Chances are that you’re finding this article at tax time. You’re either learning that you were misclassified by your employer, or (if you’re a salon owner yourself) that you may have been misclassifying your salon professionals. Many people in the beauty industry don’t truly understand the meaning of the word “independent contractor,” or how it applies to salon workers. This article will clarify the 20 Factor Test the IRS uses to determine employment status to give you a thorough understanding of the classification in easy-to-read language.
This article is primarily written about “independent contractors” who are on the salon owner’s payroll. It will only be relevant to booth renters if these control factors are present in their current rental situation. Some renters do get exploited and may not realize that their salon owner is charging them rent and treating them like an employee.
Three Common Industry Misconceptions
A person is either employed or self-employed.
There is no in between. There is no such thing as a “hybrid status.” You cannot be an employee who is also “independent” or self-employed. Many people in the beauty industry have this belief that an independent contractor or “subcontractor” is a special type of employee that has more freedoms than a regular employee, but not as many freedoms as a booth renter or someone who is self-employed. This is utterly incorrect.
If you are responsible for paying the entirety of your employment tax responsibility, you are self-employed.
True beauty “subcontractors” are exceptionally rare.
A subcontractor is a person or business that contracts to provide some service or material necessary for the performance of another’s contract.
A salon owner is not a “general contractor” just because they’re self-employed business owners.
A general contractor is a person who contracts for and assumes responsibility for completing a construction project and hires, supervises, and pays all subcontractors. General contractors are under contract themselves by a business entity. They are the overseers of a large project they’re tasked with ensuring the completion of.
Does that sound anything like your salon owner? Probably not. Your salon owner, like most salon owners, own a business entity operating independently of any outside control.
For more information about what these words mean and to see how they might be used properly in the industry, read this post.
What is the 20-Factor Test?
The IRS has a 20-factor test for determining employment classification status. This test is usually used after a worker files an SS-8 Form, a document requesting the IRS make a determination regarding their employment status. A worker who files this form is essentially asking the IRS to review their employment arrangement and decide whether they are employed or self-employed, so they know what employment tax rate they should be paying. The 20-factor test is the tool the IRS uses to make that decision.
Even a cursory examination of these determining factors makes it painfully obvious that the independent contractor classification seldom belongs in our salons. To illustrate, we’re going to go over each and every one of those factors and discuss why and how this status can be inappropriate in a salon setting. First, lets clear up some of the terminology.
“The person or persons for whom the services are being performed” are not the clients; they are the salon owners. The salon owners are the ones “contracting” salon professionals for their services. The clients themselves are the “services” (or jobs/assignments) the independent contractors are being contracted to complete. As you go through these, remember that when they use that terminology, they are not talking about the client sitting in the chair.; they’re talking about the person who contracted you.
When the IRS refers to “services,” they’re talking about the tasks you perform within your job title. For nail techs, these would be manicuring and pedicuring services. For hairdressers it would be coloring, cutting, and styling. For estheticians it would be skin care services. The IRS is not necessarily discussing the individual services you provide to clients. In many cases, they’re referring to the services you provide in general in your professional role.
The “general public” includes competing businesses (other salons) and private customers (clients).
The IRS 20 Factor Test
(Clarified for the Beauty Industry)
A worker who is required to comply with other persons’ instructions about when, where, and how he or she is to work is ordinarily an employee. The control factor is present if the person or persons for whom the services are performed have the right to require compliance with instructions.
If a salon professional works a schedule (being told when to work), is expected to perform that work inside the salon owner’s salon (being told where to work), and is being trained on how to perform their services by the salon owner (being told how to work), they are likely an employee. Even if the worker was not dictated to in this manner, if the salon owner retains the right to require compliance with their instructions, this control factor is present.
Training a worker by requiring an experienced employee to work with the worker, by corresponding with the worker, by requiring the worker to attend meetings, or by using other methods, indicates that the person or persons for whom the services are performed want the services performed in a particular method or manner.
If the salon owner requires the professional to apprentice or assist as a condition of their job and/or requires them to attend meetings or continuing education classes, they’re likely an employee. An independent contractor is only responsible for the attainment of a result. They are not to be told specifically how to attain that result. The only thing that matters is that the service they were contracted for is completed in a satisfactory manner.
Integration of the worker’s services into the business operations generally shows that the worker is subject to direction and control. When the success or continuation of a business depends to an appreciable degree upon the performance of certain services, the workers who perform those services must necessarily be subject to a certain amount of control by the owner of the business.
Salons provide beauty services. Beauty professionals perform those beauty services. Whether or not a salon professional’s services are integrated into the business likely cannot reasonably be debated. For example, the success of a hair salon hinges on the performance of hair services. Without those services, the business would not produce any profit and it would fail. Those hair services are integral to the success and continuation of that hair salon.
4.) Services Rendered Personally
If the services must be rendered personally, presumably the person or persons for whom the services are performed are interested in the methods used to accomplish the work as well as the results.
If the professional is sick, can they call any other licensed professional and have them handle their appointments for the day? Probably not. If the professional does not have the ability to delegate jobs to other professionals at their discretion, they are likely not independent.
5.) Hiring, Supervising, and Paying Assistants
If the person or persons for whom the services are performed hire, supervise, and pay assistants, that factor generally shows control over the workers on the job. However, if one worker hires, supervises, and pays the other assistants pursuant to a contract under which the worker agrees to provide materials and labor and under which the worker is responsible only for the attainment of a result, this factor indicates an independent contractor status.
Can a professional decide for themselves to interview and hire people to assist them without the salon owner’s consent? Booth renters and freelancers generally can, because they are truly self-employed if they’re being treated properly. However, the majority of salon workers do not have the freedom to hire or manage their own assistants.
6.) Continuing Relationship
A continuing relationship between the worker and the person or persons for whom the services are performed indicated that an employer-employee relationship exists. A continuing relationship may exist where work is performed at frequently recurring although irregular intervals.
Is the professional expected to show up to work regularly and to remain loyal to one particular salon? We’ll get into this more later, but this factor makes it extremely clear that the IC status is very, very commonly abused. Independent contractors retain their independence, which includes the freedom work wherever they please and offer their services to anyone willing to pay (including competing businesses).
7.) Set Hours of Work
The establishment of set hours of work by the person or persons for whom the services are performed is a factor indicating control.
If a salon professional classified as an independent contractor works a set schedule that the salon owner established, that’s an indicator of misclassification.
8.) Full Time Required
If the worker must devote substantially full time to the business of the person or persons for whom the services are performed, such person or persons have control over the amount of time the worker spends working and impliedly restrict the worker from doing other gainful work. An independent contractor, on the other hand, is free to work when and for whom he or she chooses.
If the salon owner puts an independent contractor on a full-time schedule, has them sign a non-compete, or has them sign an employment contract, that independent contractor is extremely likely to be determined an employee. This factor indicates a significant degree of control that is highly inappropriate for the IC classification.
9.) Doing Work on Employer’s Premises
If the work is performed on the premises of the person or persons for whom the services are performed, that factor suggests control over the worker, especially if the work could be done elsewhere. Work done off the premises of the person or persons receiving the services, such as the office of the worker, indicates some freedom from control. However, this fact by itself does not mean that the worker is not an employee. The importance of this factor depends on the nature of the service involved and the extent to which an employer generally would require that employees perform such services on the employer’s premises. Control over the place of work is indicated when the person or persons for whom the services are performed have the right to compel the worker to travel a designated route, to canvass a territory within a certain time, or to work at specific places as required.
Is the professional required to perform their work in the salon owner’s salon or are they permitted to service the client at their private studio? In most states, salon services must be performed inside a licensed, board-approved salon facility. However, a truly independent contractor will generally have the ability to perform the service wherever they please (so long as the place they choose is also compliant with applicable state board regulations).
10.) Order or Sequence Set
If a worker must perform services in the order or sequence set by the person or persons for whom the services are performed, that factor shows that the worker is not free to follow the worker’s own pattern of work but must follow the established routines and schedules of the person or persons for whom the services are performed. Often, because of the nature of an occupation, the person or persons for whom the services are performed do not set the order of the services or set the order infrequently. It is sufficient to show control, however, if such person or persons retain the right to do so.
If a professional is expected to perform services the way the salon owner dictates following the salon owner’s service protocols, that’s indicative of an employee/employer relationship, but take a look at that last sentence. Even if the salon owner gives the independent contractor the freedom to perform their services in their own sequence, if they retain the right to set that order, it is sufficient to show control.
11.) Oral or Written Reports
A requirement that the worker submit regular oral or written reports to the person or person for whom the services are performed indicates a degree of control.
This doesn’t often apply to our business, however, it may apply if the salon owner requires the independent contractor to submit sales reports. (This is common in rental salons where salon owners don’t set flat rental rates, but instead take a percentage of each renter’s gross sales. In these situations, five out of six IRS revenue rulings determined that salon landlords who took percentages were actually employers.)
12.) Payment by Hour, Week, Month
Payment by the hour, week, or month generally points to an employer-employee relationship, provided this method of payment is not just a convenient way of paying a lump sum agreed upon as the cost of a job. Payment made by the job or on a straight commission generally indicates that the worker is an independent contractor.
