Winning insights on self-employment for salon owners
So today I ‘m going to delve into the world of self-employment. A phrase often shrouded in mystery and a little apprehension at times. Having spent many years as a self-employed stylist myself, I can fully endorse this system in the context as a hairdresser.
In this article I will discuss the different types of self employment, the pros and cons of each one and which option works best for you as a salon owner.
Let’s dig in shall we?
I’ll start by looking into the different types of self-employment and the distinguishing factors between each one.
1. Rent a chair
This is where the stylist pays you a set amount determined at the time of their ‘employment’ (I use this term loosely throughout this post as they are of course not employed! But for the purposes of explaining, you get the gist!) The stylist is literally paying to rent their space within your salon, hence the name!
The plus point with this option is you know how much you will earn – as predetermined at the beginning. This is also a positive as you are renting them a chair or a position in your salon. Consequently, if they are away for any reason – you will still earn money as a result.
The downside with this is as a salon owner, you are capping your earnings in a way. As you have already concluded with the stylist that they pay you ‘X’ amount so anything over and above, belongs to them.
Salon Saviour tip
This shifts the responsibility of client acquisition and retaining of new clients onto the hairdresser.
2. Percentage of earnings
This is where the stylist pays you a prearranged percentage of whatever goes through the till. Alternatively, as the salon owner, you can pay them a fixed percentage of their earnings. It works either way. You must also establish exactly what this amount covers. It could be the use of all products within the salon up to and including colours for example. It could also include the use of the junior apprentices and/or receptionist, brushes, electrical equipment… you get the idea! The list is endless and ultimately your decision.
The benefit of doing things this way is the increased earning potential that comes from having busy and productive stylists. The amount you can make is limited only by the amount of work each stylist can fit into their column on any given day.
The negative side to this is unlike the rent a chair option where you will be paid a fee regardless of the stylist being there. Having a percentage of their earnings means if the stylist is off for any reason – you get zero!!
Although on the flip side, it does offer incentives to staff too. As aforementioned in my point before and how you won’t get paid if they don’t attend work, neither does the stylist.
Salon Saviour tip
In this instance, the responsibility of managing clients is shared between employer and employee, as both will benefit from increased business.
3. A mixture of the two
This approach combines both the rent a chair with the percentage earnings.
Let me explain in more detail… so here you may charge a standard amount to use the salon premises say. Then charge a smaller amount for each service performed. For example, you may charge £150 as a weekly flat rate, then 40% of every colour treatment and 25% of cuts etc. Salon owners often request a smaller portion for cut and blow dry services, as it is usually only the stylists time and own equipment utilized here. Therefore it can be a more cost-effective approach to adopt a lower fee from them.
This option is definitely better for you as the salon owner. As you get the best of both worlds in effect. You have your guaranteed income allotted from the rent a chair. Then a bonus share of the money earned via the treatments. Again the division of the money generated is up to you and whether or not you provide the equipment or whether that is up to the stylist.
The drawback is some staff feel opposed to this system as it does favour the salon owner. Which could be detrimental to your business if staff feel undervalued.
A good way to combat this dilemma would be to ensure your amounts are a fair representation of the work they accomplish and is subsequently a win-win.
Salon Saviour tip
The management downside of this system is the complexity of administering it. Which in itself could be an obstacle.
So if you're just starting out, which system is best?
Generally speaking, salons save money with freelance or in other words self-employed staff. Namely for these reasons:
- Not obligated to pay statutory sickness or maternity pay
- Holiday pay also comes under this umbrella
- National insurance: This is the responsibility of the stylist to pay themselves by filing a Self Assessment tax return.
They are not under contract as such, therefore you are not bound by the legalities in the same way. However, I would strongly advise some sort of contract to be put in place, as it gives you some control and protects both sides.
A few points to think about when getting a contract drawn up. You may wish to include:
- Length of contract. Will it span for 1,2, 3 years or less potentially?
- Dismissal. On what grounds can you dismiss the stylist if mandatory.
- When do they work for you? (Hours of operation) This is a tricky one to broach, as being self-employed technically means they are not paid for the number of hours worked much like a traditional job and they have the choice how many days/hours they wish to work.
- What happens to their clients if they are off sick? Here you would need to state whose responsibility this is. Do they call their clients to rearrange? Or is it up to the salon?
- How do you deal with client payments? This depends on your setup and whether you decide have employed members of the team, or your employ your staff. In my experience, I paid a percentage to the salon owner but also paid for the use of the card machine within the premises. All payments (cash & card) went directly to the owner and I had my wages paid into my account minus their allotted amount. If you accept cheques, do they get made out to you the salon owner? Or the stylist themselves? This all needs to be distinguished beforehand.
- Are you responsible for helping them obtain clients and marketing them? Again, this will be determined by how you choose to run your business. Referring back to my point on the preceding topic and if your staff are renting a chair or paying a percentage of earnings.
- Who provides the equipment? This would again depend on the type of employment you select and is your prerogative as a salon owner. A general set up would be the stylist provides all small equipment namely scissors, combs etc. And you might provide hair dryers, brushes and use of colours for example.
- Can they use the apprentices/receptionist? This is again dependent on your agreement from the start of their employment or self employment and the type of contract adopted.
Disclaimer: Always seek legal advice prior to any decisions regarding your salon and team. Get a trained lawyer to advise and review any document representing your salon. The National Hairdressers Federation offer proven contracts, specifically for rent a chair. So do go check it out.
Hopefully this post will help you make a more informed decision when it comes to your pride and joy!! I hope this has helped hold your hand somewhat through the minefield that is self-employment and figure out the best fit for you and your salon moving forward.