I’ve been fortunate to have traveled throughout the US and Canada meeting thousands of salon owners and managers, as well as hairdressers and educators.  Many times, I’ve been asked about compensation.

Suffice it to say, there can be a large gap between the opinions of salon owners, managers, and hairdressers  about compensation.  In this article, I’d like to attempt to bridge the gap between salon staff and management, and offer a few tips to help clarify the many misunderstandings about compensation.

“There is no Universal Compensation Program”

– No one system applies to every situation. What might work in a small salon in Iowa, for example, may not work in Southern California.  Salon prices and staff wages can vary greatly coast-to-coast.

Here are  some guidelines:

Hourly compensation  or a salary based compensation package that includes incentives, benefits, based on performance, productivity, performance rewards,should have been used as a model long ago.

Keep in mind, an hourly compensation model would allow you to monitor and control labor costs, which greatly affects your  profit & loss statement.Today most salons use the commission structure.Unfortunately most hairdressers believe that  higher commissions will allow them to earn more. I must remind them that 100% of no customers is still nothing. The best model is to create a demand for your services,work hard to develop a full book of customers, then raise prices,not commissions. Using this model will allow owners to advertise,create incentive packages, insure job security,create an upscale clientele, provide continuing education, and provide benefits. If the business cannot make a profit, no one benefits.

Create a commission package that is based on salon sales as well as longevity of individual hairdressers. If you do choose the commission model, a 40-50% commission rate (minus a service fee for products) can work provided you keep raising prices, not commissions. A sliding scale can also work with a 40% or 45% commission on the first $  2000.00 weekly total. If they take in $3000.00 in services, a 5% added bonus or other incentives you may want to consider.  As salon owners you determine the totals that you can afford.

You may want to start all new employees with a good hourly wage, after a 6 month  probationary period you can provide  another raise or a combination of hourly and commission.When considering your compensation system, I urge you to make sure you comply with your state’s labor laws and wage standards.

Shared Responsibilities and Rewards – Whatever compensation model you choose will only be successful when both salon management and employees are committed to the common goal —  a successful and profitable salon.

Professionalism, excellence in customer service, business stability, consistent marketing and skilled staff members are all key elements to making any salon successful well into the future.

Team Based Compensation  – is another approach to compensation you may want to consider.  I urge you to be careful when you discuss a change in compensation to your staff. I suggest you grand father your current staff,and adapt these changes with your new staff members. Keep in mind ,this can be a very sensitive  topic with your team and can lead to turnover and business instability.

Profit Sharing – based on performance, sales,and productivity is also a possibility only if the business is profitable and continues to grow. You should discuss this model with your accountant to see if this concept can be explored.

To all my hairdresser friends ,this article is not intended to take away from your hard work , but to help you insure job security,job fulfillment, continuing education,keeping you and your salon busy with customers and hopefully a benefits package as a reward for your loyalty and hard word. Some day you may own your own business and will better understand why a business must grow and remained profitable.  With out profits , no one wins. It’s a win situation for everyone. The key to earning a higher income  is to create a demand for your services and be fully booked. It is much better to be booked solid and raise prices at 45% then have only a few customers at 60%. I welcome any suggestions about compensation,please share with others and add your comments.