Paying Your Stylists: Booth Rental, Salary or Commission for Salon Owners, Which Should You Choose?
Salon owners and stylists have different ways of paying stylists. They each have their advantages and their disadvantages.
In a salary model, the salon owner pays a straight up salary or salary base to the stylists. There may be additional commission-related perks.
For the salon owner, you know that your salon will be staffed. If you have lots of walk-in business, you will have the personnel to handle the rush, particularly on weekends. You also will be developing a cadre of team members, who (we hope) will want the salon to be successful. You can train your employees and set the rules for procedures and have a group of people who do social media that benefits not themselves only, but also the salon. Employees can focus on styling hair and not the other aspects of the business.
You pay for personnel, even if it’s a slow day or even a holiday. Having a combination of salary and commission can make this a little less costly to salon owners. You have to handle all of the payroll, the benefits (which you may be obligated to offer, depending on the size of your work force) and you clearly must supervise and manage everybody. If somebody isn’t a good fit, you may also be hit with unemployment compensation charges if you let them go.
The Commission model is a very common set-up. Stylists retain a portion of their service fees (which they typically set) and must turn over a certain portion to the salon owner in commission. The stylist should partner with the salon owner to build up business, as they both benefit.
Advantages: The commission model prevents the owner from having to pay stylists when there is no business, although both suffer from a lack of income in that situation. Commission structures can also favor stylists who are diligent about selling product. Stylists on commission have a vested interest in the health of the salon and are ideally team members, which should make them want to be a part of salon promotions. Employees on commission are team members and look to you for direction and want the salon and its business to continue to grow.
Disadvantages: Commission-based stylists can become competitive with one another, perhaps to the detriment of the client and the salon. Salon owners are still responsible for payroll and payroll taxes and benefits, if applicable. Salon owners have to be absolutely diligent in keeping track of commission records and may need to come up with fair systems to deal with walk-ins, difficult clients and being sure that salon tasks get done even if there is no commission related to them (clean up, decorating for holidays, picking up the phone if the receptionist is busy, etc.) The major problem with commission is that you are in competition with other salons, who may promise more traffic or higher commission rates. Stylists are going to constantly compare their commission revenue with the possibilities of booth rental and may leave you. Turnover can be high.
Salons that run on booth rental system have an entirely different pay structure. The stylist is essentially renting space from you and certain supplies. They are responsible for bringing in their own business and collecting their own service fees. They pay a monthly or weekly fee to the salon owner and certain other fees for add-on services. You are not a manager, but more of a landlord.
The salon owner has no obligation to do payroll (stylists are independent contractors), and only has to be sure to collect the booth rental and have a system for vacations or leave (What’s the policy regarding booth rental during maternity leave or holiday time?). You can bring in a whole variety of really different types of stylists, so that your salon serves all types of clients or you can try to rent to people whose clientele will meld with your current customers. Booth renters have a true incentive to stay busy, which helps the salon.
The stylists are not necessarily part of your team, so it is up to them if they want to sell product and also what their price structure is They may have their own procedures and their own ways of doing things. There can be competition among stylists, and the salon owner has to come up with a system for walk-ins and particularly busy times, as each stylist sets their own hours. Stylists may or may not wish to participate in promotions or salon-wide initiatives and may be eyeing their options at other salons.
You have a lot of choices to make regarding stylist pay structure , depending on your personnel needs, your walk-in traffic, your ability to pay commission, the relative attractiveness of your salon vis a vis your competitors and the makeup of your clientele, as well as your ability and desire to manage and supervise and team build.