For the sake of illustrating the failure that the commission system is, I’ve been running some projections. This post is for every owner that said, “Hourly plus commission is unreasonable and unattainable.” I’m about to blow your mind and prove you wrong.
This is a tale of three nail techs working in the same salon, Happy Feet. Happy Feet salon is a pedicure spa. They are the absolute best in the area and they’re incredibly popular. They offer a variety of one hour long pedicures, all priced at $45. Clients love the concept and the salon is thriving.
Tech 1 is recently graduated and came to the salon with no clientele to speak of. She spends most of her workday answering phones, cleaning, and alternating walk-ins with Tech 2.
Tech 2 has been in the business for five years or so and moved to the area a year ago. She’s built a moderate following of her own, but still isn’t fully booked like her coworker, Tech 3.
Tech 3 is a veteran and is very well established. She is booked solid. All of her clients are standing. She’s at the point where she can’t accept new clients.
All three techs work 40 hours a week (Tuesday-Saturday, 9am-6pm, with a 1 hour unpaid lunch break each day). They are paid a base pay of $8 an hour. In addition to their base pay, they are given tiered commission bonuses when they hit weekly sales objectives.
If they make $700 or above (roughly 15 pedicures), they are given a 5% commission bonus.
If they make $1100 or above (around 25 pedicures), they are given 10%.
If they make $1500 or above (around 33 pedicures), they are given 15%.
Clients are automatically charged an 18% gratuity, which goes directly to the techs.
Tech has performed 15 pedicures, bringing in $675 in service sales. She came close to hitting her weekly sales goal, but she fell short so she does not receive the 5% bonus this time around. Her paycheck is $320 (hourly) plus $121.50 (tips). It totals $441.50 and equates to $11.03 an hour when averaged out. Tech 1 has earned $355 for her salon. It’s not a lot of money, but her stellar reception skills, her great attitude, and her attention to detail when it comes to keeping the salon in tip-top shape make her an A+ staff member. Even though she falls short on her sales goals, the salon owner appreciates her hard work. Her failure to meet those goals does not compromise her employment in the least.
Tech 2 performed 28 pedicures, bringing in $1,260 in service sales. She exceeded the second tier goal and is eligible for the 10% bonus! Her paycheck is $320 (hourly) plus $226.80 (tips) plus $126 (bonus). It totals $672.80 and equates to $16.82 an hour when averaged out. Tech 2 has earned $814 for her salon this week!
Tech 3 is an absolute maniac and has performed 40 pedicures, bringing in a whopping $1,800 in service sales. She didn’t just hit the highest tier, she far exceeded it, so she is certainly eligible for the 15% bonus. Her paycheck is $320 (hourly) plus $324 (tips) plus $270 (bonus). It totals $914 and equates to $22.85 an hour when averaged out. Tech 3 has earned $1,210 for her salon this week!
Now, let’s compare these same three techs at a 50/50 commission split.
Tech 1 brings in $675. She doesn’t get paid hourly, so the owner has to keep on top of her to answer phones, fold towels, and clean. Because she’s not getting paid, she doesn’t have incentive to do these menial tasks. Her paycheck is $337.50 (commission) plus $121.50 (tips). It totals $459 ($11.47 an hour when averaged out). She has made $337.50 for the salon. If her numbers don’t increase and her attitude doesn’t improve, her employment is in serious jeopardy.
The salon has lost $17.50 on Tech 1 this week under the commission-only model.
Tech 2 brings in $1,260. Her paycheck is $630 (commission) plus $226.80 (tips). It totals $856.80 and equates to $21.42 an hour when averaged out. Tech 2 has earned $630 for her salon this week.
The salon has lost $184 on Tech 2 this week under the commission-only model.
Tech 3 brings in $1800. Her paycheck is $900 (commission) plus $324 (tips). It totals $1,224 and equates to $30.60 an hour when averaged out. Tech 3 has earned $900 for her salon.
