I’ve worked in the field for decades and have never been paid for prep time. It is kind of like when you own a studio or training business and there are the hours you are actually with clients/students, like the tip of the iceberg you see, and all the other time that is below the surface you do not.
You bring up a good point…. good instructors have always spent a lot of time honing their craft, and then extra time preparing the room and shutting it down. It would certainly be a motivator to provide compensation for that time, and I suspect would benefit your studio by making you a very popular place to work. However, you are right that it can be hard to figure out how to do it.
A couple of thoughts I have is that you could offer it as, say, once a week offer an hour or two paid time at the facility where people come in and share choreography, can use the equipment to mix their music lists, can use the equipment to work on new ideas…. you could even have one of the master trainers available as a mentor to bounce ideas off of. Maybe once a month also have a paid training that offers CECs…
Free CECs are a huge cost savings to instructors, and improve everyone’s classes.
Offering money for outside the facility training is also great. …. I know I would take more workshops than I do if part of the cost of travel were paid.
And, of course, if you pay on the high end of the local standard, and explain you do so to encourage extra prep and training, to reflect the high standards in your facility, that would be very well received as well.
I do think you need some sort of structure to pay for prep time, but the fact that you are actually thinking of treating your instructors as professionals makes me want to work at your facility.