Understanding The Different Compensation Structures In The Salon Business


If you are planning to create your career in the salon business, it might be worthwhile to know about the ways in which you might get paid for your job as a professional stylist or beauty expert. However, while there are no strict rules or laws for defining the compensation structures in the salon business, there are a few major guidelines that are more or less adhered to by most operations.

Typically, what might work for a salon in your neighbourhood might not be suitable for the one that has been newly inaugurated in the downtown. As such, most salon businesses follow one of the three basic compensation models namely the booth rental model, the hourly pay model and the commission model based on their particular needs and requirements. Here is a discussion on three basic compensation structures that you might want to know about.

Booth Rental Model

In this model, the employer works only as a landlord that has rented his station to a salon stylist in exchange for a monthly rent. In essence, such salon stylists work independently with their own personal tools and equipment and can be technically regarded as self-employed. Since booth renters manage their own business, they also handle the client transactions and hold their own professional liability insurance too. As such you will be earning wages of your own accord and not be on a fixed company payroll. In other words, you will just be provided a workspace by the employer without any other interference from their side.

Hourly Pay Model

One of the most commonly employed compensation models, the hourly pay model is also the easiest for both the employer as well as the employee to follow. As the name suggests, the hourly pay model implies that the salon employee will be paid a specific base amount per pay period of work. However, since the employees are paid their wages for every pay period they spend at the salon regardless of whether or not they have actually worked, the hourly pay model can end up being an unprofitable compensation strategy for the employer. 

As such, when the employees already know that they will receive a fixed amount at the end of every pay period, they can lose all motivation to up-sell or keep the clients happy and satisfied. In some cases, the hourly pay model is combined with performance bonuses and commissions to entice the employees to work harder and gain greater incentives. Doing this, can not only ensure consistent employee motivation but also promote business and revenues.

Commission Model

The commission model largely equates to a fixed percentage of the sales or revenues that an employee generates for the salon. In essence, the commission model is purely based on the performance of the stylist and does not in any case guarantee him or her a fixed minimum wage. To put it in simpler words, if the stylist doesn’t actually work and earn their wages, he or she would not get paid. Typically, in this model, each of the stylists have specific clientele that they tend to while also making some additional money through walk-ins. 

There are a lot of salon businesses that adopt the multi-tier commission model as a means of encouraging and motivating their stylists to put in additional efforts in marketing as well as catering to the clients. It is important for the salon business to ensure that its commission model accommodates at least a minimum hourly wage for its employees regardless of the commission they earn to avoid any legal hassles with the Department of Labor.

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