The salon has lost $310 on Tech 3 this week under the commission-only model.
For those of you keeping track:
Hourly + Commission Bonuses
Tech 1: $11/hr
Tech 2: $16.82/hr
Tech 3: $22.85/hr
Tech 1: $11.47/hr
Tech 2: $21.42/hr
Tech 3: $30.60/hr
…what compensation method is more expensive again? (Hint: it’s commission-only.)
It gets worse. Take a good look at those losses. On the surface, they don’t look too bad. Obviously, any loss is not ideal, but $17.50 a week? Is that really worth freaking out over?
Let’s evaluate those losses over the course of a year.
Tech 1: $910/year
Tech 2: $9,568/year
Tech 3: $16,120/year
This is assuming each tech has the same weeks throughout the course of the year. In all likelihood, Tech 1 and Tech 2 will see an increase in business as time passes and they build their clientele further. This is also assuming that the owner of Happy Feet does not employ any additional techs.
Full-service salon owners, if your stylists are on commission-only, your losses are up in the high tens of thousands. This projection is based on $45, one-hour services. Many stylists can work two or even three color clients simultaneously, bringing in upwards of $300 an hour depending on your service pricing and their respective speeds.
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I know salon professionals are screaming, “What the hell?! Their losses over the course of the year is our income!”
First, under the hourly+commission bonus structure, each tech’s yearly income (assuming every one of them remains static–which is not likely in the least) is as follows:
Tech 1: $22,958 ($3,738 above industry median)
Tech 2: $34,985.60 ($15,765.60 above industry median)
Tech 3: $47,528 ($28,308 above industry median)
So, none of these techs are suffering under the hourly+commission bonus structure. They are actually doing far better than the average technician in the United States (at least according to the Bureau of Labor Statistics Occupational Outlook income reports for manicurists and pedicurists).
Look, I understand exactly where you’re coming from but you need to step into the salon owner’s shoes. In addition to paying employment tax for all three techs, she has to cover product, rent, and utilities. If something breaks, she has to have money available to fix it. With that slim of a profit margin, it’s highly unlikely she can afford to provide her techs with continuing education, holiday bonus checks, benefits, or even pay for advertising. She might not even be able to pay herself a living wage after all is said and done, let alone save for her own retirement.
This is where labor abuses in our industry originate.
Owners who are forced to scrape to make ends meet are unhappy owners. Many get desperate and resort to tactics that are of questionable legality at best (like charging “head fees,” “backbar fees,” or charging for product costs). A good deal of them purposefully misclassify employees as independent contractors to evade employment taxes (preferring to shove that 15.3% self-employment tax burden on you, by the way). A few of them even skim money off their employee’s paychecks.
When the salon suffers, everyone suffers. If you want to see this industry improve and to eliminate the crimes committed against salon professionals, you have to accept the fact that you DO NOT deserve to make more than the business you’re working for. It’s not sustainable.
If you don’t believe me, do the math for yourself. Those who oppose realistic compensation systems don’t have a clue what actual salon operating costs are. Commercial real estate is not cheap. Building out that space to transform it into a salon is not cheap. Insurance is not cheap. Receptionists are not cheap. Assistants are not cheap. Cleaning crews, window washers, building maintenance, repairs, equipment, product, and advertising are. not. cheap.
Let me make this clear: Yes, I do believe it is absurd to expect 50% of gross sales as compensation when you’ve invested nothing in the business and risked absolutely nothing. That’s true, but there’s another side to that.
You deserve better than what a 50% all-or-nothing commission compensation system can ever provide to you.
- The security of a steady paycheck.
- The ability to take time off for illness and vacations without having to worry about your income.
- The reassurance of a health insurance policy and a retirement savings account.
- The opportunity to grow as a professional without having to pay out of your own pocket for that professional growth.
- The possibility of upward mobility that only a properly managed salon can provide you with.
