There is no doubt that the fastest growing segment in fitness over the past five years is in the area of personal training, and more specifically in the past two years, in small group personal training. Even the big box gyms understand that they can no longer rely exclusively on revenue generated from membership base for monthly billing. These club owners know that personal training can not only operate as its own profit center, it ultimately affects the renewal retention of those gyms that rely heavily on membership sales. Every club owner understands the potential revenue that can be generated from personal training but most still struggle with the best method to bring personal training into their business model.
Often when club owners decide to get into the personal training business, they try to do it as inexpensively as possible. Of course, they want to avoid the added expense of hiring more employees and no one likes the idea of having to pay all of those employment related taxes and workers compensation costs. Taking the simple method of making trainers “independent contractors” is where things can get tricky and even end up destroying the club.
If you are a club owner that currently uses independent contractors to run your personal training and/or group exercise classes, I HIGHLY recommend that you google the phrase; “Independent Contractor vs Employee”. You will find very specific information from the IRS and the Division of Labor Standards Enforcement (DLSE) that will scare the hell out of you. Independent contractors and employees are not the same, and it is vital to your business that you understand the difference. If you wrongly classify an individual who behaves as an employee as an independent contract you may have to –reimburse them for wages you should’ve paid them under the Fair Labor Standards Act, including overtime and minimum wage; pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment; pay any misclassified injured employees workers’ compensation benefits.
If you are a club owner who wants to convert your employees to independent contractors, my recommendation is that you don’t. A better business model for club owners who want the added revenue without the headaches of running a personal training business should simply “contract” with a personal training company. This model of business will give you the same results without the fuzzy lines between a 1099 and a W-2.
