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Compensation Guidelines

Concept image of a lost and confused signpost against a blue cloudy sky. It is not how much you earn that matters,it’s what you do with what you earn.”  Jon Gonzales

Compensation Guidelines

As I travel throughout the United States and Canada meeting salon owners and managers, I am often asked about compensation. Suffice to say that if you are a salon owner, your view on this topic is probably opposite that of  many hairdressers, and vice versa.

Unfortunately there is a lot of misunderstanding about compensation, especially with hairdressers.

This article will attempt to help guide you in the area of compensation and help clarify and bridge the gap between staff and management who are classified as employees.

This article does not apply to independent contractors or salon owners who rent booths.

In today’s difficult and changing business environment, we must address different compensation models as well as clarify and inform hairdressers misunderstanding regarding compensation between hairdressers and salon owners if we are to combat staff turnover, maintain business stability, growth, and guarantee job security for our staff.

I should probably start out that there is no such thing as a universal compensation system that will be effective for everyone. What might work in a small salon in Iowa, for example, may not work in Southern California.

There is no one shoe that fits all compensation programs that applies to everyone, so while I will offer my opinion on this very misunderstood and controversial topic, I will attempt to express by 41 years of experience as a salon owner and educator as well as the opinions of thousands of salon owners I have had the honor of meeting throughout the U.SW. and Canada. The bottom line is that you use a compensation system that not only works for you,but also works for your staff.

That being said, I feel an hourly or salary based compensation system with a benefits package based on incentives, rewards, performance and productivity should have been addressed long ago.

While most salons offer commission, I feel hourly wage should have been adopted long ago.

With an hourly compensation model, you will be able to monitor and control labor costs when measuring your profit and lost statement. This model would  also be an excellent model to use in order to satisfy the new overtime and minimum wage mandates by our government taxing agencies.

In California there is talk from our legislators to eliminate commission within the beauty profession.

With the new minimum wage and overtime laws,protecting the labor law rights of workers, salon owners must be careful that they are not violating the rights of your workers.

As the cost of living and rising business costs continue to escalate, we need to be be raising prices periodically to keep pace with rising business costs.

If we are to accomplish this goal, we need to raise our standards of excellence in education creating a demand for our services not commissions, periodically to keep pace with rising business costs.

Sadly many salon owners are not able to raise prices due to staff turnover, the emergence of low cost franchises, a difficult economy, declining profits,poor educational resources, and a host of other challenges.

Most salons’ today still work on a commission basis or a combination of hourly wage or team based compensation. While the commission system may have worked in the past, you may want to explore other options or continue your present system of compensation with new guidelines for new incoming stylists.

If you are currently using the commission model for your present commission compensation system you can make this model work by raising prices not commissions.

In a commission compensation system, hairdressers are paid a percentage of a salon service.

In order to attract and keep employees many salon owners are falling into the trap of offering higher commissions in order to avoid losing their top hairdressers to a competing salon, or booth rental which will in reality lower your bottom line. In order to keep ahead of the curve you must raise prices.

Unfortunately many salon owners are paying to high a commission just to survive. In order to survive many salon owners are allowing themselves to be drawn into rent and commission wars that can lead to lower profits, staff turnover and business instability.

If you do choose the commission model then 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% commission on the first $ 1000.00 weekly total if they take in $2000.00 in services, a 5% added bonus. You set the amount that works for you.

Or you can start all new employees with an hourly wage, after 6 months another raise or a combination of hourly and commission. Be careful with the new minimum wage laws.

Unfortunately many hairdressers will think this is an unfair compensation model between staff and management.

I have read many chat discussion boards from hairdressers.

The perception is that all salon owners are rich and greedy. How dare the owner make money off of my hard work? How dare they keep half of what I earn…I ask where did these attitudes start?

As a result, many hairdressers change jobs after they gain experience and build a clientele by thinking they can earn more money at another salon offering higher commissions or booth rental options. Read my report Avoid the Grass is Greener Syndrome.