- The liberation that comes with being a properly classified employee (as opposed to an exploited worker who is expected to assume responsibilities the salon owner has abdicated).
- The reduced tax burden and access to every right and protection afforded to every properly classified employee in the United States.
So yes, you’re ridiculous for thinking you “deserve” 50% or more of gross sales as compensation. You deserve better working conditions than a salon owner offering you 50% could ever give you, and tiered commission compensation is how you get it.
So, basically you’re stating that commission only is best for both owners and pros?
No. The opposite. Commission only doesn’t benefit the owners in the least bit. It needs to be calculated carefully in order for it to be legal, to begin with. Owners need to be comparing their staff’s commission against their hours to ensure they’re making at least minimum wage for their hours worked. Employees working under the commission split typically don’t like working for free (which is completely understandable). This means that unless they’re getting paid, getting them to do chores around the salon is often like pulling teeth. I have more reasons why commission doesn’t serve the salon here: https://thisuglybeautybusiness.com/2014/02/why-commission-only-doesnt-work-for.html
The commission system is really what contributes to owner abuses against salon staff since it puts them into a position where they’re forced to try and work with a super slim profit margin.
Excellent article! Now if only employees would understand how this system is best for all concerned!
I’ve actually been pretty surprised with the positive reception I’ve gotten from employees so far. A lot of them are expressing interest in working somewhere that utilizes this compensation method. They like the idea of a guaranteed wage and that this system makes overstaffing incredibly unlikely. I’ve had a lot of owners contact me asking how they can convince their staff to switch to this method, so I suppose I should work on an article that outlines all that next. As long as the owners have a solid plan for what kind of benefits the employees can expect and when they can expect to see those benefits come into effect, things will go smoothly for the most part. You’ll always have one or two that rebel and leave, but a lot of employees want things like paid vacation and regular continuing education courses. My first owner used to pay for the entire salon to go to Premiere Orlando every year–rooms, dinners, tickets, everything. These little things greatly improve employee satisfaction and minimize turnover when they’re executed correctly.
I would love to see an article that helps owners explain this system to their staff! These projections are great, but it would be incredibly helpful to have some strategies for implementing this policy 🙂
I have one in the works for the fall! 🙂
Thanks for the clarification. No more reading articles at 3am for me! Lol
Lol! I do the same thing! I know it’s too damn late to be reading when I have to re-read the same sentence over and over and over again…and I still can’t remember what it said by the time I’ve reached the period at the end. 😀
[…] says, “When I first read your article about the nail techs and it broke down their pay scales, I wondered, how do you determine the tier amounts? That, of […]
Independent contractors are not always mis-classified if you consider that a staff member / worker believes they have a book (their following) even when built via the salon. It also can be considered a form of booth rental (notice a form not exactly, but independent)
Once a worker builds a book in a commission or salary salon they many times go into the records (illegal under any circumstance) and get their names and addresses (this is theft). They then sometimes work on other staff to leave the salon to make their move feel better in their minds. And now with social media there are unscrupulous owners in-boxing people with followings to steal them. Therefore the IC or 1099 worker is in many cases exactly what owners should be doing since they will take their so called book anyway. It is legal when done properly without control etc etc and is not a bad working model. It is not that much money in taxes that an owner pays but the costs associated with building a book only to have it stolen might be worth the change form a losing system as commission 50 to 70% in some cases (held up for ransom by some)
BTW: as an IC the workers receive more tax write offs than a commission worker so whats the big deal SS = 6% it is their money anyway which will be returned one day in retirement
What are your qualifications? Mine are smeared all over this website, and all my claims link to statutes. Everything you’ve written here–literally everything–is wrong. Go read some more. Educate yourself. Absolutely nothing is “illegal under any circumstance” (even murder–look it up). There are no absolutes in law. You’re also wrong about write-offs and the social security contribution rate. Seriously. Just stop.
Go Tina!!!!! Thanks for all your info