Do not let the last sentence confuse you into believing that classifying commission-only employees as independent contractors is permissible. If we’re going to get really technical here, commission-only generally isn’t legal unless the owner is auditing the hours worked against the commission and ensuring that the workers are making at least minimum wage at the end of each pay period. (I have an article on that here.)
When the IRS talks about an independent contractor who is paid commission or by the job, they’re talking about people who come into a random business, do a job that needs doing that is not integrated into that particular business, do that job without any outside interference or direction, and leave with their payment with no expectation to return.
If a salon professional is on someone’s payroll and getting paid at regular intervals, they are most likely an employee.
13.) Payment of Business and/or Traveling Expenses
If the person or persons for whom the services are performed ordinarily pay the worker’s business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be able to control expenses, generally retains the right to regulate and direct the worker’s business activities.
If the salon owner reimburses the professional for gas spent driving to/from a class or networking event, and if the owner is buying the products the professional is using (or reimbursing them) that professional is likely to be determined an employee. An independent contractor generally makes a significant investment and has a realization of profit or loss (those are further below, we’ll discuss them more when we come to them).
14.) Furnishing of Tools and Materials
The fact that the person or persons for whom the services are performed furnish significant tools, materials, and other equipment tends to show the existence of an employer-employee relationship.
If the salon owner requires a professional to use a certain set or brands of tools (CHI blow drier, Wahl clippers, Hattori Hanzo shears) which the salon owner provides, that professional is likely an employee. Most of us buy our own tools, but “materials” are usually furnished by the salon. So, if the salon owner requires a professional to use a particular product line that they provide, that professional is not truly exercising independence, even if the salon owner requires the professional to pay them for the privilege of using their chosen products.
15.) Significant Investment
If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees (such as the maintenance of an office rented at fair value from an unrelated party), that factor tends to indicate that the worker is an independent contractor. On the other hand, lack of investment in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer- employee relationship.
Booth renters typically have made a significant investment. They pay their rent for their “office” and work in their space at their own discretion. If a professional works as an independent contractor in a salon that they do not have any investment in, they are dependent on the salon owner for the facility.
16.) Realization of Profit or Loss
A worker who can realize a profit or suffer a loss as the result of the worker’s services (in addition to the profit or loss ordinarily realized by employees) is generally an independent contractor, but the worker who cannot is an employee. For example if this worker is subject to a real risk of economic loss due to significant investments or a bona fide liability for expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent contractor. The risk that a worker will not receive payment for his or her services, however, is common to both independent contractors and employees and thus does not constitute a sufficient economic risk to support treatment as an independent contractor.
A booth renter can realize a profit or suffer a loss. She could spend a bunch of money on rent, product, and equipment and never recoup them. She could hire an assistant and drain her savings paying for him because she doesn’t have enough business to sustain his paychecks. (We’ll assume she’s super bad at her job and can’t even pay clients to sit in her chair.)
That being said, salon employees generally also have a risk of profit or loss, as stated in the last sentence. Anyone who has ever had an owner refuse to pay them their commission when a client has complained about a service knows exactly what it’s like to realize a loss as an employee.
However, this factor references a significant investment and a realization of profit or loss. If both of these factors are present in the absence of employer control and an absence of an expectation of a continuing relationship, the odds are good that the worker is independent.
17.) Working for More Than One Firm at a Time
If a worker performs more than de minimis services for a multiple of unrelated persons or firms at the same time, that factor generally indicates that the worker is an independent contractor. However, a worker who performs services for more than one person may be an employee of each of the persons, especially where such persons are part of the same service arrangement.
“De minimis” is a Latin expression meaning, “of minimal things.” Trivialities. A trivial service in a salon would be a repair to a broken shelving unit performed by a carpenter. This is not integral to the success of the business overall.
What salon professionals do in a salon is not de minimis. If the professional is prohibited from performing their services at other salons (either with or without a non-compete in place), they are not truly independent. This is true even if the salon owner gives the professional permission to perform de minimis services at competing businesses.
For example, let’s say that you’re a part-time stylist who has a cleaning business on the side. If the salon owner says you can clean a competing salon but you can’t work as a stylist there, you are being restricted from performing more than de minimis services and are therefore very likely an employee of that salon owner.
18.) Making Service Available to the General Public
The fact that a worker makes his or her services available to the general public on a regular and consistent basis indicates an independent contractor relationship.
If a professional is permitted to work in other salons, take clients at their home salon, and basically work for anyone willing to pay them for the privilege, they are likely legitimately self-employed. If the owner says the professional cannot perform services for anyone outside of their business, they’re likely an employee.
19.) Right to Discharge
The right to discharge a worker is a factor indicating that the worker is an employee and the person possessing the right is an employer. An employer exercises control through the threat of dismissal, which causes the worker to obey the employer’s instruction. An independent contractor, on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications.
If you’re independent, you generally can’t be fired as long as you’re continuing to provide satisfactory results. Independent contractors are actually contracted. They sign an agreement to perform a particular, specific, one-time job. As long as that job is completed to the contract’s specifications, they can do the job however they please, whenever they please, using whatever tools they please. They can’t be “fired” since they’re not employees. Rather, the person contracting them (the salon owner in our case) could terminate the contract and potentially sue the contractor for failing to fulfill their obligations under the agreement.
If the salon owner has the ability to threaten a professional with termination, they are likely not independent.
20.) Right to Terminate
If the worker has the right to end his or her relationship with the person for whom the services are performed at any time he or she wishes without incurring liability, that factor indicates an employer-employee relationship.
Remember our contract termination example from above? A typical independent contractor’s contract will have penalties for early termination on the contractor’s part, too. If they break the agreement, they’ll generally face consequences.
For example, let’s say you hired a really sexy contractor to repair some drywall. (You may or may not have purposefully bashed a hole in that wall just to lure him into your house.) As he’s working, you sit back, relax, and stare at him dreamily. He becomes incredibly uncomfortable with your gawking, drooling, sighing, and mouth breathing and decides to terminate the contract and leave. The contract has a penalty that requires the contractor to return the deposit in full plus a $50 fee and give you a big kiss on the cheek before he goes. He’s a little disappointed with himself for signing that contract without reading the fine print, but he pays his penalty and leaves, feeling shamed and objectified, vowing to sue you for sexual harassment.
You get the point.
Using the Independent Contractor Status Correctly in the Salon
Independent contractors are freelance professionals. They’re nomads who go wherever there’s work to be found. They have their own websites, set their own prices, and work entirely at their own discretion for whoever is willing to pay their fees.
Generally, these nomads have a special edge over their competition that makes them unique and highly desirable professionals, but that “special edge” tends to be a niche specialty service that doesn’t quite warrant their full-time employment at any one location. These people tend to call themselves “specialists” or advertise that they “specialize” in something specific. They carry their own insurance, provide their own tools and product, perform their services without any instruction or intervention, and go wherever the wind blows them. Many of them also maintain their own business locations (typically studio suites or home salons). Makeup artists (those who do permanent makeup, traditional makeup, and special effects makeup) are commonly found in the freelance world, as are career session stylists and manicurists.
On extremely rare occasions, a salon owner can hire a freelance professional as an independent contractor to perform a specialty service or to work a special salon event, so let’s look at some examples of how that arrangement might play out.
The Independent Educator/Consultant
A perfect example of an independent contractor in the beauty industry is an independent educator and/or consultant (like me).
- I am not on anybody’s payroll.
- I am not exclusive to anyone. I go where there’s work and I do so at my discretion.
- There is no expectation of a continuing relationship. I could visit twenty different salons across the state in a month. I might return to a few of those salons again in the future to teach another class or consult with the owner, but there’s no expectation of a continuing relationship past that one job.
- I can teach or consult wherever I please. It’s my call entirely where I choose to host those meetings or classes.
- Nobody tells me what to do or how to do it.
- If I choose to break an agreement, my contracts require me to return any deposits.
- If I require the services of an assistant (which I sometimes do), I choose, hire, and compensate them myself.
Nobody owns me. I’m a self-employed business owner working out a contract for another business owner.
The Permanent Makeup Artist
A salon owner has heard that several of her clients are interested in getting permanent makeup, but there isn’t enough of a demand for it to hire a permanent makeup artist at her location. She’s also not interested in taking on the liability of such a high risk service. However, she wants to make those clients happy and she happens to know of a really great permanent makeup artist that works freelance.
The owner decides to schedule an permanent makeup party for her clients. The PMUA agrees to work the event and provides the salon owner with her rates and service prices. The two agree to contract terms.
- They mutually agree on a date and time for the party to start and end.
- The PMUA will be closing her salon to be present for the party, so should the salon owner cancel, the contract will hold her responsible for paying the PMU an amount that equates to the amount of money she will have lost as a result of her business being closed.
- The salon owner has clients who will be relying on the PMU to be present that day, so if the PMUA cancels, the contract assigns a penalty to her as well.
- The PMUA will be bringing all of her own supplies, products, and equipment.
