Posted on Leave a comment

Retaining Your 1099 Independent Contractors

I’m always asked how I retain such good professionals over several years, especially when they are independent contractors. It’s not easy – keeping 1099 workers at your facility is a tough task. But it’s possible and as the saying goes: paying your instructors handsomely for hours on the tennis court or gym floor speaks volumes.

So, with independent contractors (and you can do this with employees too) I create an inventive program for each professional, based on their strengths and weaknesses. It’s a pinpoint method of keeping staff happy and therefore keeping them coming back year after year. A returning staff ensures continuity with the membership as well as a better return on investment. If your professionals are strong and come back year after year, their lesson books get more and more filled as they are trusted by the membership and loyal to the club or facility.

Incentivization Programs

Incentivize them to “hang” around. We all know that independent contractors set their own schedules and are not on “the clock”. They can come and go as they desire. But I like to have them hanging around, especially if they have three or four years under their belts and the membership trusts them. I create an incentive to keep them around. Commissions on racquet and clothing sales. If you have a busy shop, they can help and earn a bit while even off the court. Why not pass on a 3% commission on all racquet and clothing sales and build that into your pricing at the beginning of the year. They have a sliding scale based on the number of racquets they string – the more they string, the higher the rate goes, say, every 5 to 10 racquets.

Use Tournament Fees To Cover Lost Teaching Hours

Round robins and mixers, along with tournaments, are a great way for new pros and contractors to meet members, assess levels of play or fitness, and become part of the fabric of the club. Too often, independent contractors see tournaments or mixers as a barrier to their success: They take up too much court time away from teaching and they just take up a weekend where members who are playing in a tournament could be taking a lesson or two. That could be how your independent professional sees it. But tournament fees (also known at some clubs as prize fees) should be aimed at serving those losses due to lack of court time. The industry standard is that the Director takes 40% of tournament fees/prize fees. Those fees should be distributed, in part, to contractors who are running say the other side of the round robin, or can even be offered as a replacement for lost revenue due to a lack of courts. Either way, I would rather have the professional be on club property and helping to run a tournament or supporting the program than at another club and finding work elsewhere.

When negotiating your own Director’s contract, look at how you could work with yearly prize fees. I find these easier to administer. A prize fee is fixed for a whole year – say $100 per member household – and that allows all family members to sign up for each and every tournament. The more the household plays, the more this cost is dissipated in their minds across each tournament. This is a vital additional income and if the Director takes a 40% cut leaving 60% for the club and prizes, it can prove very lucrative and easy to pass on to cover lost revenues for your pros. I always advocate a yearly fee rather than a nickel and dime approach where the club charges per tournament. I feel this dissuades members from playing, thinking that each time there is an additional cost to play.

To take this further, why not add an incentive to your pros in growing club championship or member-guest draws? If you budget this into your tournament prize fee revenue, you can offer your pros additional income per member they sign up or if, say, the draw reaches 32 or 64. Communicate your goals and reward the work. I have, in the past, given bonuses to pros who have brought a guest to the club and in time that guest has joined as a member – set that up in your initial contract with your club as Director. Most clubs that I know want new members!

Private Instruction Sliding Scale

I’ve always cringed when a Director told me that my hourly rate will be, say, $45 per hour on court across all clinics and lessons. That is such a door-closer for me to a new job. It’s just not interesting to most instructors.

Let’s say, for arguments sake and ease of math, that an hour private lesson with one of your contractors is charged out to the member at $100. Industry standard is that 10% of that fee is either a commission, if an employee on court, or a court rental fee if an independent contractor. Remember, that independent contractors cannot receive a percentage deducted from their full rate by federal law and continue safely as an independent contractor. So, after the commission or court rental, the $90 then goes back to the Director. Usually, depending on your instructor’s experience, the cut between Director and instructor hovers around 50%. So, say, the instructor receives $45 per hour and the Director received $45 for that one lesson. Now, let’s look at how to incentivize your instructor. Say you go out at $110 for a semi-private, two-person lesson. Now a 50-50 cut would be $50/$50. Both Director and instructor make more if you incentivize your instructor. If your instructor does a three and me, which would go out at $120, that would be $108 back to the shop and a $54/$54 split. All too often, Directors take all the additional revenues, leaving the instructor at the original $45/hour cut. But, if you offered more for three and me lessons, you’ll have more members taking lessons as it costs a single member only $40 compared to $100 and yet they are still receiving personal instruction. More participation on court means happier members, an energized program, and more hours for your pros on court.

There are other ways of incentivizing your 1099 workers with “Playing In With The Pros” special rates and discounts. But starting with the private lessons and adding revenue and passing those additional revenues is an enormous and positive factor affecting your contracted professionals.

Bonus Structure For Clinic and Tournament Programming

Adult and junior clinic programming is by far the most profitable part of any tennis and fitness departments. With classes, revenues are higher with costs of instructions being lower. Again, you can energize your instructors through creating a bonus, or “profit-sharing” structure within your programming.

