Where Are the IC Contracts? In most instances when hiring a pet groomer as an independent contractor (IC), the law does not require a written contract. Grooming Myths and Misunderstandings Feature story by Grooming Business in a Box® As consultants to thousands of career seekers, groomers and grooming business owners for 23 years, we have reason to say, “We’ve probably…Calling a salon or spa a small business is like calling $250 shears “a pair of scissors” — it’s true, but there’s a lot more to it. Running a salon requires an eye for style and the knack for customer relationships. It also calls for the business savvy to keep it all working smoothly. With a nail file in one hand and a ledger in the other, there’s a lot to keep tabs on — including employee classifications. Here’s a quick guide, because not having a handle on these can be costly. What’s the difference in classifications? A worker is considered an employee when the person is on the salon’s payroll.
This person takes on all the responsibilities of an employee and also benefits from the perks. For example: Elle is an employee at The Beehive, a trendy new hair salon in town. She’s on the salon’s payroll, which means she is entitled to workers’ compensation, unemployment (should she need it) and the salon’s liability insurance. She doesn’t pay her own payroll taxes. The Beehive offers their stylists benefits, and Elle is eligible to buy into the plan. Being on payroll means she is paid by the hour, by commission or a combination of both. No matter the payment model, she makes at least minimum wage and is paid on a weekly or biweekly basis. Elle doesn’t deal with her own financials, instead a receptionist at the front desk collects payment from all the salon’s customers for all of the salon’s employees. Elle simply collects her tips. Because Elle is paid by the salon, she must abide by certain rules set by her boss. The salon sets her schedule; it determines, pays for and provides the products and supplies she uses to wash and style hair;
and she participates in whatever menu services and promotions the salon chooses to advertise. As an employee, Elle can be fired by the salon owner. A booth renter pays the salon owner to rent a space; the renter uses this space to conduct business. For example: Brian rents a single booth inside Close Shave, a retro barber shop. He has little to do with the establishment other than the monthly rent check he writes to the shop owner. Since he is not an employee of the shop, he keeps all the money he makes from his customers, who pay him directly. Lack of a paycheck from an employer means he handles his own payroll taxes and does not benefit from the larger-scale perks of being a part- or full-time employee. Since he is independent of the shop, he sets his own schedule; chooses his preferred brands of products and instruments to use; and when he wants to try his hand with a Groupon promotion, he can, without permission or recourse from the shop owner. Brian cannot be fired.
With legal action, he can be evicted from the space, just like a landlord can evict a tenant. An independent contractor doesn’t work for a salon as an employee, nor does the person lease space from a salon. This person conducts business in a space on a service-by-service basis. For example: Ida is an independent contractor and certified massage therapist. She’s self-employed and mostly works out of her home. On the side, she sometimes temps at Tension, a back- and neck-specific massage parlor. She was recently asked by another local day spa if she could take an on-call role when the lead therapist is on vacation. Ida isn’t on a payroll — which means she pays all her own taxes — and she doesn’t pay anyone a rent check. If she makes more than $600 at any one place throughout the year, that place will provide her with a 1099 for tax purposes. Being an independent contractor makes Ida unique, as few exist in the industry. The Pros and Cons for Salon Owners
You can create the rules and set the schedule. The salon is a cohesive team environment. All the money is handled in one place. You can fire an employee if needed. You incur the extra cost of payroll taxes, insurance, benefits, etc. You must pay for supplies and products for employees. Requires more intensive management. If you have booth renters: You don’t pay payroll taxes, liability insurance or provide products and supplies. You don’t handle money from clients. You function as a landlord and receive a rent check each month. You have no say over schedule, products, service pricing or promos. You don’t have oversight of the finances. Since each renter is independent, the salon does not have a cohesive team environment or behavioral control over workers. You cannot fire renters. You must go through proper channels of eviction, if necessary. Since independent contractors are not a viable way to staff a salon — and they account for less than 1 percent of the industry’s classifications — listing pros and cons is irrelevant.
Whether you’re the boss and have salon employees or simply a landlord who has booth renters, there are legalities and tax considerations you must be aware of. First determine which employment classification you have based on the information above, and also these three questions: In a salon that has employees, customers pay the salon or spa, the salon pays its employees — all the money goes through the same cycle. The salon has financial control. The best way to manage this is with a capable point-of-sale system like QuickBooks Point Of Sale for Salon powered by Revel Systems. QuickBooks POS is a complete system for your day-to-day customer transactions, including payment processing, employee management and business performance tracking capabilities. In a salon that has booth renters, customers pay the stylist directly. The salon owner acts as nothing more than a landlord. The tenant has financial control over all transactions related to their services. There’s a lite version of QuickBooks POS that might be a better fit for booth renters.
In a salon that has employees, a salon owner can set ground rules. They can decide all stylists must wear black and white, for example. Salon owners can require employees to attend staff meetings and trainings. They can also punish unprofessional behavior. In a salon that has booth renters, the salon owner cannot dictate the rules. Owners can’t control or punish the booth renter who comes to work wearing an tasteless outfit or talks about last weekend’s drunken exploits. The salon owner has no authority over behavior, regardless of how it affects the salon business as a whole. Though clientele cannot be “owned,” non-compete agreements can be enforced by salon owners, though only in the case of employment rather than booth rental or independent contracts. In a salon with employees, the salon owns customer relationships, while in a booth rental setting, each individual renter owns the relationships with their clients. Salon Owners’ Responsibilities Regarding Taxes