- The PMUA will be wearing her own branding and will distribute cards and aftercare information to the clients that bear her branding as well.
- The salon owner will provide payment in full for the agreed upon services (outlined in the agreement) as soon as the PMU arrives for the event.
- When the event has satisfactorily concluded, the agreement will be fulfilled and the two will part ways.
In this scenario, both participants are business owners, meeting on equal ground. The terms are defined, penalties are assigned, and independence is clear. The salon owner will not be telling the PMUA how to perform the service, what products to use, or requiring her to wear the salon’s branding. The service the PMUA offers isn’t one that is integral to the salon (the salon doesn’t even offer it). The agreement and their relationship terminates upon the fulfillment of the contract.
Working in the same salon every day, being expected to be loyal to that salon, being paid a paycheck on a biweekly basis, being told what to do and how to do it, being told what products/tools to use to perform your services, being controlled through the threat of dismissal, being required to go to training or mandatory meetings, and being required to work a schedule set by the salon owner are all indicators that a professional is very likely an employee.
Nothing about that says “self-employed.”
So why the hell should they be paying the entirety of their employment tax responsibility? That’s not their burden to carry if they’re not enjoying the freedoms owed to them in exchange for that higher tax rate. Salon owners, if you want to control a professional like an employee, you need to be paying your share of their employment tax like every other employer in every other industry.
Professionals, quit accepting labor abuses under the guise of “industry custom.” It is not customary to be exploited by your employer just because a whole lot of owners conveniently believe the same misinformation.
I was looking for a new place to do booth rental and came across a place that offered me ; no booth rent, 50 percent commision, all products provided and had to be what salon owner chose for me to use; I could not sell retail of my own or get a cut of hers, I could pick my own hours; had to be dressed up (no jeans), and I’d get paid once a week, and I had to pay all my own taxes because she said I was basically an independent contractor. Of course I didn’t agree to this but I’m baffled that she has other girls there. They are being taken advantage in the sense that the salon owner does not have to pay our taxes out of our check nor contribute to our taxes. It doesn’t make sense to me. Is this something that should be reported? All other salons in the town I live in are straight up booth rental. And she acts like she’s doing us a favor by providing all products so we don’t have to deal with the hassle. This was gonna put me at a extra 900 a month out of my pocket. I just feel bad for the other girls cuz i know they don’t know any better. The oldest hair dresser she has is only 3 years in her career as a beautician. Everyone else is newer. :/
I had an my last workplace do the same thing. Had to comply with her hours. Even when i was getting a 9 am appointment then a large gap to proceed at 2:30 pm. Same feed on all supplies provided. Which was only partially true. I still purchased many things. It was a ridiculous loophole. And I couldn’t see the benefit. I just left and rented a room elsewhere.
Owners that exploit their staff generally target new professionals since they’re less likely to be informed about their rights. It definitely should be reported, but unfortunately, I’m not sure how much you can do since you weren’t a victim. You could submit a report to your state attorney general’s office or labor department and hope it goes somewhere, but in general, they won’t really pay much attention to a case if it isn’t filed by an immediate victim.
What about dog groomers? I make 50% commission. Now my boss sets the prices of dog grooms. I can’t say oh that bichon is bigger and should be $ XX . From everything this article said I’m thinking I’m an employee. …..????????
These standards are federal and not industry-specific. Dog groomers are often subjected to the same labor and tax abuses that we are. Lol, you’re not the first I’ve talked to and I doubt you’ll be the last. I don’t know much about your particular situation, but I would say the probability is very high that you’re actually an employee.
Hello- great info- but if you are a little bit of both – through the questions – for example #1 – I fall under Self Employed, #12 I get paid 60% commission only, I have sat all day & made $0.00, get paid weekly, and apparently mis-understood and I can use what is in the salon, bring my preferred stuff, replace what I use (I thought she meant hard gel since she didn’t have any) she means everything- toe separators, files, polish, callus remover, buffers, etc…..all! Because I’m getting 60% I have to replenish stuff ! Yikes I misunderstood that conversation! I suppose the question lies in what if she hires another tech & they use “salon” stuff — am I still responsible to replace ?
When I leave – what would I take with me? This seems tooopen eended to be legit?
I think what really puts me off to the whole system of classifying Stylists as independent contractors is to forego the minimum wage, and also to skip out on having to pay employment taxes and other fee’s.
I have been in the industry for 3 years, and I’m just about ready to quit! I cannot find a salon that has any potential for building clients. (walkin’s are a must, otherwise you will be sitting for years with small client numbers)
My first year out the salon withheld my client list and put me back to the beginning, the second year I was classified as an independent contractor. (this was clearly a way to skate minimum wage law and not be accountable for employment taxes)
I am now halfway through my third year with a marginal client list. I am in a commissioned salon with zero marketing, and while I am classified as an actual employee this time around, the owner is clearly not aware of minimum wage laws, and so I find myself making less than the minimum wage quite often as there is no business coming through the doors whatsoever. (this has been the worst season to date) I don’t understand the reason that salon owners wouldn’t want to market their salons, and actually bring business to the salon.
In my current salon the owner has expressed that she would like to move some of her clients to my chair, however I see no real method as to how she plans on doing this, nor does it seem a very effective way to build a clientele. (All the clients I currently have ,are ones I built in the previous salon from walkins)
Are there really no salons who have any idea as to how to
A. Bring in clients?
B. Treat their employees with any dignity at all?
My current boss/owner justifies her actions because she is giving me an opportunity! This is the same justification that slave owners used to justify their actions. And, it’s the same justification used all across the world to justify low wage.
I’m studying for a degree in economics currently, and this is completely ridiculous!
Lol, sure, she’s giving you “an opportunity”–to sit around and *maybe* make money for her.
I agree with you that it is a complete joke. This is why I educate and consult. It absolutely blows my mind that these owners dive into ownership with absolutely no education and no plan to speak of. I’m not even saying an MBA is required to run a salon, but do SOME kind of research. Anything. Seriously. (All day today, I’ve been building an Amazon Store for the site, full of books I believe every potential salon owner needs to read before they even consider it.)
The biggest problem with salon owners is this lack of critical, basic education. When I consult with startup clients, as soon as we discuss how their position as a business owner changes their job description, they decide not to open. When they’re confronted with the reality of the enormous risks and responsibilities they’ll take on, they back out because that isn’t what they’re in the industry for.
Luckily, people are starting to come around to seeing their salons as an actual business. It’s slow, but it’s happening. I’ll be offering webinar classes and doing audio lectures later this year that will hopefully reach even further than the blog does.
I feel your pain. I’m doing everything I can to make things better, but it really is an uphill battle.
You can’t be “a little bit of both,” lol. These 20 factors are used to determine employment status overall. You may not qualify for a few of them, but if the vast majority apply to you, you’re being misclassified. I can tell you right now, you’re an employee and that’s how the IRS would classify you. Your on 60% commission, being paid by the owner on a regular basis. You just need to get out of there. That owner is clearly trying to avoid paying employment tax on you. 60% in a self-employment arrangement is entirely unfair to you. 15% goes to self-employment tax, which bumps you down to 45%, and any applicable state tax would take you lower. On top of that, you have to essentially provide your own supplies? That’s ridiculous. You’re getting screwed. I’d get out of there immediately if I were you.
That’s what I was thinking! Thank u!
I work at a salon in an assisted living facility for the elderly. I am the nail tech. I provide all my own supplies. My commission rate is 90%. The 10% goes to the facilty-it is a non-profit facilty.The hairstylist in the salon rents the salon and “hired” me. She also own her own Beauty Salon outside this company. I also work at the front desk at the facility. I have never signed a contract. The only paper I signed was a paper stating that if I fell, hurt myself in the salon, the facilty is not responsible( I am not an employee when I work in the salon)She tells me I am a sub contractor. I turn in reciepts of all my services at the end of the day, and my manager sends them to Human Resources. The money I earned is paid to me bi-weekly. Human Resources cuts one check to my “manager” . The check is my “managers” cut and my cut. My manager then cuts me a personal check for what I earned. No taxes are taken out. My manager makes no money off of me whatsoever. As of right now, things have gotten ugly. She is dictating my hours, making me stay when I am not busy, makes me buy my own supplies. She is bashing my character to my co-workers. She told me I am an Independant contractor. I am getting screwed here. She is telling me now that her accountant is saying that I need to have a 1099 or liability insurance by August. I have been working here in the salon since November 2013. Please tell me what to do in this situation.
Well, the situation is questionable, but probably not actionable since the “manager” isn’t profiting off you. I’m not entirely sure why she thinks she has some kind of power or control over you, however. It sounds to me as if you’d be better off making your own arrangement with Human Resources, lol. If I were you, I’d be very up front and tell her that she obviously has no clue what an independent contractor is. Independent contractors are self-employed–that means you work for YOU, not her or anyone else.
What the hell does she mean you need to have a 1099? You’re not paying her anything. She needs to be providing YOU with a 1099 for the money she has paid you. Either her accountant is a moron or she doesn’t really have one. I’m going to assume it’s the latter, since no accountant would tell her that you’re required to provide her with a 1099 or provide liability insurance (accountants don’t give a crap about liability insurance, they deal with finances and taxes). So she’s full of shit.