If your instructor is out there getting additional people on court, give that instructor a share of the profit. They will be on the phone drumming up business. You can either have a “fee” per person added to the clinic through the phone or email or text marketing completed by the instructor, or you can have a simple formula where each additional court or group of spin bikes is a set fee to the lead instructor of that clinic. For established clubs, this is harder as classes are usually already known, but for a new Director, this is a great help to get members out on the courts with one-to-one personal marketing.

Conclusions

To summarize the above, think outside the box. Within a tennis or fitness department -and whether it be employees or independent contractors – there are so many ways to enrich your staff’s tie at work and to allow them to feel to be a part of a club or facility and membership. The world is your oyster and each year you can try different approaches within your fee and payroll structure.

By Ed Shanaphy, USPTA Director of Tennis and President of Beyond The Baselines, a consultancy aimed at assisting boards and committees to bringing “Best-In-Class” programming to their clubs and facilities.

 

 

Posted on Leave a comment

Independent Contractor or Employee: What’s Best For My Club, Facility or HOA?

W2 or 1099?

This question rears its ugly head every time there is a change at the head of the tennis, and sometimes golf, programming. As the country club industry in the USA contracts and clubs look to minimize costs, more and more often Directors of Tennis and, indeed, assistant professionals, are independent contractors and not employees. But, this savings in costs can come with a heavy loss in control over the tennis staff. This must be weighed by any Board or Committee before deciding whether to have your tennis staff as independent contractors.

Don’t Fall Foul Of The IRS!

It’s simpler in legal terms, and for the IRS,  if the Director and his staff are indeed all employees of the club. For the club’s owners, whether a member-owned, equity club or a business operation for profit, this action brings the entire department under the umbrella insurance policy covering the club’s facilities and brings the tennis staff under the worker’s compensation policy as well, which is indeed an important benefit to any worker. Clubs in recent years are preferring this easy method of controlling, insuring and employing their Directors of Tennis.

When tennis staff are employees, it’s easier for the club to track and record remuneration and compensation. Billing and revenues go through the Club – often, when the Director is an independent contractor, he or she bills the members directly for all revenues and leaves the Club without the knowledge of what the position may be worth financially. This is a tough situation when it comes time to hire a new Director. In many instances clubs are left without information, usage numbers and financial profit and/or loss reports.

When housing is involved, especially at seasonal clubs, technically housing paid for and provided by the club is a benefit in kind and is taxable. If an independent contractor is in the housing provided by the club, this becomes a liability if the independent contractor  doesn’t claim the housing as a benefit and it is found out later that this housing was indeed provided. It is quite easy to deduct this taxable benefit if the professional is an employee.

Basically, as an employee, the Director of Tennis and his staff are far more under the control of the country club or facility hiring them. Whether on the clock (and that is another issue we will look at in the coming articles) or salaried, the Director and his staff must be on duty a certain number of hours and have to answer to an employment contract and usually an Employee Handbook. As an employee, the Director can be told when to take time off, how to teach, and when it might be needed to attend departmental head meetings and management conferences.

Independent Contractors

The classification of independent contractors is in and of itself a bit tricky. There is a 20-point test that the IRS will put any club through to prove that their tennis staff are indeed contractors, and not employees of the club. In many cases, we would say in the majority of cases, clubs have mis-classified their independent contractors who are essentially employees.

There is a three-question simple test:

  1. Behavorial Control – Who keeps the schedule of the independent contractor? If the schedule is kept by the Club, then they are exerting control over the worker and that worker is an employee and not allowing the contractor to pursue work elsewhere. The Club cannot at any time tell the independent contractor when or how to work. Does the Club in any way tell the independent contracted professional how to teach or who to teach at certain times? And does the Club dictate what tools to use or provide tools (baskets, balls, etc). If any of the above questions are “yes” then you are most likely falling foul of the independent contractor classification. Remember, the view of the IRS is that the member taking a lesson or clinic from an independent contractor is a client of the contractor, not of the Club or the Director (if an assistant professional is teaching the lesson or clinic).
  2. Financial Control – Does the independent contractor stand to lose money in the teaching at the Club? This would mean that your tennis professional could lose money as an independent contractor through un-reimbursed expenses. In most cases, especially with assistant professionals, this is not the case. In most cases as well, the independent contracted tennis professional will have several facilities at which they are teaching and therefore the reliance on one facility or Club would often point to mis-classification.
  3. Business Relationship between The Parties – The IRS will often look at whether the work being offered is “indefinite” or by “project” and will also look at if there are benefits usually reserved for employment status: housing, along with employee food offerings, can run a Club afoul on classification.

Perhaps where clubs misunderstand the difference between independent contractors and employees in a tennis shop is the so-called “lesson” book. By law, an independent contractor is required to keep his/her own schedule. A club cannot dictate when or how long an independent contractor must be on-site or teach, or even discuss how to teach. In reality, the IRS would say that a club tennis shop cannot book a lesson for a member with an independent contractor – that member is a customer of the independent contractor and must book directly with the professional under this classification and pay the independent contractor directly to avoid any wrongdoing. When faced with this issue, there are many ways clubs may give incentives to the independent contractor to make the club and its members a priority, but again,  it is easy to fall on the wrong side of the tax law and classification.

