Rent a chair or employees for your salon? Which is best?
Should you go the rent-a-chair route?
It’s a decision faced by all hairdressing salons from start-ups to established businesses. And it rears its awkward head every time you recruit new team members.
As with most things there is no one easy answer. There are pros and cons to both business approaches.
But first let’s look at the different ways to set up a hairdresser’s rent-a-chair arrangement.
How to charge for your salon chair
I often get asked for the best way to charge your rent-a-chair stylist. It’s horses for courses really. These are three main routes:
1. Charge a fixed weekly/monthly rent to the freelancer. This works well for both parties as you know what income you’ll receive each month and the freelancer knows exactly what expenses they have to find.
It can be galling as a salon owner to see the rent-a-chair chock-full of clients and know you won’t get a penny more.
2. Take a percentage of the chair’s takings rather than charge a fixed rent.
If the freelancer goes on holiday, is sick or goes through a quiet patch then your rental income will drop off a cliff.
You also need to trust the freelancer implicitly. All invoices need to go through your salon till so you can calculate the percentage due to you. It can be all too tempting to ‘slip’ payments past the till.
3. A combination of the two. This works best for the salon owner. You charge a lesser fixed sum (but you still have some certain income) plus you take a cut of the hairdresser’s takings. It can be like winning the jackpot.
It can cause resentment as the freelancer can feel you’re having your cake and eating it.
Why choose the rent-a-chair business model for your salon?
There are two areas where you can score a big advantage:
Salons save money with freelance team members
Filling your salon with rent-a-chair hairdressers can be very appealing, especially when you’re just starting out and money is tight. If you’re based in the UK you’ll save money in these 3 main areas:
- Sickness and maternity: you have no responsibility to pay any Benefits if the freelancer is away from work due to illness or maternity/paternity. Clearly a major saving to your wages bill.
- Holiday pay: likewise you have no legal obligation to pay them for time off or holidays.
- National Insurance: Freelancers have to pay all their own taxes and national insurance so you save on Employer’s national insurance contributions. For most employees in the UK this is running at 13.8% currently so it’s a significant saving. You’ll find the detailed Employers’ NI contributions table here.
Employment law doesn’t protect rent-a-chair hairdressers
Secondly, a freelance hairdresser is self-employed (not an employee of your business) and so is not protected by, nor has the benefit of, UK Employment law.
This means salon owners are not bound by unfair dismissal procedures, holiday pay and maternity rights for example.
As a salon owner you’re probably thinking ‘yipee’ this makes my life much more straight-forward. And cheaper.
And you’re right.
But. There always is a ‘but’. You and your hair salon business have no legal protection either.
What does this mean in practice?
Here are just a few examples. A rent-a-chair can:
- Not bother to turn up after a heavy night.
- Decide to knock off early and go home.
- Worse: they can poach and walk off with your salon clients.
- Worse still: they can persuade your staff to come and work with them in another salon and bring their clients.
The answer to the nightmare?
Have a Service Contract between the two of you setting out the rules of the game. This way you’re both protected and know where you stand.
Rent-a-chair Service Contracts
Thousands of hairdressers manage to make rent-a-chair work for them successfully. You just need to be aware of the pitfalls and take legal advice before, not after, taking this route. Don’t put your business in jeopardy.
Always go to your solicitor or get in touch with a body like the National Hairdressers’ Federation who offer proven contracts specifically for rent-a-chair.
Yes, it will cost money, but not as much money, heartache and hassle as sorting the mess out if it all ends in tears.
There are very many things to get straight in your mind before taking advice. Here are just a few to get you thinking along the right lines:
- Length of the Service Contract. Are you committing to one year? Or two or three? And what happens at the end?
- What if you catch them stealing or doing something to harm your salon and other team members?
- When they will work in your salon. Do you want to open up on a Sunday just for them?
- What happens to their clients when they are sick or on holiday?
- How do you deal with client payments? Through your till or straight to them?
- Are you responsible for helping them get new clients and salon marketing?
- Who provides the hair products and equipment – chair, hairdryers?
- Can they use your apprentices and receptionist?
There is another legal pitfall you want to ensure you avoid when looking at Service Contracts. I’ll just touch on it here as your legal advisor will cover it.
It’s the question, “Is your ‘freelancer’ really freelance or (in the eyes of the law and HM Revenue and Customs) an employee?”
If they really are an employee then you may well be liable for backdated employer tax, penalties and risk claims for unfair dismissal, maternity benefits and discrimination. Nasty. That’s why you need to be aware of it.
