Renting or Employing? – A Guide for Salon & Spa Owners

by Greg Milner | Oct 26, 2017 | Hiring Salon Staff, Staff Recruitment

Tearing your hair out over whether to rent chairs or treatment rooms? 

There are traps aplenty, so before you go down the path of either employing staff or renting out space/chairs, or a combination of both, do some study.

It might save you much heartache, legal wrangles and costly mistakes down the track.

In most of the English speaking world, there are laws that govern what you can and can’t do, whether you’re taking on employees, or renting out your shop space to contractors.

The law is different for each situation, so it’s best to

Rent OR Employ. But not both.

If you try to do both, things start to get complicated. Based on our research, it’s clear that attempting to work on a mix of employed staff and contractors creates all sorts of problems.

Who gets the walk-ins? Who takes to the money? How is it accounted for? And a host of other complications that can be avoided by making a decision; do you want to be an employer, or a landlord?

There are advantages and disadvantages to both.

As an employer, you get complete control over everything. You decide

• How the business is marketed
• What the staff wear to work
• What hours are worked
• Your prices
• Your opening hours
• The branding of the business – colours, websites, logos, the works.

Equally, you’re responsible for everything too. Control = Responsibility, and Responsibility = Control.

But there are downsides. You pay the staff whether you have customers in the shop or not. You’re responsible for all the marketing. If there are no clients, it’s your fault. If staff are sick, it’s you who has to fill the gaps.

Renting out chairs or rooms eliminates a whole bunch of advantages and disadvantages. Essentially, you’re a landlord. You charge an agreed amount for the room or the chair, and that’s it.

Unfortunately, many salon owners find themselves compromising here and giving a little there, until the arrangement becomes so muddy, you’re drowning in what ifs.

So, here are some guidelines to make your decision a little clearer.

If you’re renting space or chairs, you cannot tell the contractors what to wear or when to work, apart from when your doors are open.

• Forget your salon branding. It’s meaningless, because the clients are coming in to see their preferred contractor, not the salon.
• Your only marketing should be to attract contractors. It’s not up to you to find clients for them.
• You don’t one phone number, unless it’s something like “Hi and Welcome to Hairdressers on Haynes, press 1 for Sharon, 2 for Jayne, 3 for Donna” etc.
• On your website, list the contractors with individual mobile numbers or extensions.
• Each renter has their own booking system and payment processing – ideally, an iPhone with a Paypal dongle. (Collecting payments used to the main stumbling block until this technology became available.)
• The owner of the salon should not pay the renter for anything.
• If possible, have no reception.
• Use written contracts that make it clear the renter is renting a chair or room with associated services of toilets, bowls, coffee machines etc.
• Determine who gets walk-ins. Whoever’s there, grabs them.
• This one is important – each renter must have their own Google My Business listing, their own Facebook page, Instagram account. No renter gets access to the salon’s social media platforms.
• Contracts should be 4 weeks notice either side.
• Don’t let the renter’s work creep. No letting them open and close and paying them for it, leading up to helping run the salon etc. That’s when the become an employee by stealth.
• Best if they have their own ABN. They don’t need to be a company to have an ABN.

Here are some test questions and answers from Fair Work Australia:

Q: Does the renter have the right to exercise detailed control over the way work is performed, so far as there is scope for such control?
A: If the renters can set their own times and turn up when they want within say a 9.00am to 6.30 time frame Monday to Saturday then that is a renter
Q: Is the worker ‘integrated’ into the hirer’s organisation?
A: If the chair hirer has their own booking system then no.  Also if they take money themselves then no.

Q: Is the worker required to wear a uniform or display material that associates them with the hirer’s business?
A: They can be required to wear appropriate salon wear.  But no uniforms.

Q:  Must the worker supply and maintain any tools or equipment (especially if expensive)?

A: They need to supply tools but not sinks and basins.

Q: Is the worker paid according to task completion, rather than receiving wages based on time worked?
A: They are not paid and therefore not an employee they use their own PayPal etc

Q: Does the worker bear any risk of loss, or conversely have any chance of making a profit from the job?
A: Yes, if they get no clients they make no money,  if they get loads then they make good money.

Q: Is the worker free to work for others at the same time?
A: There should be nothing in contract to say you cannot rent anywhere else.

Q: Can the worker subcontract the work or delegate performance to others?
A: They rent the chair and can put anybody in to do the work there (ad in  contract about they have to be insured)

Q: Is taxation deducted by the hirer from the worker’s pay?
A: Nothing is paid to the chair renter from the Salon Owner

Q: Is the worker responsible for insuring against work-related injury they might suffer?

A: Yes they should have their own insurance.

Q: Does the worker receive paid holidays or sick leave?
A: Nope.  Therefore they are not employed

Q: Does the contract of hiring describe the worker as a contractor?
A: The contract does not hire anybody but rents chairs.  The renter pays for  chair or room.

There are some serious benefits to all of this.

• You let go of all staff issues.
• Let go of all marketing issues.
• No payroll issues or payroll tax to pay.
• You charge in advance and never let them get behind. Take a deposit too. If the payments stop, they’re out.
• No training issues or costs.
• No need for software of your own.
• No stock to keep. The renters look after their own stock. (You might provide racks or shelves on which they can keep their retail products.)
• You don’t need a phone system or internet. The renters use their own phones and data plans.
• Organise nothing. No marketing, no Christmas parties, no industry functions.

Some must-haves in any renting contracts:

• The renter is responsible for cleaning their own room/area, and removing debris and rubbish to the salon’s garbage bin.
• All work areas must be left hygienic to meet environmental and health regulations.
• No tricky clauses about money and commissions. One fee for the room or the chair. That’s it.
• No sharing of products related to the job.