There are 3 primary ways to compensate hairdressers:
- Booth Rental
Booth RentalIf you own a booth rental salon you are really a landlord not a salon owner. Each technician pays for their station at an agreed upon rate (daily, weekly, etc.). Often they are responsible for booking their own appointments and marketing their services. They may pay a fee for backbar supplies, provide their own, or it may be included in their rent. The trouble with owning a booth rental salon is you get all the headaches of salon ownership without the rewards. Each technician is actually their own business and that is where their loyalty lies. You have no ability to control pricing, quality, hours worked, customer service...basically you have no control! The only bright spot would be that since renters are not employees they are responsible for their own taxes.
CommissionCommissioned stylists are generally employees of the salon. Since they are employees you do gain a good deal of control over your business. You can implement policies and procedures that need to be followed, you can disclipline when necessary. You are making the work schedule, managing the appointment book, determining services offered and pricing, etc. Of course you also are running a payroll, accounting for tips, hiring, firing, mediating squabbles. Commission rates vary greatly, but usually what I hear is in the 42% to 60% range (but at 60% the salon cannot be profitable). In some ways commission is a hybrid of booth rental and salary salons. While the technicians are employees, they are also paid entirely on the sales they bring to the business so they act like little one-person businesses. This creates huge obstacles to salon growth and profitability because there is no incentive for teamwork.
Hourly/SalaryIn a salon where the technicians are paid hourly or on salary the salon owner has the ability to reward the employees who most deserve it. How many of us have experienced the situation where a stylist is rude to co-workers and other stylists' clients, and never picks up a broom or folds towels but still gets a big raise just because her prices went up! Talk about rewarding bad behavior! On the flip side, we all know great stylists whose earnings are capped out because they are at the highest commission tier. In an hourly/salary based salon you can still reward these people!
When we bought our salon it was a combination of Hourly and Commission. When we hired a new stylist she would be hourly. After she met certain criteria (retail % at a certain level and request rate at a certain level) she would convert to a 45% commission. Our commission scale topped out at 50% and we had two awesome stylists who were capped out. One of them is also our salon manager and since she was paid on commission she couldn't afford to spend less time behind the chair to manage. The other was getting burned out after years in the business and wanted to spend more time training others, but she also couldn't afford to give up the time behind the chair because we were only paying them for one thing --sales.
Earlier this month (after much thought and analysis!) we converted to Team-Based Pay (TBP). Every commissioned employee was converted to an hourly rate that is higher than what they were making on commission. It's a huge deal when you change someone's comp. And it's scary for me as a salon owner because I know I'm committing to pay them for every hour they are in the salon whether we're busy or not. There's a lot more to TBP than just converting your payroll - it's a way of life! I'll talk about our Team-Based Pay journey a lot on this blog!