Legal Debates Surrounding Salon Chair Rental
Renting a chair in a salon, or even renting a room, is commonplace within the hair industry.
In 2004 there were over 100,000 self-employed hairdressers and barbers in the UK and it looks clear that the number has since grown.
Some hair salons rent a single chair, others have 100% of the premises occupied on a self-employed basis, and another variation is where the salon effectively hires the services of an independent contractor for an agreed rate.
Like all forms of employment there are positives and negatives to utilizing self-employed individuals; David Wright, an employment law expert who advises salons across the UK considers a few of the issues.
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. With this option you start to have to exert some controls e.g. unless you take the monies how do you know what they have taken, 50% of nothing is nothing so you need the individuals to attend regularly, it’s implicit that they have to use your price lists.
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 must be mutually beneficial.
Apart from the risks with self-employment you have to accept you lose controls. Such as their working hours; you can’t reasonably have post-employment restrictions, and the contractor isn’t bound by your disciplinary procedure
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 for services or chair rental.
This is normally for a fixed period of time, for example one to three years, although they normally also include a notice clause in case it goes wrong for either party
The contract is vital as it will cover the nature of the service provided and the agreed terms.
For example who provides the products? Who pays for salon promotional materials? Are there any additional costs? Who pays for energy costs and maintenance? Do they clean their own work area?
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, National Insurance, holiday pay, SSP etc.
There is insufficient space for me to highlight all the potential pitfalls but I’ll give some examples.
The person is not your employee, but your salon’s reputation can be affected if they provide a poor service. Clients often make critical comments about the salon, rather than the individual stylist
In addition, it is far more difficult to limit their activities if they choose to leave.
If they are self-employed why would they remain in the salon to the publicised closing time if they didn’t have clients?
I have read that the HMRC can question self-employed in a salon.
Increasingly, this is an issue. In fact it has been announced that there is to be a major review and investigation into bogus self-employment arrangements as it loses the Government millions in lost revenue.
But running alongside of this there have been a stream of cases going to Employment Tribunal where allegedly self-employed people have successfully argued the arrangement is bogus and won the right to the minimum wage and holiday pay.
The latest case was the highly publicised case of the UBER taxi drivers. It is a complicated legal difference but they were found to be workers rather than employees. They are still entitled to receive 28 days holiday and the minimum wage
HMRC have provided indicators of what is self-employment and it includes the following:
- They should exercise independent control and judgement over how the work is carried out me
- They would normally work for a number of people.
- It should be possible for them to make a loss (this is difficult if the arrangement involves them retaining a percentage of their column income)
- They have the right to appoint a substitute and do not necessarily required to carry out work personally
- A self-employed worker can decide whether to accept offers of work or not, this of course leads onto they have the option to determine their own working hours
- They normally have to correct of faulty work at own cost and time
- They provide their own materials and equipment
- You may not be able to answer YES to every question above but you would be concerned if you weren’t able to say YES to the majority
Without over complicating the issue let’s look at some of the features of the UBER taxi drivers case which the court found inconsistent with them being self-employed, the comment in bracket is my attempt to relate this to a salon environment
1 the company claimed the drivers made a contract with the passenger and the company was merely their agent but this didn’t reflect the reality of the situation—the passenger booked through the company and the driver accepted the booking
(you can therefore see the vulnerability if the salon deals directly with clients for bookings and payment)
2 Uber interviewed drivers to assess their suitability which looks like recruitment
3 Uber retains the passengers name, address, contact details and takes their money
(this is typical in many salons except where there’s a pure rent a chair arrangement)
4 effectively drivers had to accept trips
(so the stylist really needs some control over bookings)
5 Uber set the route for the driver to follow
6 Uber fixed the fare —–in many salons self- employed contractors have to use the salon price list
7 Uber rated the performance of their drivers
(therefore appraisals and other performance assessments would be dangerous)
8 Uber handled complaints against driver and rebates
(your contract should be explicit that the hairdresser deals with all complaints about their work)
If you were challenged how many of the above factors would you encounter?
It is probably time for you to review your current practices and written agreements. It is important to remember that many individuals freely choose self-employment for the additional freedoms and earning potential and they too have risks if they are assessed as employees or workers. For example, if they earn enough the National Insurance contributions are higher for a worker than someone who is self-employed (and of course the employer would also pay. In addition, they would become liable to PAYE and lose some of the advantages of self-employment
David Wright advises Habia and salons across the UK. For an all-inclusive annual fee of £250, you can contact him with your employment queries. He will write your contracts and produce your policies and salon handbook. In addition. you will receive a monthly newsletter full of practical advice.