Renting a chair in a salon, or even renting a room, is commonplace within the hair industry.
A survey in 2004 suggested there were more than 100,000 self-employed hairdressers in the UK. Some hair salons rent a single chair, often to extend the range of services they are able to provide, whereas some salons have 100% of the premises occupied on a self-employed basis.
Like all forms of employment there are positives and negatives to renting a chair; David Wright, who advises Habia and a range of salons on their legal business, answers some of the key questions.
I employ three hairdressers, but have space for a fourth. I am considering renting the fourth chair – what sort of financial arrangements can I have?
There are basically three types of arrangement:
- Some salons charge a flat weekly rent; this may be attractive as you will know exactly what income you will receive for the duration of the agreement.
- Some salons don’t charge a rent, but share the takings with the hairdresser. There is no prescribed fixed percentage but I have seen anything from 40-60% being charged for the chair rental.
- some salons have a version of both, a smaller rent which at least guarantees some income and then a percentage of the takings so that, if the hairdresser is successful, the salon owner also benefits.
Of course, the hairdresser will also do his/her calculations and the arrangement needs to be mutually beneficial.
If I rent a chair do I need any sort of contract?
Definitely. The hairdresser is not an employee so they do not get a contract of employment. They are providing a service for you and receive a contract of service.
This is normally for a fixed period of time, for example one to three years, although they normally also include a notice clause.
The contract is vital as it will cover the nature of the service provided. In addition, you need to cover every area which might be the cause of future confusion.
For example who provides the products? Who pays for salon promotional materials? Are there any additional costs? Who pays for energy costs and maintenance?
Renting a chair seems a safe option for my salon, but are there potential pitfalls?
You are right, renting is attractive in that you have none of the potential problems with staff, like recruitment, discipline and covering maternity.
In addition, you do not have the costs of income tax and National Insurance. There is insufficient space for me to highlight all the potential pitfalls but, for example, the person is not your employee, but your salon’s reputation can be affected if they provide a poor service.
On the other hand, if they are very successful then their earnings can be substantial and this sum could have been your profit if you employed them.
Finally, it is far more difficult to limit their activities if they choose to leave. It is frequently argued that the clients are their clients. In simple terms, they can be seen as actually being in competition with your business.
I have read that the Inland Revenue sometimes frowns at the idea of someone being self employed in a salon.
You are right, the Inland Revenue is sometimes sceptical, but many thousands successfully do this without a problem.
Sometimes there are issues when a salon closes or there is a major disagreement and the person argues they are really an employee.
There have been many tribunal cases on these issues and there is a range of features that tribunals consider determining if the person is an employee or not.
Clearly, the individual will pay their own tax and National Insurance. As they are self-employed they are free to trade elsewhere.
In theory you have contracted for their services so the individual may be free to let someone else (subject to specified qualifications) deliver the service on their behalf.
The person is more likely to be viewed as an employee if they have to wear your uniform and have fixed hours in your salon.
I want to extend the range of services in my salon but don’t want the risk of employing someone. Is renting the space the route for me?
It might well be, just consider the issues in question one. If you have done your research and you believe there is a market/demand you could easily employ someone and seek to minimise any risks.
For example, you could recruit someone on a temporary basis and possibly initially on part-time hours.
I accept you do have the salary costs, but if it doesn’t work out, then there is the probationary period and there are no redundancy costs to the employer until the employee has attained two years’ service.
More of David Wright’s Legal Advice For Salon Owners