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Our industry is in a state of flux! One of the major components under discussion is the way we pay our employees. For the longest time the benchmark has been 50% commission. Yes, [we know of lots of salons](/en-au/pro/salon-software) who pay higher than this, but here is where it all started!

At the end of the last century, service pricing increased in small increments, usually on an annual basis and across the board. **What history shows us is that COSTS were jumping faster and higher than service pricing!** 50% commission became harder for salon/spa owners to offer to their service providers as there were less funds available to pay costs after the 50% commission.

## Owners started dropping their commission rates in order to stay profitable.

Service providers were insulted to be offered less. It’s not that they're not worth every penny, but costs have outstripped the 50% left to the owner. We have seen an exodus of service providers as they move to booth/chair rent in an attempt to retain their commissions.

> "The fact is this: for every dollar that you spend on expenses you must generate three dollars in revenues!"

It is easy math to see that 50% commission is going to send you into the red right from the start. Your only saving grace here is to have a smoking retail revenue stream!

## Here are your wage options:

###### **Commission based pay structure.**

Still a viable option but not at 50%! **No matter what commission you are paying, you must make sure that you take off your product charges before paying out your service provider.**

For example, if a service is worth $100 and your costs are $10, you pay commission on $90. This would still be a tier system and a provider’s income growth would be from the increasing prices as they climb the ladder. If your revenues for month are $30,000, your commissions paid out should be around $10,000.

###### **<CenteredImage alt='' src='https://us-west-2.graphassets.com/AalLHDRueT6SDLkGLppQVz/DAxK3R7gSzSbTBqagQhB' /> Hourly wages plus commission.**

This has to be the smartest choice in the coming years. **Here’s how it works: if a service provider is earning $20 per hour they must generate three times that to meet the minimum requirements.** After they achieve that level you can offer a bonus or commission of 25%. In a thirty hour work week, your service provider would earn $600 and the minimum requirement would be $1800 in services. If their revenues were $2200, a difference of $400, you would pay a bonus of $100.

The beauty of this structure is that the provider has a solid and steady income with enough incentive to encourage the motivation to attain more. **It is the STEADY income that will hold your providers in place.** This is still a tier system, so again the opportunity to grow is part of staff development. Start your newbies at a basic wage and show them how fast they can increase their income!

###### **Chair/Booth Rent.**

If you are the owner of a chair or booth rent salon you have actually become a landlord, which is a different business model. There are pros and cons to this model which we will tackle in a future newsletter. Today, we’ll focus on the pay structure. **The concept here is usually to recoup the expense of the business and keep the commissions earned behind the chair by the owner.**

Remuneration is different in every province, state, and country, so please make sure that you clarify expectations with your local bureaucracy. We have seen some harsh fines from government because the owner was not in compliance with employment expectations. The obvious downside to being a landlord is that your income is capped by the amount of rent you receive.

That’s it in a nutshell! We don’t have a crystal ball, but we CAN tell you that change is inevitable!


Wage Options for Salon Employees


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[The beauty industry](/en-au/learn/vagaro-alternatives) is a different business than it was in the last century. Sounds like such a long time ago, but it’s less than sixteen years ago!

We’ve moved from paper appointment books to “cloud-based” data collection, cash and cheques to fancy credit/debit machines, one-price shopping to multi-level tiers,  and the stylist-driven clientele to the sophisticated [marketing plans of the salon owner](/en-au/pro/salon-software). On the downside, we have seen our pricing increase by only 25-50% for baseline services and our costs increase by 200-300%!

## Finding service providers is an on-going issue for our salon owners today.

It seems there are more stylists working behind the chair in the last century than there are now. There are more and more chair/booth renters showing up in the market place, which is a clear indication that what is going on in the salon business is not suiting the requirements of many of the employees. They are looking for a comfort zone in a rapidly changing business model.

## We aren’t keeping up with the societal and technological changes that are happening in our industry.

When we talk about problems, we have to talk about solutions. We start by looking at long-term solutions. The logic: the product we provide the market-place is service, something that can’t be bought online. That gives us a unique situation in the marketplace, because our clients have to come to us and we have the opportunity to capture their retail products purchases as well. You can buy products online, but you can’t buy service!

## In today’s market, the responsibility for bringing in clients and marketing/building the business falls squarely on the owner.
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In the “olden days”, owners advertised for “stylists with clientele”, and the onus for building the business fell directly into the lap of the service provider. Why are so many stylists leaving for a chair/booth rental? Something is happening in the salon industry that is creating a disconnection with our service providers.

