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Independent Contractors in the Salon Industry

Salon owner and her employees

There are a few industries in which employees are often misclassified as independent contractors, and salons are one of the big ones. Most salon workers should be employees but are often classified incorrectly. It’s a widespread problem – a problem which costs workers money and, if they’re caught, costs employers a huge amount of money.

Reasons Why Misclassification Is a Common Problem

  1. Employers and employees don’t know any better. The employer’s peers may advise them to do the same thing they do, spreading the incorrect practice like an illness. Employees often don’t know one way or the other about employment laws.
  2. Employers don’t want to pay payroll taxes. Some employers know exactly what they’re doing and consider the money they’re saving on quarterly taxes to be worth the risk of getting caught.
  3. Employers want to avoid the hassle of filing payroll taxes. The administrative side of running a business can definitely be a hassle. Those that can’t be bothered by the stuff should hire a personal assistant at least.
  4. Employees like getting a bigger paycheck that doesn’t have taxes taken out. They like it until tax time when they owe self-employment taxes big time. The allure of a tax free paycheck ends abruptly when an employee does their taxes.
  5. Employees fear that if they say something, they’ll lose their job. This is an issue in any industry. Employees sometimes know they’re being taken advantage of but keep the status quo for fear of the consequences.

Employee Rights

Employees don’t always know it but they have a lot of rights. They have a right to be paid minimum wage, to be paid on time, to make overtime, etc.

Workers that are not employees but rather, independent contractors, have different rights, like the right to make their own hours, use their own products, dress how they want, make their own rates, take customers with them when they leave, etc.

This is one of the reasons why it’s important to classify workers correctly. When employees are classified incorrectly, their rights get muddled, which gives the Department of Labor reason to meddle in your business.

Let’s look at the difference between a salon employee and an independent contractor at a salon.

Salon Employee Vs. Independent Contractor

Employees must follow the employer’s directives. Typically, employees must:

  • Adhere to the salon’s dress code
  • Honor the salon’s discounts and coupons
  • Charge clients the salon’s rates
  • Work within the salon’s hours of operation
  • Use the salon’s preferred products
  • Share a percentage of client payments
  • Sign non-compete agreements

An independent contractor in the salon, on the other hand, rents a booth from the salon and takes care of all the details of the business on her own.

The above list is a helpful guide for determining if you are employing employees or independent contractors but, if it’s still not clear, take a look at the DOL’s economic dependencies test. For an even more detailed breakdown of the rules, clarified for the beauty industry, take a look at this post from This Ugly Beauty Business.

What the Salon Owner Wants

Typically, a salon owner wants to have some control over their workers so that they can provide a consistent service and ensure a steady flow of customers.

While there is nothing wrong with having a shop full of autonomous workers, it’s not usually in the salon owner’s best interest. They usually want some uniformity in the services they provide. Hiring a bunch of booth renters may not be the way to achieve that.

Salon owners often mix these roles by hiring booth renters – because that’s what is done in the industry – and then expecting them to adhere to their rules, like employees do. This is not a legal practice and salon owners may need to rethink their business model in order to comply with the Department of Labor. A worker is either an employee or an independent contractor, not both.

Payroll Taxes

Evading payroll taxes is like evading any other taxes; it means ticking off the IRS, and that’s not something you want to do. Payroll taxes are a little complicated but they’re required. Here is what the IRS expects to see from every business owner:

Most salon owners that have 1099 workers should re-evaluate if they are classified correctly. Lawsuits are expensive and, while they don’t happen to everyone, when they do happen they can mean the end of your business.

 

Employees need to track their time.

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9 Comments

  1. Suzy Campbell
    Suzy Campbell October 30, 2018

    This is off topic..
    Bit I’m a stylist with a new job and have been seeing many red flags with my new employer. I am looking for advice on my biggest concern- I colored my own hair at home as I always have, the owner says my hair has to be done in the salon using salon products. I feel like this is violating my rights! I can maybe understand using salon products, but has to be done in the salon? I’d love to hear your thoughts on this situation

  2. Jane Doe
    Jane Doe February 1, 2019

    I work in a unisex shop, the owner takes 50% of my earning every pay period unless I make 50 hours then it’s only 40%. I have to follow a price sheet and also make all transactions at a cash register. He holds my credit card tips and my weekly incon until the end of the pay period. When I get my pay stub the only things printed is the amount paid out no wages or anything. He doesn’t pay my taxes, doesn’t provide me with product and does little advertising. I make at the most 1000 a week and only see 500 is this fair?

  3. Nikki
    Nikki March 11, 2019

    I have one stylist that wears see through tops with no bra and nipples pierced. I don’t tell them what to wear but I do require that’s it’s professional is that against the law. And the other stylist boyfriend comes and hangs out there everyday and before I hired her I told her I didn’t like men hanging in here unless they were receiving services because of the privacy and comfort of the clients with hairloss but he still comes in here what do I do

  4. Anna Ortega
    Anna Ortega April 25, 2019

    I have a independent contractor as a anesthesia and she gets upset when we don’t give her walk ins and shes only rental not an employee. How do I tell her the proper way . I also have commission girls as a employees and I give them the walk ins . This independent contractor create problems with the front desk and makes everyone feel like we are stepping on eggshells

    • timesheets_blog
      timesheets_blog April 25, 2019

      The best way to handle difficult situations like these is by being direct. You’ll need to sit her down and speak with her. Let her know exactly why all the walk-ins go your full time employee, and that is how she should expect things to be in the future. Once you set her expectation correctly, things will settle down. You must address this head on.

  5. C. A. S.
    C. A. S. May 15, 2019

    I’ve been here 12 yrs as an independent contractor licensed cosmetologist/barber for the state of Texas. What are my lawful rights to days off?
    Now the owner has a problem not having half of his workers off for graduations.

    • timesheets_blog
      timesheets_blog May 20, 2019

      From my understanding, an independent contractor in Texas does not follow the same regulations from the federal or state governments as an employee does. This means you are not eligible for overtime wages, employee benefits, and more. The federal government does not force employers to give their employees time off, so I assume that applies to independent contractors as well. I suggest speaking with your local labor board just to be sure.

  6. Have learned a lot,being a young entrepreneur and still new in the market, I see what I have to do.Thanks a lot

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