Either quit or go around her back to HR and discuss setting up a rental agreement with them independent of the “manager.” The professional liability insurance isn’t a bad idea though. Policies for independent operators are cheap and the coverage is fantastic. You’ll probably never have to use it (fingers crossed), but if you ever have to, it’s a really great thing to have.
I work in a nursinh home as a contracted beautician. The adminastrator of the facility is putting a ton of rules for me.
– He is setting my prices – which are crazy cheap (cheaper than beauty school prices)
– Stirct dress code
– I have to give them my invoices so they can mail them to my clients family
– I have to be the one to go get each client from their room and take them back
– I can not leave anyone unattended in the salon
– Wants me to work certain hours
– I signed a contract but it had nothing to do with being a beautician (like its the same contract he uses for anyone) basically saying that I have to give him a 30 day notice and I need to have general liability insurance.
– The facility does not make a profit off of me
So my main question would be about the prices and dress code. And working in a nursing home would I be the sole person to go get my clients? Sometimes I waste 5-10 minutes trying to find a CNA to transfer my client into a wheelchair.
I’ve heard of this happening in nursing homes before, so this isn’t the first time I’ve heard of this exact scenario. It seems to me as if they’re just severely misinformed. You should be setting your prices and billing your clients directly. The alternative to that is that they set the prices, classify you as an employee, and compensate you in accordance with the law–they would also have the ability to control all aspects of how you do business by setting your prices, your schedule, and your dress code. I believe their terms regarding supervising people within the salon make sense from a legal standpoint, and I’m willing to bet that if they were to put that in a formal lease (if they choose to make you a renter), it would be a reasonable condition of tenancy since leaving a customer unsupervised presents a liability issue. I’m unsure about the CNA issue, and I’m pretty sure no laws are written to address that, but for the sake of efficiency, you may want to talk to them about ensuring that your clients are in the salon at their appointment time by arranging for a CNA to transport them in advance.
I am sure you have explained this before, seeing as I am now overwhelmed by all this very helpful information, I am struggling with a particular question. What is the difference between booth renter and independent contractor?
I am so glad you asked!! This post explains each classification: https://thisuglybeautybusiness.com/2012/09/know-your-rights-in-salon-employee.html
And this post is also helpful too: https://thisuglybeautybusiness.com/2013/11/independent-contractor-defined-for.html
Hi Tina, please advise my situation. I signed a contract a month ago with a nail salon to be employed as an esthetician/nail tech. I get paid 50% of all my services every 2 weeks and expected to pay all taxes myself. I provide all my own tools, (UV nail lamp, implements, files, etc) and the owner provides the product. Regarding schedule, the owner proposed a set schedule and asked if I had any issues with the hours (I didn’t so I accepted). The dress code is business casual and must be black or white only. I was given a policy manual that I have to adhere to and also have to document my service stats daily/weekly/monthly. I am required to help out with answering phones/callbacks/desk duties when not with a client. I must give one month notice to take vacation and not entitled to vacation pay. I must do cleaning duties of the whole salon every day in addition to cleaning my own room. My clients are rung out through a centralized reception desk into the salon’s till. I am not allowed to provide my esthetic/nail services outside of the salon as the salon must be my only client. If I decide to leave the salon I cannot solicit the clients who came to the salon after I joined. Does this sound more like an employee status or self-employed? Am I being taken advantage of? TIA
You are not an independent contractor, you’re clearly an employee. I say this because:
1.) She’s providing product.
2.) She’s requiring you to adhere to a schedule.
3.) There’s a continuing relationship.
4.) You’re expected to adhere to a dress code.
5.) You’re on the payroll.
6.) You’re expected to adhere to a policy manual and document services.
7.) You’re required to perform duties outside of your job description (reception/cleaning).
8.) You’re required to give notice of vacation.
9.) You’re expected to remain exclusive to that salon (which is the absolute determiner where the IRS is concerned–an independent contractor has freedom to operate wherever, whenever, however, and for whomever they please). By having you sign a non-compete/non-solicitation and giving you a handbook, the owner has given you the evidence you need to prove you’re being misclasssified.
You are absolutely being taken advantage of. To find out what you can do, first read this post:
If that fails, then read this one:
l can understand why salon owners want you to use their products, ask your schedule to help you book your own clients (isn’t it an advantage to you?). have a dress code. sorry to sound mean, if you dont like that then go and open your own salon, why do you want to go under someone’s business and want to damage their image.
So can I, but that’s the right of a legal employer; not the right of someone who is evading taxes and exploiting workers. When someone is misclassified as a self-employed so-called “independent contractor,” they essentially ARE a salon owner, according to the IRS. As a salon owner yourself, would you allow someone who isn’t paying your taxes to dictate to you as if they had the legal right to? I’m guessing no. Why would you want to “go under someone’s business” who isn’t classifying you or compensating you legally, or meeting their obligations to you?
Thank you soo much, I’m going through this exact same thing and I need to know what actions to take! The owner is saying I need to file for an LLC or she is garnishing my wages for workers comp that she is getting ticketed for! Which is totally illegal, all the salons in this town do the same thing😤
Make sure you contact the enforcement agency (or agencies) dealing with her case currently and inform them of the garnishment. (I’m sure you already have, but just in case, let them know.) It’s likely that other salon owners in the area will be investigated shortly. When one of them gets punished, they tend to try to rat out the others. I’m not sure why so many salon owners seem to think that labor and wage enforcement works like an episode of Law & Order, but they can’t “cut a deal” by turning in other people, lol. All they do is make it easier for the enforcement agencies to track down other violators.
You have no idea how this post helped me today. I’ve been at my first spa job for almost two months and experienced everything that you listed. I wasn’t sure what I should do before but I am now. I’m sharing this with everyone I know.
Please help! I had no idea these laws even existed, if I did I would have never accepted this job…
I’m only 3 years into the beauty industry and came across what seemed to be a dream job…
They had me file for independent contractor when I started (which I had no idea about, and when I asked they were very vague about it).
I work at a salon where everyone has a strict schedule, paid weekly with 50/50 commission with 1099, asking for a day off or schedule of my choice would be a joke, cleaning, reception duties, all services must be paid at the front desk and go into the salon draw, I’ve been told I cannot pass out my personal phone number to my clients, mandatory meetings, and much more. I want to get into the process of taking action how and where do I start?
I have a post for that! File the form linked in the article. 🙂
Thank you soooo much! Wish me luck ☺️
hi! I am in aesthetician in South Florida I am currently working at a salon that provides me with a W-2.I am looking to make a change and the salon that I am currently thinking of going to is offering me 60% commission. they will pay for all products I am told except for my tools and give me a 1099. They also told me that they will be deducting weekly a $20 fee for the cleaning lady and laundry. Is this legal? Apparently everyone else employed there does this. I have been told by other people in the industry that a 1099 here is the norm and that I will not likely see a salon offering me a W-2 anymore, is this true? Do I just need to stick it out where I’m at?
Well, whoever told you that you wouldn’t find many salons giving out W-2s is a fool, lol. It certainly isn’t easy to find an owner that does things legally, but they do exist and more of them are changing their practices every day..
The arrangement you’re considering isn’t appropriate. Without knowing all the details, I can tell you that based on what you’ve communicated in your comment, it is highly unlikely to be permissible in the eyes of the IRS. They’re basically accepting commission as rent (a practice the IRS has routinely ruled against). They’re providing product–also indicative of an inappropriate degree of control. I’d advise you to stay where you are until you can find another salon that doesn’t exploit their workers. That 60% commission is really 45% after you pay your 15.3% self-employment tax. A salon owner that abdicates their responsibility for their employees is likely to also be shirking other responsibilities. To me, that would point to very weak, inexperienced, or unethical management–not something I’d want to be associated with.
Thank you so much for your reply. The problem is I can’t seem to find one that doesn’t do 1099 near me. The salon I’m currently employed at is doing 1099 to all new employees too. If this is illegal and so many places are doing it how can they get away with it ? I have been in the industry for a long time and have never heard of the IRS finning anyone for this. Also what about the employees who don’t know better and accept the 1099 ? I have never heard of someone being audited to prove they are really IC’s. What can be done to stop these businesses from taking advantage of employees present and future? The salon I was considering has been in business for 18 years and they are thriving although honestly I can’t imagine anyone accepting those terms. They tried to sell me on the fact that it would be better for me financially since I would have so much more to write off than I do now which I can’t seem to confirm either !
Lol, I’ve been in consulting for a long time and I can promise you–as the person salon owners call when they receive their audits–it definitely does happen. Frequently. (If you want to hear a true cautionary tale, here’s one.)
The only thing that can be done is to keep educating–which is what I do. I wrote a book, I teach classes, and I consult for salon owners full-time. I also participate heavily in Facebook groups, spreading as much information as possible, but that’s the best anyone can do.
…they ALWAYS try to sell it as if it’s better for you. Trust me, nothing about paying 15% self-employment tax is better for you at all–especially if you aren’t setting the prices to cover the expenses.