Part of the responsibility is the difference in expectations of the new talent entering the work force. In the last century, stylists generally did everything in the salon, from answering the phones to marketing the business. Everyone working behind the chair knew exactly what everyone else was earning. There was a fairly simple structure in place based mostly on 50% commission.

## Only 25% of your employees are actively engaged in your business!

In today’s salon, they stylist is expected to climb tiers and levels based on their technical and retailing abilities. In Canada, it has been recorded that a whopping 60% of employees are not engaged in their business of employment and 15% are disengaged. That's 15% of your employees who are actively DAMAGING your business!

## We need to look at a different method to reimburse our service providers.

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With that disengagement, we must look at new ways to capture the commitment of our employees. We need to see more hourly wages being offered rather than commissions. We will still see levels and tiers for stylists to grow with wages increasing with each level, and what that will create is a more stable income for service providers in the salon. That stability will mean that fewer stylists will leave their salons and we will see fewer chair/booth renters opening. It is much harder to give up a solid income for the instability of a chair rent.

## It also means that stylists won’t just walk away when they have a two-hour cancellation.

They will be available for that last minute client or the walk-by traffic. The service provider will be there to provide a service and the salon owner will provide the client. Without giving some serious consideration to what it is we want to achieve in our industry, we will continue to struggle along, slapping band-aids on our symptoms without addressing some of the underlying issues.

Time to get off the apathy train and start planning on a great future. Let us know what your perception of the future is. Change is good!


Evolving with the Salon and Beauty Industry


The interesting thing about our industry is that [every salon owner has the same challenges](/en-au/pro/salon-software), whether they have thirty-five employees or five employees. Every business owner offers a different perspective. Staffing is a recurring theme with hundreds of different opinions and solutions. Are you wondering how to keep employees and clients in your salon or spa?

##### **Start a Career Path For Employees**

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One of the strategies for stopping the flow of high-level staff loss is to create a specific career path program for your employees. Like anything else in the salon this program has to be in writing. It becomes part of your salon process. Every stylist at some point hits a glass ceiling, and many stylists leave the salon to open their own salon and earn their own riches (ha!ha!ha!). If only they could foresee the future and know what the reality really is. They probably haven’t been informed that only 5% of salon owners are profitable!

The career path program you create for your stylists should include all the expectations you have of that stylist at each level; technical abilities, attitude, education, pay structure, etc. Where most salon owners really miss the boat is not offering their top stylists shares in the company. Whether you are ready to put an exit strategy in place or use it just as a strategy to keep those top stylists, start planning now! You have already invested time, energy and money to grow those stylists within your salon structure. It is in your best interest to create a reason for them to stay.

##### **Training On Site**

Do you hire stylists from another salon or do you train on the premises? Our philosophy continues to be that whenever possible, train your own stars rather than hire someone else’s. Sometimes stylists leave a salon for valid reasons, but we often find that the transition is fickle and the stylist arrives at the new salon carrying all their old baggage. This creates the same scenario and problems that caused them to leave their old salon. A lot of owners are intimidated by setting up their own training programs, but the rewards for initiating them into your salon culture at an early stage is very gratifying. There are several ways to create a training program within the salon:

- Develop an apprentice program for new hires
- Hire new stylists right out of school
- Develop an associate program or training/work program

##### **Client Retention After Employees Leave**

But there is always the staff member that isn’t going to stay no matter what you offer, or plan for them and they leave. What do you do? The first thing we recommend that you do is to craft a letter that will go out to each and every one of their clients, informing them that:

- the staff member is leaving
- you wish that stylist well
- they are a valuable asset that client has been during their time with you
- how much you have valued their business over the years

The very next thing that needs to be in this letter is an OFFER to remain in the salon with another stylist.

We have seen this scenario happen many times. Many salon owners recoil in horror over the idea of asking to clients to stay with the salon; but let’s be honest –this is your business and your client list. The salon owner pays for the client acquisition so the clients belong to the salon.

However, I also have a very successful salon that celebrates the stylists that leave. We share their new information readily. as well. We are still swamped with stylists and clients who have no desire to leave. The salon also offers clients reasons to stay when their stylist leaves - true heroes on both sides!

##### What To Offer Clients

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What should that offer look like? It could be a $20-$50 gift voucher for their next service, or their next hair cut is free, but our favorite is a gift voucher. If it is a salon client it should be a salon service, if it is a spa client it should be a spa service. [The industry average to acquire a new client](/en-au/learn/vagaro-alternatives) is approximately $80-$100 per client. After all the investment you have made in that client why would you let them just walk away without an invitation to return?

We would love to have your views on staffing! Please leave a comment; we'd love to hear from you.


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