So the Club must weigh the loss of control as noted above with the savings gained by not having costs associated with employees: tax, 401k, food and housing benefits, worker’s compensation and other costs. The decision should not be taken lightly but can easily be changed if needed by revising contracts and employment status and housing leases.

At Beyond the Baselines we work within the club structure to help management and member-filled committees which would be best for their facility – employee vs independent contractor. Often it is the environment and the ethos of the club that will make the decision for us, but sometimes the decision is more about financial and time controls. What will your club offer? A W2 or 1099

Coming next week:
Exempt versus non-exempt tennis professionals.

Coming in October:
How to create incentives for independent contractors. 

Posted on

What is a Director of Tennis

Not more than a few years ago, the department head at a country club was the Head Tennis Professional. Terminology gives us a hint as to what has happened in the country club industry over the past two to three decades.

The Head Tennis Professional is a position, as guessed by its title, usually focused on teaching and on-court instruction. In the past, this position was the Department Head at the club management level. In today’s modern country club employment tree, Head Tennis Professionals exist usually in a role just under the Department Head.

These days, most clubs now have an extra layer of management within the tennis department – The Director of Tennis now serves as the Department Head. With the cost of club membership rising and the actual number of country club memberships declining over the past two decades, the need to service the elite memberships with a concierge level of service is more and more expected in line with higher membership costs  Many clubs, which offer the growing sports of paddle tennis and pickleball along with the traditional racquet sport of squash, may indeed have a Director of Racquets above the Directors of Tennis, Squash and Paddle.

The Director of Tennis is a largely undefined role as we move into the next quarter of a century. What we are seeing as the industry changes is that the Director picks up the pieces across the department. Whereas the Head Tennis Pro was really just a glorified head instructor, the Director wears several different hats, all of which require training and competence in not only tennis, but tennis and social programming, marketing via email, email, texting and website, along with knowledge in insurance liability and payroll processing and employment law.

Perhaps the most notable statistic in any Director’s job description is that almost 100 percent of the job descriptions for Directors limit the amount of time the Director should be spending on court. This limitation in effect leaves time for the Director to be the “in-house” concierge, administrator and cross-marketer that is necessitated at any club, no matter size or location. The focus in hiring a good Director of Tennis should not only be on his or her tennis playing and teaching skills, but those skills the candidate possesses in relations to running a business – as the racquets department in any club is now seen more and more as a separate business within the club as a whole, with cross marketing between the various businesses (food and beverage, golf, and spa) as an integral ingredient to a successful club operation.

Posted on

The Retention Equation

business handshake

Tips For Retaining A Director of Tennis or Head Tennis Professional

Retaining a Director of Tennis, as the economy improves, is one of the hardest tasks facing a country club. A great Director may be approached by a panoply of other clubs as he or she makes a name for his or herself in the industry, and keeping that Director happy at your club is a salient responsibility.

The most important initial factor into the retention equation is that the Director’s qualities and strengths within the industry fit the requirements with your position, the club, and the environment in which the role exists. This is why it is important to have a very strong job description which is related to the past issues and the future goals for the club.

Usually, the opportunity of hiring a new Director of Tennis or Head Tennis Professional is a chance to reflect on how the previous holder of the position could have improved the department and program from the members’ perspective. A survey of the membership is a wise choice to encompass not only the membership in the idea of hiring a new pro, but also garnering ideas and viewpoints of the program that a smaller committee of members may not see or even be aware of.

Secondly, the pay must be commensurate with the level of job and the level of the applicant. Pay for a Director can be handled in many ways, between salary and on-court revenue along with merchandise and stringing sales. There appears no stead-fast or formulaic basis for compensation across our industry. That being said, a search committee needs to have reference materials and comparisons to other local, area and regional country clubs to ensure that their compensation is in the appropriate neighborhood in terms of pay scale. Both committees and candidates for any position should check what the local and regional compensation levels are as well as on-court fees at competitive institutions.

In today’s stressful world, the work environment is very important to any tennis professional. From the ethos of the club and its members through to how Human Resources reacts to employment issues, the workplace needs to be a happy and enjoyable location to help retain good professionals. Employment benefits, especially to the younger professional starting out and the older professional who might be facing some health issues, are increasingly more in demand across our industry.

The relationships at the country club are extremely important to the professional in regard to job satisfaction. The relationship between the other department heads at a club along with the bond between the General Manager and, at larger clubs, the Assistant General Manager and Accounting are crucial. The bond between management and the tennis department is crucial as it helps solidify the tennis professionals base within the club structure and cash flow for the bottom line.

Finally, the support of the tennis committee or the board is integral. Often, a new hire is not supported by the entirety of the committee. Several reasons, we have seen from our work, can provide a splinter group within a committee: the letting-go of the previous tennis professional; the way in which the search was conducted to find a new pro; the decision on the new hire might not have been unanimous; the lead candidate turned down the job offer. All of these and more need to be hammered out – and often it takes a mediation from a third party to help all committee members understand the need for solidarity.