I was in a salon the was audited by the IRS the owners decided to let me go before they would talk to me because they did control my hours and pay me in check controlled product along with calling me a contractor. Paid no tax on me. I paid it.
Hi Barbara! I recommend filing an SS-8 with the IRS to get that tax reimbursed. You’ll likely get the money eventually, but if the owners were somehow successful in hiding your existence at their company, that may not happen. In either case, it’s probably best to be proactive.
I bought an existing salon that had been in business for 19 years 5 years ago. I recently had the previous owner (who had stayed at my salon as an employee) and a stylist (whom I employed through beauty school and I have helped build her career) leave without warning and open a new salon .12 miles down the block. When I accessed the staff activity report I found that they had downloaded my client list about 6 weeks before they left. My manager spoke with one of the girls about this and she said she couldn’t figure out how to download her own client list so she just downloaded the whole thing but hat she’s only contacting her clients. I was fine with this. As stylists we work hard to develop relationships with our clients and I had no problem letting them take them with them, and would have gladly given them their lists if they had asked. However, we are now having our clients (whom didn’t belong to them) asking when we are moving. Come to find out, they are calling our clients and misleading them to believe we are moving locations by not telling them their names and that they left. They are saying “our salon” has moved. They also recruited an ex-employee of mine and she is sending cards to clients that see my current staff after being gone almost a year. I do not like to play dirty. When I bought my salon it was a ghost town and I have worked very hard to help my staff by advertising and providing them with constant education to keep them knowledgable and inspired. My reports show that business is down dramatically and I fear that the damage is done, and I am in a position to consider laying off a few of my employees so I can make ends meet. My staff and I are all hurt that people whom we considered our teammates are doing this to us. What are my rights? Is there any Complaint I can file with the State of Michigan? Can I sue them? My staff deserves better than for me to just sit back and take the punches…HELP!!
If they were W-2 employees, you may have legal recourse, but you’ll have to talk to an attorney to get the specifics about how likely it is that you’ll walk away with anything. From what I see here, you’d have several major challenges:
1.) You will have to prove that one of the staff members stole the database. What was said to you can’t be proven unless a witness was present–and that witness may have their credibility called into question depending on who they are and where their loyalties are likely to lie in this situation.
2.) You will have to prove that they have done quantifiable, monetary damage to the salon. It wouldn’t be hard to show a loss of business, but it would be hard to attribute that loss to them specifically.
3.) You would have to prove that they are soliciting your clients and misleading them. Voice messages would be extremely useful in this, as would text messages or emails–but it would need to be proven.
Don’t play dirty. Keep your head up. The best revenge is success. Your heart is in the right place–protecting your remaining staff. Focus on new client acquisition and retention. If anything, this mutiny should be an opportunity for you to bond with those who stayed and strengthen your resolve to succeed, despite the way they pulled the rug out from under you.
Thank you for posting this…and so much more that I’m reading. I wish I had found this blog in 2012 when I knew I was technically an “employee” and being told that I had “control”, but at least I know it now and can prevent it from happening to me a second time. I’ve bookmarked this article for future reference!
[…] must cover operating expenses, product costs, tools and labor? Unless your nail technician is a self-employed booth renter, the money you pay them is not what they receive–even then, renters cover their own […]
I am a manicurist in a small boutique spa. I have been working the past 3 years with the owner who is also my friend and client. We have had some small issues over the past 3 years and tend to try and talk them through. Recently I have been told by a couple clients of mine to be careful because the owner has been saying things about me. I have felt that this has become an unhealthy environment for myself and my clients and have proceeded to let her know I will be resigning. However I do have a lease agreement stating I must give a 30 day notice. My question is do I have to uphold this notice due to the fact of the environment of the salon and my client’s and my well being. I feel I am working under duress and have not been feeling that we’ll due to the stress caused by the owner. I told her I would give her two weeks but wanted to know if by signing that 30 day lease/contract I have any right to break that agreement due to the environment. I am also witnessing her treat another contractor that she issued a 30 day notice to with disrespect and hostility. I feel this gal is being mistreated and is only trying to finish out her 30 day without complications. Which is not easy for her to try and avoid the owner and her misconduct. Can she apply a cease and desist order for the owner to stop her harassment or seek reimbursement of her monthly rent?
The lease stipulates that you have to give a 30 day notice–not that you have to be physically present for the duration of the notice. I recommend against breaking the agreement. Pay your rent up for the last 30 days, deliver the notice, and move out. The alternative is to go to court, and that’s not worth the cost or the added stress. The other renter can absolutely file a complaint, but again, it’s lengthy, expensive, and generally not worth it when compared to the alternative.
I have been doing nails now for roughly 10 months. When I first exited school I worked for one of the few commission salons in my small town. The deal was that I was to get 60% of what I did on hands and 50% on pedicures, when I was “hired” (I call it that because that is what it felt like, I had two interviews and they offered me a job there) someone “forgot” to inform me that I would be responsible for all of my own product when it came to enhancements. At first I was told that was why she gave an extra 10%, because most nail techs liked using what they wanted and she didn’t want to buy different stuff anymore. The owner told me when I was working, I could only have scheduled days off, I couldn’t just come in 20 minutes before my appointments and was written up because they scheduled me an appointment one day before I had shown up for the day, I was given a cleaning duty, and I started being expected to bring all of my supplies in (paper towels, alcohol, acetone, lotion, etc.) I got a check every two weeks and most times I was paid I didn’t even clear $1 per hour since I was there full time. I left there in December of 2014, she won’t pay me the rest of what she owes me. Also, I had started keeping track of all my appointments and she had shorted me on previous pay periods as well. And she never gave me a 1099 at the end of the year. I feel foolish since I didn’t keep exact track of the checks that I got in the first month I worked there. It made a mess of my tax return since I was claiming money that I didn’t have proof of. I found out that the owner is telling people that I was a shitty nail tech and that is why I left. I left because what she was paying me seemed fishy and I realized she was getting fat off me and giving me nothing in return, the bottom line was when she wanted me to sign a 2 year non-compete that wouldn’t allow for me to work anywhere else within 100 miles of her salon. Do I have a claim against her? I think I was an employee and I wasn’t paid even minimum wage…I want the $190 she owes me. It pisses me off that I have to even ask for it. I am happy to say that I am renting a booth now and even though the salon owner acts like I’m her employee ever so often (I keep her in line) it is far more superior than commission…I pay a fraction monthly to what I was paying in the first place. What do you suggest?
LOL! The non-compete had me dying laughing. That would never, LITERALLY NEVER hold up in court. A judge would laugh her out of the room.
I can’t say whether or not you have a claim, but you absolutely should file an SS-8 with the IRS and file a report with your state labor agency (or state attorney’s office if you’re lacking a labor authority).
Tina, Is there a contract template for independent contractors that I can download and edit to use ?
I would be grateful for your help
I highly recommend against the use of independent contractors in the salon, as the status is rarely appropriate. I also highly recommend against template contracts, as every business and every state has different requirements. You’d be best served by an attorney with a specialization in employment law for guidance. I recommend finding one with a reputation for employee defense, as they’re more likely to provide sound direction than one who specializes in employer defense. (No offense against the employer defense lawyers I periodically work with, but I’ve noticed that they tend to steer my consulting clients down very dangerous, questionable paths.)
I’ve been a stylist for ten years this month. Thank you for all of your information and clarity you are bringing to our industry. I am working in a salon with nine other stylists. The first five years of my career were spent booth renting until a move out of state had me start all over. I got a job at the nicest salon in my new town and explained, not asked, that I wanted a w-2 and 50% commission. I grew a solid clientele within six months with dedication to my craft and social media presence. Five years later, I’m feeling stuck in an odd position. I was presented by the owner an “opportunity” to partner in a second location. Among a slew of other red flags, the biggest “hell no thank you” was learning that all the other stylists were on 1099’s being paid a measly 50%. I had spent the past years never minding adhering to my four day work week schedule set, attending mandatory meetings, etc because I truly am an employee. I realized I was and am kept that way because I know better. And I now realize the other girls don’t. and if they do, clearly feel bullied into believing they can do no better, have no rights, or have no voice. I collected my red flags, along with not wanting to partner with a business that could be audited, and heeded their warnings. I have all sorts of business and internal ethical dilemmas now. After five years, I feel like I am busting at the seams and can’t grow past my current constraints. I need an assistant but can’t hire one. And what do you know: I’m told my only option is to switch to a 1099 for 55%. which would leave me making even less. Not sure what to do. Perhaps keep saving my scraps and move to the islands and bartend.
This ugly beauty business..see also: thankless tiring expensive…
Unfortunately, stories like yours are the rule rather than the exception. I’ve long encouraged professionals to work more with the SEIU, but trying to organize people in this profession isn’t easy. Many would prefer to bitch about their circumstances than to take direct action to change things.