The problem is that owners who pay too high a commission will have a very difficult time in making a profit and growing their business and probably just get by or fail. If there are no profits, how is the owner going to provide a benefits program, provide training and education, provide job security, develop a marketing and advertising program to increase salon traffic so they can create a demand and continue to raise prices?

The reality is that far too many hairdressers do not understand the business aspect or the need for a business to be profitable if they want to keep raising prices and insure job security.

Perhaps a small curriculum on business should be part of the beauty school curriculum so that hairdressers will have a clearer understanding of compensation, as well as the duties, challenges, and financial risks of salons must endure to own a business that does create jobs.
In order for any business to survive, grow, prosper, and develop a high quality control system, it needs to maintain profitability, maintain stability, avoid staff turnover, and continue to grow. If a business is not profitable, everyone loses.

As a hairdresser I would rather get paid a 40%commission with incentives, job security, raise prices, bonuses and stay busy rather work in a salon where I earn a 60% commission and sit all day with no clients and have no job security.

It is so much more beneficial to work in a salon where there is strong leadership from the salon owner, a positive and professional salon team environment, job benefits, a very busy salon, attracting high end customers, education and on going support from management, and maintain job security.

If we are to be compensated and respected by an high end clientele we must work hard to create a demand for our  services and raise prices, not commissions. 100% of no customers is still 0. I urge all hairdressers to create a demand for your services and raise prices, so the owners can afford to not only ensure your job security but provide you with a fun and positive salon environment and rewards and incentives for your hard work.

Sixty per cent commission may sound great, but 60%of no customers is still nothing, and will probably lead to job loss.If a new owner offers you more than 60% commission and expects you to bring a clientele, let that serve as a warning and red flag.

Let us learn a lesson on what is occurring throughout the United States because of our current competitive business climate.
Many salon owners are down sizing or laying off workers at an alarming rate due to the economy and lack of profits.

If we can help bridge the gap between staff and management about compensation and the need for a business to be profitable so everyone can benefit, I truly believe we can combat staff turnover, maintain business growth and security, grow our profession, and improve the standard of living for all hairdressers and their families.

We need to be thankful we have jobs, opportunities, and the ability to not only make people look good, but feel good about themselves. An outstanding hairdresser will never be out of a job

When discussing compensation, I would suggest you grandfather your present compensation system for your current employees. I do not advise you to lower their wages if possible.

A word of caution, I must warn you that discussing compensation with your current staff members could lead to a walk out by some members of your staff. In no way do I want to be held responsible for staff turnover, so you must decide what action should be taken in this regard.

I do recommend that you structure a new compensation program for all new incoming employees based on hourly wage, commission/hourly wage rewards, incentives, team based, bonuses, based on performance and productivity.
If you’re currently paying over 50% you may have to make some very hard decisions especially if you’re not making a profit
If you do lower commissions do so when you raise prices.
I must warn you that this is a very delicate topic, when discussing compensation with your staff and can lead to potential staff turnover.I would discuss this on an individual basis not at a salon meeting.I will be presenting my popular two day business seminar in April 2017.

I urge you to read  Bridging the Gap between Staff and Management.

When considering your compensation system, I urge you to make sure you comply with your state labor laws and wage standards. Each state has their own laws. Because i do not represent any special interest groups please share this blog post and add your likes. I need your support.

Let us all work together to build business stability, profitability, and job security by working hard to create a demand for our services and raise the standard of living of our workers.. Let us all unite as a team (yes the salon owner is part of the team) to elevate our profession to a level that raises the image of our profession in the eyes of the consumer and business community.

Only then will we be able to provide our employees with a generous compensation package, maintain business stability, provide on going education, and create a positive, professional salon environment, incentives and rewards, and job security as rewards for their hard work.

Please visit my blog and share your thoughts on this topic.

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