Salon Salaries: 4 Payment Structures for your Staff
Salons differ in the amount that they pay their stylists, as well as the pay structures they use to do so. We explain the four main types of pay structures for salon salaries, and their pros and cons for your stylists.
The most important factor for any salon isn’t its location, atmosphere, or marketing. It’s the stylists you hire to make your clients happy. I’m sure you’ve noticed that your clients often return to see a specific stylist in your salon. You’re lucky to have your team and the best way to go about showing appreciation is by paying them fair salon salaries.
Many salons vary in how much they pay their stylists, as well as how they go about setting up their pay systems. We explore the pros & cons of each of the different methods of paying your staff. Hopefully you’ll soon have a better understanding of what’s best for your salon salaries.
1. Hourly rate
Hair stylists have the most stability with their paychecks under the hourly pay structure. They know they’ll be getting paid regardless of whether they managed to bring in any clients or not. Stylists are also confident in knowing that they will be getting paid for all of the other tasks that come with the job like cleaning, greeting guests, answering phones, marketing work, etc.
With that said, your higher performing stylists may not be a fan of this model. They may end up doing more work than their lower-performing counterparts, but won’t be getting paid for their extra efforts. To add to that, your stylists may not feel encouraged to upsell products or work harder to bring in more clients, because they know they’ll be getting paid the same regardless.
Sure, you could change the hourly rate according to individual performance, but this can be hard to justify if you get questioned on it. Stylists are always talking to each other, and you should assume they know how much the others are being paid. If you decide to pay hourly rates, you may want to introduce a secondary incentive program based around performance.
At the time of writing, the median hourly rate for a hair stylist (in Australia) is $20.90 AUD ($15.60 USD).
2. Annual salary
Although people may assume that it’s reserved solely for desk jobs, an annual salary is another avenue for salon owners to consider. An annual salary has many of the same benefits of an hourly position. Your stylists are guaranteed to get paid even if they weren’t able to get any clients, and they’re being compensated for all of the other tasks that come with the position.
The biggest drawback of an annual salary for a hairstylist however, is that they won’t be getting compensated for any additional work they do outside of working hours. If there’s a last minute client or someone that wants to show up before official hours, it could be cause for concern.
An annual salary has the same drawback as an hourly wage. Stylists will be getting paid the same rate no matter the work they do.
At the time of writing, the average annual salary for a hair stylist (in Australia) is $50,592 AUD ($37,746 USD).
3. Commission based
Usually reserved for contractors that you may be renting a chair to, commission based pay is a great performance incentive.
This option offers no base pay, instead giving stylists a high commission rate on the clients they bring in and the products they sell. If there is a rockstar stylist that brings in a whole slew of clients and gets a lot of work, they can look forward to a pretty hefty payout. Commission based pay structures encourage employees to work hard because they know that they need to be continually finding work if they want to get paid.
The downside of a commission based structure though, is that stylists that are new or struggling to find work are going to have to deal with making little to no money. This is something that can weigh on their minds heavily and cause stress.
It should be noted that a commission pay structure encourages stylists to build their own list of clients that may leave with the stylist if they ever choose to quit. If this has happened to you, see our blog on ‘Whose client is it anyway?‘.
A commission pay structure compensates stylists based on a percentage of the salon revenue per service. This varies wildly between salons so it’s up to you to work out what works best. Can you afford to give your stylists 30%, 40%, or even 50% of the profit from a particular service?
Here’s a guide to help you decide on the best commission rate for salon or spa staff.
4. Performance based
Performance based pay structure is a mixture of the previously discussed salon salaries. It’s similar to a commission structure in that stylists receive more pay based on how much work they’re putting in. In this situation however, they still have an hourly or annual rate.
This pay structure gives your stylists peace of mind. They’ll rest easy knowing that they are always receiving a certain amount of money. It has the added benefit of providing extra motivation, knowing they’ll receive more money with each additional sale.
The disadvantage is that when things are slow, your employees may receive checks smaller than what they’re used to. Unfortunately this will be out of your control. In addition certain stylists may be not work any harder because they’ll be getting paid either way. Having stylists with this sort of attitude can often breed resentment within the team, and lower morale. This method of paying salon salaries really depends on the type of people in your team.
A successful performance based pay structure requires a fine balance between offering a fair base wage, and enough of a performance bonus to offer incentive without bankrupting the salon. It’s by far the hardest pay structure to get right, but if done correctly can boost your salon’s performance significantly.
Figure out what’s best for your team
Every option for salon salaries has its own pros & cons. Thorough research will ensure you’re making the best decision for you and your stylists. As always, run any ideas for change past your team; whatever you decide on won’t work properly without everyone being on board.