[…] To learn more about independent contractors, read the following articles: “Independent Contractor” Defined for Salon Owners Can I Make My Independent Contractors Sign Non-Compete Agreements? The 20 Factor IRS Test: Why the Only Independent Contractors That Belong in Salons are Booth Renters […]
I work for an on-site bridal hair and makeup company and I am classified as an IC receiving a 1099 at the end of the year. I choose when, where, and how much I wish to work for them. I worked 15 weddings with them last year and I believe they booked around 70. I receive a check from the owner immediately after the wedding is over and I have completed my services. I do not have to clean or pack up anything. I do sign a contract with the company before accepting any job. This is done yearly. I agreed to work for 50% of the service that I am doing. Example: If I do a bridesmaids hair I will make $30 as the service price is $60, plus I get to keep 100% of any tip that is given. I agree to not solicit myself while at a wedding with the company and I agree to not work for the company if I have my own competing business as it would be a conflict of interest. The company provides all of the makeup, hair product, tools, etc. They are in charge of all emailing and coordinating with the bride prior to the wedding, they accept all payments from the bride, and they provide all of the marketing/advertising. They also provide a day of agenda to keep the wedding on track and chaos free as weddings can be very hectic and work best when there is a set schedule for the 3-4 hours that hair and makeup services take. Basically, I agree to work weddings as I please, show up, do the services I have agreed to do, get paid, and leave with no responsibility or financial obligation other than my taxes at the end of the year. I love working for the company and I like how it’s structured, but I’m just wondering if I should be classified as an employee vs and IC. I would love your input! Thank you!
I’m inclined to believe you’re not properly classified. There are a few concerning factors here:
* the company is providing the product
* the company provides an agenda
* the services you’re providing are the primary service the company offers
* the company restricts you from operating independently, citing a “conflict of interest” (This is ridiculous. Of course there’s going to be a conflict of interest. You’re self-employed, providing your services to their company and to the general public. That’s your right as a self-employed person.)
* they’re collecting the money
On the surface, this deal sounds good, but in my opinion, it’s not. Keeping your tips is your right (afforded to you by federal law), so that’s not really a “benefit” per se. I’m not sure how aggressively they’re advertising, but they’ve provided you with 15 weddings in the last year. Is there any reason to believe that you cannot do for yourself what they are doing for you? That way you could keep the service income, and potentially retain the clients as your own customers after the wedding. If all they’re really doing is advertising, setting appointments, and replenishing your kit–is it really worth the 35% you’re left with (minus travel expenses) when all is said and done?
I’m not trying to sound like a hater, lol. If you love what you’re doing and like the arrangement, then, by all means continue doing what makes you happy. I’m seeing a lot of these companies pop up (like Glamsquad), who are putting beauty workers at risk and taking advantage of them–all while making them believe they’re part of something wonderful. I hate seeing it, and since so many of them are popping up, I’m growing very suspicious of each new one I hear of.
Okay I’ve read a few of your articles and I need some advice. I am a nail tech and I am a booth renter inside a salon. However, and that’s the dreaded word here, I never signed a non-compete or a contact of any kind, I am required to wear black and/or white to work, I have to use white towels for my services, I provide all my own product but am not allowed to sell any product I use to my clients, the commission based stylists who also do manicures and gel polish use my products but the salon owner claims because she also purchased some gel polish colors and I replaced them when they were gone that we are even, I am cut a check at the end of every week minus my $75 a week booth rent, I’m not allowed to pick up my tips until the following day, the salon owner pays insurance and workmans comp and then has me reimburse her for my portion. I could go on if I could remember more. I know I’m booth rent and closer to IC status. But she treats me more like an employee. And I realize that. She is very controlling. She does not however control my pricing or my schedule but the receptionists book all my appts, clients must book through the salon phone number and I am not allowed to use my own business cards unless approved by her. I feel very much taken advantage of. But when I started working in the salon I was brand new to the industry. And I’m not one to create issues but I feel like I’m totally being taken advantage of and being treated like an employee not a booth renter. Am I right?
Your landlord has certainly crossed over a number of boundaries they had no right to cross (allowing her employees to use your products, having you reimburse her insurance, the receptionist, central payment, cutting you a check for your income, the salon phone number, the business cards, etc.). You’re not creating issues by demanding the freedoms you’re entitled to as a self-employed person. You’re absolutely right that you’re definitely not getting what you’re paying for. Why would you pay the salon owner for the right to work for them? Essentially, that’s what you’re doing. She can’t have her cake and eat it too. If I were you, I’d let her know that I’m no longer willing to stand for any of it. Either she allows you the freedoms your 15.3% tax burden allows for, or she can make you an employee. If she’s unwilling to do either of those things, I’d let her know I plan to take up the issue with the IRS and with the state labor department. In any case, you can expect to be “fired” (or evicted), so have a backup plan ready before you do anything.
I have another question. Where did you find those 20 factors? I’ve been researching because my “boss” says she is not breaking the law or anything with the IRS. I also discovered she isn’t paying her part time employee minimum wage. From what a gather she has to. But since she won’t believe me I wanted to show her exactly what the 20 test factors are. But I can’t find them specifically. Can you give me a link or anything? Thank you! By the way I found a new place. Haven’t moved yet but will be!
Here you go! https://www.irs.gov/pub/irs-utl/x-26-07.pdf
I have a girl that has desperately wanted to leave her corporate job as an Esthetician. She’s been housing me for two years now. We finally sat down to talk and I felt her pain for wanting to be on her own and free. I told her I’m not interested in an employee relationship. She agreed she wasn’t either. Here are the problems. She has no money to buy supplies product or anything else she needs. I have everything needed to provide the services she wants to offer. What I don’t have is an extra room ( we have to share the space so we came up with a basic structure schedule. I.e. She’s wants to come in on these days for this amount of time. That way we can both use the room and no one is butt hurt that it isn’t available. She’s had a hard time using another product line but I told her from the beginning that I didn’t want my previous line back in my shop. I also don’t have room for a separate retail area for her. She agreed to that at first and then went back and forth because she wasn’t willing to try something new. I feel strongly against the line and it’s a deal breaker for me. Right now all services and retail payments are done through my business as she has no other way to do it. I’m giving her 60% and 10% in retail sales. At this point I’m not sure we are doing this right. She has her own business lic her own company name and logo and all that jazz. She has sign on my door for her business with her own number and she has a small clientele of her own. She said she just wanted to do it part time. I want to help her and want her to succeed and one day have enough money to rent her own space and be by herself if that’s what she wants. Is she an employee in this situation or something else? I’m so lost and want to do things the right way!
You’re definitely not doing it right, since you’re collecting payment and paying her from it, she’s offering a service that’s essential to your business, you have an expectation of a continuing relationship, she’s using the products you dictate and provide, and she’s working a schedule (even though she worked it out with you). It seems to me like she has everything to gain from this relationship and you are assuming all of the risks with very little reward. If I were you, I’d employ her properly or let her go. It’s not worth it for you to take on the liability, and honestly, she doesn’t seem to have her shit together.
[…] Beauty industry advocate Tina Alberino writes on her blog This Ugly Beauty Business, in the article, The 20 Factor IRS Test For The Beauty Industry, “Working in the same salon every day, […]
[…] are common in the grooming industry but do not follow the IRS guidelines. The 20 factor test as described in this blog, layout the same criteria for groomers as it does hairdressers. If Sally has paid attention, the […]
my daughter just graduated high school this year as well as getting her cosmetology license
after passing her state board she was hired at a local salon
they pay her straight commission and do not pay any taxes
she gets a certain percentage based on volume of sales and as sales increase her percentage increases
she is required to work specific days with specific hours and takes walk in clients
she is required to follow procedures and policies
she has to use the products that the salon offers and the prices that the salon has stipulated
i think she is being taken advantage of and want to offer her the best information
i think between the taxes she will have to pay and the limitations of the write offs she will end up getting will not result in a good out come
her fellow workers are telling her that she should save 20 percent of her pay for taxes and that she can write off her gas, mileage, clothing, food, equipment, and several other items that i do not believe that she can
please advise me with any information that you can
Her coworkers don’t know what they’re talking about. They’re feeding her the same lies their tax-evading employers fed them. I advise you to read this, then this, then this. There are dozens more articles on this site she could benefit from reading, so I encourage you both to use the search bar to find relevant terms like “independent contractor,” “commission,” and more. I’m not trying to shamelessly plug my book, but she’s the person I wrote it for. She really does need to fully understand what this industry is really about before she looks for another job and gets taken advantage of again. This information is critically important to her career, so I highly recommend that she read it. She can purchase it here. She is the exact type of person salon owners seek to exploit. She’s young, she’s new to the workforce, and she’s vulnerable. She’s uninformed. They’re going to get away with as much as they possibly can, and she’s the perfect target for exploitation.
hello. Do you assume that all salon owners are attempting to violate tax laws and take advantage of credentialed workers? I can assure you some salon owners are as confused on rules and regulations as anyone else. some salon owners actually mentor young people and try to help them create a future in the salon industry in spite of the confusion.It is not about money for some salon owners, and many times it is at a financial loss to do this, especially when newly licensed people have limited experience and knowledge because the state board training is not conducive to real world application. its about helping the industry and the up and coming people in it. Please share a thought whilst promoting your book and support for the non salon owners, that many salon owners are good people trying to survive in a rapidly changing industry. without us paying huge rents and /or property taxes and overheads, booth renters may have no where to go, because they can not buy or rent especially as newly licensed , based on their own merits and income.If all new stylists were “self employed booth renters etc” they would go broke and be very disillusioned with this industry. please comment on this in defense of the industry as a whole. without the building renter/ owner of the actual salon these folks you defend would have no place to work .It is a 2 way street and we can help each other. please do not make salon owners ( we have been in business for 38yrs in the same location and are still trying to change with the times and keep current….which is not easy) appear as the enemy. without us things would not be better for this industry. thank you in advance for your response.