The law and the taxman don’t care about the label you give your rent-a-chair, they will look behind that to the true nature of the relationship. Stipulating hours and a uniform are just two of the things which the Courts and HMRC say point to employment.
The 5 biggest rent-a-chair pitfalls for salon owners:
I’d guess at this point you want to stop reading and go and fire all your employees.
But don’t. Keep reading. There are 5 big pitfalls to avoid when taking the rent-a-chair route.
Pitfall One: they are running their OWN business
This is the most persuasive business reason of all.
The rent-a-chair hairdresser is running a competing business not only on your premises, but standing amongst your employees and clients.
Don’t get me wrong. There are lots of freelance hairdressers out there who wouldn’t dream of doing anything detrimental to the salon owner’s business.
But times change.
Your rent-a-chair needs more clients. Gets fed up of giving you a cut of the profits. Has a change of personal circumstances and needs to earn some more dosh fast.
And it is when one of these things happen that you are reminded that they are a competing hairdresser, with their own cherished business, working in your salon premises.
If all your team are rent-a-chair that makes life easier-in a ‘dog eat dog’ sort of way. It’s when the rest of the team are employed and you have just a couple of rent-a-chair hairdressers working out of your premises that it can get sticky.
Pitfall Two: teambuilding can be challenging
As the rent-a-chair freelancer is really working for their own business they don’t expect you to manage them. Thumbs up.
Yet, for this very reason, they are probably not going to make a good team player. You don’t need me to tell you that one ‘bad apple’ can spoil a team – you run a hair salon and know how teams behave and react.
Motivating and managing a salon team is one of the hardest tasks a salon owner has. So why make life so much harder for yourself by adding a truculent rent-a-chair stylist to the potentially toxic mix?
I can see it from the freelancer’s perspective too. They are running their own business, paying their own income tax and handing over a ‘rent’ to you. Why should they act as if you employed them? You can see their point.
I’ll cover the best answer I know to this in a minute… so keep reading.
Pitfall Three: your salon brand, standards and culture
In a nutshell: the person is not your employee, but your salon’s reputation can be affected if they provide a poor hairdressing service or bad customer care.
As a salon entrepreneur you invest time and money marketing your business. You set high standards for technical work and client care. You build your business reputation.
And then some idiot damages it and it’s outside your control.
Pitfall Four: poaching your clients and staff
I touched on this earlier. You can build some safeguards into a Service Contract but who wants to resort to the Courts?
Of course, you are always open to any salon employee leaving, then poaching clients and your staff. It’s life.
But a rent-a-chair hairdresser is already self-employed. They are already running a business so the chances of them deciding to leave and set up a hair salon down the road are probably higher than for most employees. Keep this in mind when you take advice on a Service Contract and keep your valuable database password protected.
Pitfall Five: firing a rent-a chair
Whether a freelance hairdresser will work well for your salon depends on the individual circumstances. Just bear in mind however, that if it isn’t working out you can’t just fire them if you have a Service Contract in place.
Just because they are not covered by Employment law doesn’t mean they don’t have any legal rights.
Your right to terminate a rent-a-chair’s services is limited by the terms of your written Service Contract. If you ‘fire’ your freelancer in breach of the agreement you could be liable for breach of contract.
How to reduce the risks of rent-a-chair
If you decide to go down the hairdresser rent-a-chair there are some sensible business precautions you can take to reduce the risk:
- As you would with employees have a rigorous selection process. Verify references, have a couple of interviews and a trade test. Involve other team members especially if they are self-employed too.
- Go through your staff handbook with the freelancer before taking them on. You can’t force them to adhere to it but if they start querying your standards and culture at this stage you’ll probably want to re-think hiring them.
- If they are currently working elsewhere how about a mystery shop?
- Do have that Service Contract I talked about earlier. It’s essential.
- Have a probation period of 2 or 3 months. If it isn’t working you can part company easily.
If you decide on the employed route you can minimise the risks too. Perhaps take someone on a temporary basis and initially on part-time hours. If it doesn’t work out, then call it a day within their probationary period.
Weigh up the pros and cons
If you’re a start-up salon with a tight budget or want to extend the range of services you offer, but don’t want the risk of employing someone then renting a chair out is it’s a great way of getting a passive income for your hair salon.
The flip side is that if they are very successful then their earnings can be substantial and this could have been your profit if you’d taken the employee route.
The contents of this article are not intended to amount to advice and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents. Lockhart Meyer Ltd disclaim all liability and responsibility arising from any reliance placed on any of the contents of this article.