even endorphin-high humans can get vicious when their monetary stability is threatened. Your clients will pick-up on tension between instructors and between staff and the management – not good.

As if the class time issue wasn’t enough, add in the impact of seasons, extreme weather, weekends and holidays, and you have an environment where teachers feel disappointed by lower than expected class numbers and stressed by the unpredictability of their paycheck. Teachers may start to lose their vigor for teaching and sub out their classes more often when financial conditions are not optimal.

Best practice: Ditch the pay per head rate model and adopt a flat rate + pay per head bonus system.

Combined flat-rate and pay per head models

In this model, a flat rate is set, and regardless of how many students show up, the instructor will be paid at least that amount. In addition to the flat rate, the teacher can earn more if the class size surpasses a certain number of participants and they get paid an additional “bonus” per head. For example, the flat rate is $40 and the per head bonus is $5: if the class has 10 people the teacher will be paid $50 ($40+(2X$5)). In this example, if the class attendance is eight or less, the teacher will be paid $40 because they are guaranteed that base rate.

Business pro: Motivates instructors to recruit students and deliver high-quality performance without brewing unhealthy competition. It’s a more stable source of income for instructors than the simple pay per head arrangement.

Business con: Teachers may still be competitive about class times and disappointed when their attendance is low.

Common mistake: Not putting a cap on the flat rate + pay per head bonus.

Best practice: Do an analysis of how much you are going to pay teachers with different possible class attendance and consider how many  “freebies” you are giving out per class. To find your optimal flat rate, per head rate and the max a teacher can earn for one class, you have to run the numbers. Try a few different formulas and consider how much you are making from clients. Remember that promotions, such as a client using a free class will impact your net revenue for the class.

Phew, that is a lot to take in! Remember, when you are choosing the best instructor payment model, you want your studio compensation program to attract teachers, inspire them to improve their skills and their class size and be sustainable for your business. The longevity of a healthy fitness business is deeply woven with the quality and positivity of your teachers – consider the cost of living in your city and additional perks you can offer your staff to create a win-win attitude at your studio!

Caitlin Rose Kenney is a member of the Studio Happiness team at ClassPass in New York City. She’s a yoga teacher and former studio manager with a passion for professionalizing the fitness industry.