Percentage of Performance Revenue Payroll Model (Detailed)
Union offers a unique payroll rule called the % of Performance Revenue, designed to align teacher compensation with the actual revenue generated by their classes. This model provides a more sustainable and accurate way to pay instructors, especially in comparison to traditional flat-rate or per-head payment models. By tying teacher pay directly to the revenue their classes bring in, this model ensures that both the studio and the teachers benefit from the true value of their work.
What Is the % of Performance Revenue Payroll Model?
The % of Performance Revenue payroll model is a way to pay your teachers based on the actual revenue their classes generate. Unlike traditional models that pay a flat rate per class plus a bonus based on headcount, this model ties teacher pay directly to the money earned from student registrations. This approach ensures that teacher compensation reflects the true value they bring to your studio.
Why Consider This Model?
- Fair Compensation: Teachers are paid based on the actual revenue their classes bring in, making it fair and directly tied to performance.
- Sustainable for Studios: Aligns teacher pay with studio income, helping to avoid overpayment, especially in fluctuating attendance scenarios.
- Encourages Engagement: Teachers benefit from promoting their classes and encouraging student attendance since their pay increases with revenue.
How Does It Work?
Example 1: 5-Pack of Classes
- A student buys a 5-pack of classes for $100.
- The value per registration is $20 ($100 / 5 classes).
If the student attends a class, that class generates $20 in revenue.
Example 2: Monthly Subscription
- A student pays $100 per month for unlimited classes.
- If the student attends 30 classes in a month, the value per registration is $3.33 ($100 / 30 classes).
If this student attends a class, that class generates $3.33 in revenue.
In the % of Performance Revenue model, the teacher is paid a percentage of this revenue. For example, if the studio allocates 25% of revenue to the teacher:
- For the 5-Pack example, the teacher would earn $5 per registration ($20 * 25%).
- For the Subscription example, the teacher would earn $0.83 per registration ($3.33 * 25%).
Comparison: Different Payroll Scenarios
Scenario 1: Lower Base Rate with Higher Percentage
- Base Rate: $15 per class
- Percentage of Revenue: 25% of total class revenue
Scenario 2: Higher Base Rate with Lower Percentage
- Base Rate: $25 per class
- Percentage of Revenue: 10% of total class revenue
Example Class Revenue Breakdown
Total class revenue: $74.32 (as calculated previously)
Scenario 1 (Lower Base, Higher Percentage):
- Base Rate: $15
- 25% of Revenue: $74.32 * 25% = $18.58
- Total Pay: $15 + $18.58 = $33.58
Scenario 2 (Higher Base, Lower Percentage):
- Base Rate: $25
- 10% of Revenue: $74.32 * 10% = $7.43
- Total Pay: $25 + $7.43 = $32.43
Which Scenario Is Right for Your Studio?
Scenario 1 (Lower Base, Higher Percentage) encourages teachers to drive attendance and engage with students, as a significant portion of their pay depends on class revenue.
Scenario 2 (Higher Base, Lower Percentage) is more stable, offering teachers a higher guaranteed pay with a smaller bonus tied to revenue, which is ideal for those who prefer consistency.
The % of Performance Revenue payroll model offers a fair, transparent, and sustainable way to compensate teachers by aligning their pay with the revenue their classes generate. By clearly explaining the benefits and addressing common concerns, you can help your teachers understand and embrace this model, ensuring a smooth transition and ongoing success for your studio.