One of the most important decisions for any salon owner to make is how to structure the team’s wages in a way that will benefit their business and incentivise their staff. Too often owners fall into the trap of basing their decision on personal experiences and preferences, with little consideration as to what motivates their staff to work, or how their payroll could affect their overall profit.
There are many different business models as to how to pay salon staff, but the 3 common options are as follows:
1. Fixed Hourly Rate/Annual Salary
Paying staff a fixed rate for a set number of hours per week – be it hourly or annually – is a popular option across most sectors. Wage costs are predictable, which is convenient for both employer and employee, but no additional commission can be earned on top of this, which might seem unappealing for a member of staff in the salon industry.
2. Hourly Rate/Commission
Whilst a fixed hourly rate/annual salary might be a common option in most working sectors, an hourly rate/commission based wage is the most popular option within the salon industry itself. Within this structure, staff receive either an hourly rate or a percentage of their column income – so they would either get the national minimum hourly wage or 35% of their income for example, whichever is greater. You do need to bear the following in mind, however:
- Make sure you’ve done your calculations and know what percentage you can offer them for it to still be viable for your business to be successful.
- Put it in writing – Make sure it’s clear whether the system is based on weekly or monthly income, and make sure it’s clear that earnings are net of VAT. If retail products and advance appointment bookings are included in the structure, make sure this is clear too.
3. Tiered Commission
This is another common system in the salon industry, and in a nutshell is where if the stylist or therapist hits their column target then they receive a bonus on top. If they hit the next target then their bonus will increase, and so on. You need to make sure that you make the target achievable and fair – being £30 short of your target and not receiving a bonus can be really demotivating.
But you also need to make sure that it is designed fairly to all members of staff too – new staff or junior members of the team can’t be set the same targets as more experienced and established members of staff.
Some salons may choose to reward their staff in line with their overall business performance. This way you can include everybody, including front of house, and reward the whole team for the work they’ve achieved together.
Whichever pay structure you adopt in your salon, you need to make sure you’ve factored in all potential costs and have ensured that it is financially viable for your business.