Please read more of what I’ve written before you make an assumption about who I am and what I believe, or try to tell me what I need to be doing. I’ve written far more than this single article you’ve based your judgments of me and my work on. I call bullshit like I see it in this business. I don’t play favorites–salon professionals receive as much criticism as salon owners do here, lol. I’m not going to recite my history for you, because if I replied to every salon owner who took issue with a single post by explaining my position, I’d never get any actual work done. There are plenty of posts and other content here for you to read that can help inform your opinions. In short: I provide plenty of information for salon owners. I’m a career salon manager, a salon owner, and an advocate for all professionals (especially salon owners, since this confusion is what causes these problems in the first place). I believe our industry and our governments need to take more responsibility for ensuring business owners and employees of all kinds are informed of their rights and responsibilities, and since nobody is making that a priority in our industry, I’m doing it myself. I believe that independence is fracturing and destroying our industry. True salon owners who take ownership of their salons and run them legally and ethically are making the industry better, but owners who intentionally misclassify employees as independent contractors are not part of that group and will never be.
Beyond this comment, I don’t owe you or salon owners in general any individual defense. There are 300+ articles here, many of them already written in your defense. Read them.
I should add that we are currently looking for solutions., we have 16 people at our location. some have correct contracts drawn up by attorneys in the salon industry , some will NOT rent and insist on having products provided and money being collected on their behalf. they want more than they offer often and are young and are not well qualified in the appropriate fields to “run” their own businesses. Many more interested in an easy life and social life than a career. typical for the newer stylists these days we are finding. That is not always the case however. Please offer any solutions you may have for this situation. we would like to mentor and educate new stylists and help them grow, but it seems we are being labelled as tax evaders instead of mentors. we need a middle ground that allows the doors to stay open at the salon(s) or one day everyone in the salon industry will be working out of warehouses in the low rent area when the nice salons have been forced to close their doors due to zero income to pay overheads. in reality the only actual profit in a 20 station salon is currently what the owners make behind the chair. all other monies cover overheads to remain open and provide an elegant and well appointed environment for the stylists and we are considered a successful salon by our peers. there is no longer a way to be a successful salon owner these days and it is sad that stylists and yourself may not realize that without our joint efforts the industry as a whole will suffer dramatically. Labeling salon owners as tax evaders is a step in the wrong direction. what advise do you have to salon owners to remedy this ? stylists fresh out of school can not afford to be renters and salons can not afford to follow many of the new regulations( most of which we are not made aware of) without closing down. what is your point of view that would help both parties? thank you.
I’ve covered this problem here. You can find solutions here.
If you’re being labeled as “tax evaders,” you better make sure that label doesn’t fit. Your renters expecting more than they’re owed is inexcusable, but that street goes both ways and business owners are rightly expected to take the high road. Don’t expect more than you’re owed from people you aren’t paying taxes on.
If you require further assistance, you can book an appointment with me here. Generally, I’m pretty helpful in comments here, but you’ll have to forgive me for being less inclined to donate my billable hours to anyone who feels it appropriate to personally attack me before asking for a favor, lol. I specialize in financial restructuring for salon owners of booth rental and employment based establishments, so trust me, there are plenty of ways to be successful in this business. Every one of my consulting clients is succeeding and operating at a profits large enough to support reasonable expansion.
Also, these regulations aren’t new. They’ve been around since the mid 70’s. They’re new to you. That’s not unusual. Again, governments and beauty schools don’t go out of their way to inform us of this stuff, so it falls on us to do our own research. I’ve done plenty of it and provided it here for your reference. Read more than a single article and you’ll likely find everything you’re looking for.
I am planing on opening a salon in California. I have a few stylists that would like to work in the new salon as commission (1099) because they say they are “not ready” to take on the responsibility of rent and are just plain scared to take the plunge. Especially with the investing of their color products. The salon is booth rent but these stylists really want to work out of my salon and want the opportunity to eventually be booth rent. However, after reading all this, it makes me concerned for myself and business. Here are some proposed guidelines. Can you tell me if I am headed down a slippery slope?
1) They will each get a key to the facility.
2) They will manage their own schedules and clients. I will have an online scheudling system they are more than willing to use with 24 hr access, but can use their own if they choose.
3) I don’t want to manage them. I am not a babysitter.
4) Salon education is at their own discretion
5) I will have color and supplies that they are free to use, but are more than welcome to use whatever they want to buy themselves.
6) They will not be required to clean the salon or any other duties other than providing service to their own clients.
7) I will pay them out weekly on a commission scale.
8) Their clients would pay through my pay system, so I can track how much to pay them out at the end of the week.
9) They will be in charge of their own marketing.
Don’t do it. You’re in California where the employee classification laws (and the penalties for violating them) are the strictest and most severe in the country. I know you’re trying to give these new professionals a start, but doesn’t benefit you at all to go this route and it puts you at tremendous risk.
Hi tina , i just so happened to come across your blog in search of some answers …. i have been driving myself up the wall wondering what i was going to do about taxes this year and literally prayed to god to be able to find some sort of guidance since i am fairly new to the industry and was working commission last year april 30, 2016 to be exact. I just have to say a big THANK YOU to you because now that i have read your blog and fully did my research i am able to sleep peacefully at night. I have worked for a privately “family operated” owned salon here in san antonio,texas and was told that i would be paid 40% of my services performed weekly. I never had to clock in , but i was on a pay roll and recieved a paycheck, i was literally forced and harassed to use paul mitchell products only and if i didnt i would basically be fired !! I literally had to take all of my products that weren’t paul mitchell home due to the sake of me losing my job, all of my transactions and appointments were handled by a receptionist in which i had to be extremely specific of how much product i used for each client and she would then… based on her own knowledge charge for my services , i had a very harsh and strict schedule to go by in which i had no say so what so ever and at one point, i had to beg and plead the receptionist and owner for 2 days off instead of one due to the fact that i had a personal obligation at home , i was also taking care of my sick grandmother that needed assistance in the early mornings/afternoon at least 2 days a week due to doctors appointments and follow ups and they ended up denying me that extra day , instead they said “they can only schedule me to come in later and there was nothing else they could do” when they were extremely lenient to other “employees” who were late or needed extra time off or just a schedule fit for their needs . On another note i also found it sketchy that they had “shampoo techs” that hardly spoke english working there unlicensed and i had to pay them (dont quote me $5-$10) at the end of the day in cash if i needed a client shampooed or toned if i got double booked or busy and i believe , another $20 or so taken out of my check per week for a lady that went around cleaning the shop and our stations when mine was always cleaned and never had to have any extra cleaning done and which i never consented to, also she had 2 daughters in cosmetology school working and performing services in her shop on their friends or clients and im sure they would also pocket the money as well !!!! And just to tie in this whole workplace abuse they made me sign a paper saying i was held responsible for my taxes if i wanted to be an employee and work there !! Now i was no expert and so unaware of what was really going on under my nose until i came across your blog and not only was i being mistreated there i was also being screwed over with my taxes and literally overworked to the point of exhaustion! There was also an incident where i had to leave early but was forced to stay and work because my entire body was covered in hives , due to a reaction to the chemicals i was handling and they forbid me to leave early to seek medical attention! eventually after being overworked and totally fed up ,i decided to quit and requested my last check … i wanna say i put up with their shenanigans for not even 6 months ! So now i am at the point where its tax time and have no clue as what to do , i have not received any forms from them nor am i expecting any , so i am left clueless and unaware what my next move should be . I am sorry for the overwhelming message , but i am just so glad to have stumbled upon your blog , you are of such inspiration and the “hard ass” excuse my language behind us uneducated or nieve stylists that are new to this industry that are being gobbled up and spit out by these horrible salon owners . Again thank you for being our voice and educating us ! You are freakin awesome & If you have any advice as to what direction i should go in , it would be so greatly appreciated ❤ thank you so much!!
I’m so glad I could help!
You’ll want to file an SS-8 form with the IRS, then file taxes as if you were an employee. You can find more about that in this post here.
hi so i have a question, since 2011 Ive worked as an employee in the salon i work at currently as an assistant and stylist, and as of January first of this year i agreed to to be an “independent contractor” (as the owner and business partner which is her husband put it), which meant i was no longer an employee and she would pay me by check each week a 40/60 commission, (40 to go to me and 60 to her), which she says will cover my products as in color, back bar, towels etc. and also said they will give me a 1099 at the end of the year for taxes. i never knew much about this stuff seeing how i have been an employee for the past 5 years, and now all this has been brought to my attention and i’m confused as to what is right and wrong. Ive recently asked advice on a hairdresser advice Facebook forum, and someone sent me this article and told me to read it and i’m just not sure whats right and wrong. can you help me?
