Working through the details required to ready your salon to open or for existing salon owners, paying your employees is an important consideration. There are a number of methods you can choose from to compensate your employees. Consider the tax and payroll situation in your state and your comfort level with each before choosing a pay system.
Sliding scale commission is an incentive-based earnings plan. The more your stylists sell, the higher the percentage of the sales a stylist earns. For example, if a stylist sells $100 of product and services, they earn 8 percent. Those who sell $101 to $200 earn 16 percent of the sales total.
While there is not one best system for everyone, being aware of what each payroll system entails is a key component for your decision-making process. Remember pricing at salons differs state to state. Continue reading for information on compensation plans for hair salons.
Details of a Sliding Scale Commission
Your goal with any compensation package is to retain valuable employees. In addition, you want a loyal base and steady stream of customers. Many owners feel that the sliding scale commission method is a great way to achieve employee retention and repeat customers.
The intent of a sliding scale payment method is to incentivize your employees to increase their sales. Stylists at salons that use this payroll practice are usually employees of the salon. Since they are employees of yours, as the employer you have obligations to them as they do to you.
For you as the employer, your employees must follow the salon’s guidelines on work expectations. You set the schedule, pricing for services, and the services that the salon will offer. As the owner, you also determine the components of the commission package.
Furthermore, as you consider your compensation plan, remember you are also obligated to laws that regulate employment and benefits. FLSA, Fair Labor Standards Act requires that what you pay your employees must at least equal the federal or state minimum wage. You need to meet whichever is higher of the two – federal or state. There are also overtime wages to consider.
When determining your commission rates, do not set the percentage so high that you are not a profitable salon. This would not benefit anyone. Ranges between 40 to 50 percent are most common. Included in the sales, are the services performed by the stylists and the products sold by the employee.
Negatives to consider, this can create silos of employees. There is not an incentive for teamwork or salon goals. Stylists could feel as though they are competing with each other. This can change the climate of your salon, which can adversely impact your business. Also, in this model, you have created customers loyal to a stylist, not to your salon. If the stylist leaves, so do the customers.
However, a sliding scale encourages stylists to keep a full booking of customers. You as the owner want all the chairs filled and styling products sold. A sliding scale can help you accomplish both.
How much should you pay yourself as a salon owner?
Salary or Hourly Compensation
For employees paid by the hour or as salaried, they have the benefit of knowing what they will earn each week. You as the owner can set the pay rate for your employees. Rewards for working toward a fully booked chair can be included in your pay rate calculation. For new stylists, who do not have a solid client base, this will make you an attractive employer.
Recognizing teamwork can also be done through this pay system. Employees who always help cleaning or folding towels can be recognized in their hourly or salaried pay. Pay based on productivity can foster a supportive climate; one in which your customers will benefit.
Stylists who always have a full schedule and sell products reach maximum earnings under the sliding scale commission. Using a salaried system, these employees can be further recognized monetarily. They bring consistent business to your salon. Additionally, these regular customers will typically be sharing their satisfaction with your salon. This can bring new business to your other stylists.
As the owner, you need to select a compensation method that you are comfortable with. The goal of any employee payment plan is to attract and retain stylists that share the goals of you and your salon. Your employees need to be compensated at a fair wage for their work; you need to make a profit so that the salon is successful.
Blended – Hourly and Commission
Another plan to consider is a hybrid of hourly and commission. Paying a new stylist an hourly rate while they build a client base will attract recently licensed employees. You can then move the stylist to a commission base after building a clientele. On the other end, with stylists who reach the maximum on commission earnings, you can pay them hourly (a higher wage than the new stylist) and a percentage of sales.
You can also develop a profit-sharing system. This involves everyone in the salon. A combination of product sales, services, and productivity is required. You need to calculate the options. Typically to convert to this system, you will pay your employees more per hour than they were earning on a commission basis. Everyone in the salon must support each other. It necessitates a change in philosophy.
Separating Product Sales
In the sliding scale pay system, product sales are usually part of the total sales on which the commission is determined. You can separate product sales as its own category. Monthly goals can be set. On these achievable sales, you can then reward your stylists with a percentage of their sales.
Paying for Seminars
Another separate incentive you can set up for your employees is money toward further training. The salon business and products available are continually changing. Having employees who are knowledgeable about both will help develop and enhance the positive reputation of your salon. Creating a recognition system in which stylists can attend training sessions that the salon pays for, is a benefit to you and your employees.
What does it mean when a salon says it rents chairs?
When a hair salon rents chairs, a stylist can choose to work independently at a salon. The stylist is not an employee of the salon; they are similar to a renter. Booth-rental stylists pay a fee to use the chair. Their earnings are theirs after paying for rent.
How do most chain hair salons pay their stylists?
At most chain salons, hair stylists are initially hired at an hourly rate. Frequently, stylists can earn bonuses for performing predetermined number of haircuts an hour or work shift.
What is an independent stylist?
An independent stylist is like freelancers in any field. As an independent, a stylist can work anywhere. They can go to customer’s homes; they can rent a chair, or an independent can have customers come to them. Pricing for services is completely up to the independent stylist to determine.
Looking to start your own Salon? Get the documents you need to get organized and funded here.
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
About the author. Entrepreneur and Salon Business Fan.
Hi! I am Shawn and I am a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online salon business resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a salon business owner, I see myself. I know how hard the struggle is to retain clients, find good employees and keep the business growing all while trying to stay competitive.
That’s why I created Salon Business Boss: I want to help salon business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.