Well, I recommend reading this post in its entirety and following the links provided. You should also read this post here and the links within it. Because I get buried in emails regarding this same issue on a daily basis, I won’t answer any questions that I’ve already answered in a post (I don’t have time to re-type things I’ve already typed a thousand times, lol), however, if you have any remaining questions that AREN’T in either article, email me at [email protected] and I’ll clarify for you. I can tell you that your arrangement is common and illegal. Both of these posts will explain exactly why.
First off, thank you for all your research and knowledge. Wow my head is spinning. I would like your thoughts on my current situation. I work at a booth rental salon. I pay $200 weekly which includes a full time receptionist. We are told that we have to run credit cards through the front desk and we have to use the product line of they’re choosing. I like the products so that’s not a big deal. But I want to have my own credit card system to take my own payments, but the owner said no. I think it’s cause they only give us that check when we trade for our booth rent check. How can I prove to them that legally they can’t require that I check my clients out through the front desk?
Hi! The laws you’re referring to are federal tax laws regarding employment classification (unless you live in California, then they’re definitely explicitly spelled out in their state laws). This article contains a bunch of links to the relevant statutes. (This article is more into the nitty gritty of the degree of control and such, but the other has additional resources.) You may also find the Resources page helpful.
I’m stumped! I started working for a cosmetics line last year and received a 1099 for my taxes. I’m basically “on-call”, but when there is work I’m asked to work a “shift”. They hired me as a Makeup Artist and I definitely do makeup, but they want me to sell the brand. With that being said, the products and tools are all supplied by the line and I do have a goal, but I’m not “ringing” the sales/cashier by any means. There’s no schedule really either. The Account Executive just sends me a texts asking if I’m able to work a certain amount of days and at certain times and I’m supposed to work at counter. I did attend a training on the brand and how to use their products, but I don’t remember if it was mandatory. Honestly, it feels exactly like my old cosmetics job working in retail except I’m able to clock in and out on an app and it’s only records for them so they know what to pay me. What are your thoughts. Thanks so much for doing this seriously. There’s basically little to none info out there about this industry so your advice is greatly appreciated!!
It sounds to me like you’re largely an actual independent contractor. You’re basically a freelance MUA for the cosmetics line. It all sounds good!
Hi Tina, we just got informed by the owners of the salon that all the commission stylists and receptionists are going to be IC a week ago. They told us that they are getting hit really bad in taxes. To top it off…Approximately, 2 wks ago my co-worker cut a client’s ear and the totally bill to stitch his ear back up. Originally, the owners said that the salon has insurance and they will take care of it, but as they put in the claim they found out with the deductible plus the bill came out to be $2000. Now they asked my co-worker to pay for half of the cost. My question is if I’m a IC working for the salon do I have to get my own insurance just in case an incident like this happens to any of us?
Eek. Okay, so I see you read the Know Your Rights post right after this one, so you likely know that unless you’re a renter, the 1099 classification isn’t appropriate. They’re telling you they’re getting hit bad in taxes–you’re going to get hit twice as bad. They’re shifting all 15.3% onto you instead of the current arrangement (where you pay half and they pay half). This isn’t fair or appropriate to any of you. They need to learn how to structure their prices correctly to ensure those costs are covered, not commit tax evasion and labor exploitation.
Anyways, it’s legal for them to “ask,” it’s not legal for them to “force” the coworker to pay the cost. (Personally though, I’ve been in this situation. A client slipped and fell as a result of MY failure to not secure the chair or sweep the wet hair off the floor. She cracked her head open on my station. I insisted on paying the entirety of the bill because it was 100% my fault. I required my employer to write up a document and have me sign it, stating that I made this payment voluntarily and that I personally insisted on it. If your coworker feels as badly as I did and wants to do the same, have her sign a document to that effect.)
Regardless of your classification, you should ALWAYS have PLI insurance. Policies are very cheap ($300 a year, usually).
Also, if you’re an “IC,” you’re a business owner. You work for yourself–not the salon or anyone else. I highly advise you insist on getting the freedoms you pay for with that 15.3% of your income that goes to the IRS.
Ok I’m a barbershop owner and an accountant so please be kind as I should know this! Barbers are the gypsies in the cosmetology industry lol and everyone around here in south Florida pay rent for their station and are IC? They come and go as they please use all of their own things I have no non compete agreement. Am I doing this wrong?
Lol, as an accountant, it’s totally not your responsibility to know anything about the specifics of employment law, so nobody here is holding that against you. (Not me, at least, lol.) You seem to be doing it correctly with the sole exception of the non-compete. They’re self-employed–INDEPENDENT contractors. Non-competes strip them of that independence. What are you trying to protect with that document? Was it drafted and approved by a qualified attorney with the appropriate specialty in employment law? If not, you may want to scrap it completely. If you need a reference for a Florida attorney, I’m happy to provide you with one. 🙂
Hi Tina, I had very unpleasant situation at the my place of work recently. I was hired as an independent contractor to work as an Esthetician they also mentioned that I would be selling their product line. They gave me a non-compete contract and non-disclosure as well, but than crossed of non-compete portion. I began to work, for the first month I was mostly training, working 2 days a week 8 hours a day mostly assisting costumers with retail sales and answering phones, scheduling facials for another Esthetician that worked there. After that I started doing facials as well, my pay was hourly and no comission just tips at first. They than proceeded to ask me to call clients for promotions and sales in the store and clean the store when I didn’t have clients, even if I had 3 clients in a row after I was done cleaning my room and came out to take a small break, they were right there asking me to clean, wipe call clients. Lunch was 30 minutes, but if within the 30 min I had a client that came in 10 min early they expected me to finish my lunch and go work. If I didn’t call clients and solicit them they would have an argument saying that maybe I need to look for another job, which again originally I was hired to perform facials not doing all of the other chores and things, there was always a front/desk sales person and I didn’t really have to do it. Schedule was on and off, they would tell me they need me 3 days a week and than cancel on me last minute. Once the manager said to me that company is foreign and they didn’t know you have to pay benefits to American workers so they hire everyone as Independent Contractor to avoid the obligation to pay benefits and taxes. Also they paid like once a month, you had to submit invoice every two weeks and could wait up to 4 or 6 weeks to get paid. My 3 last checks before holidays and after didn’t get processed for 6 weeks. The manager always looked slightly tipsy and had a smell from alcohol at first I thought it was just me noticing it, but than other clients started telling me about it. Thankfully I didn’t have to work with her a lot but than she hired another Esthetician who wouldn’t say Hi to me for a month, they were also promoted her more than me and later on they hired another one without any experience at all with a skin decease basically she can’t even use the products they were selling at all. Manager hired her because it was her personal friend and can do her free facials whenever she liked. These three started their get togethers and place became like a high school central, me vs them sort of. No everyone was fake sweet but all of a sudden all of my regulars were scheduled to the days I wasn’t there, all have been told that another Esthetician is more qualified, we both have similar experience. My clients told me they were practically forced to schedule with her, I did confront the manager she told me she doesn’t know what I am talking about, things started going south quick at one point I would have zero facials and my coworker 6 facials a day, half regulars and half new clients. My other coworker with a skin decease was completely promoting another line she could use, sitting hours on her butt and reading materials about another line and always complaining that she needs to do facials. One time I felt sorry for her and told her we can share the day she can take the first client and I take the rest, guess what happened she took all of my clients and I took one. She said manager told her to do that. So all this mess started to get to me and I was trying to search for other options.I don’t know what happened, but one day I was working and an unhappy client called I spoke to her and we finished conversation nicely, she was going to talk to manager on Monday. My coworker who get’s all the clients was working that day, she asked me what happened I told her, she than said that it was her mistake and she will call client to fix it, she did. But in a process she started to talk about me not doing my job, not helping her to fix her mistake. I replied it’s your mistake I don’t even know how to help I don’t even know what happened in reality, than she yelled for me to shut up and leave the store. Of course I answered back. She called manager and manager said the same thing leave the store, I stayed since we were fully booked. I also spoke to my other coworker and she seemed normal. Two days later manager asked me to come in and told me that the two don’t want to work with me, I asked why she didn’t say. I asked if I did something that jeopardized my duties as an Esthetician she said no, I asked if clients were unhappy ? She said no, the only problem these two people who are also independent contractors don’t want to work with me. I asked the girl who was new what happened ? She said nothing she went to the manager and said she doesn’t want to work with me. No explanation, nothing the manager said that basically the girls want to do facials and it’s a survival mode and they trying to get clients right now that they can keep. The location btw is closing but in 6 months and I guess the manager decided her friends deserve these clients more than I do. I asked her if I am getting fired and what are the grounds ? She said no, they will be investigating this but I shouldn’t be coming to work at this point, because girls don’t like me. So what you think I should do ? I feel they completely misclassified me and than completely disrespected me by doing what they did. It’s been 3 weeks and nothing from them.
They definitely misclassified you. My suggestion would be to speak with someone at your state labor board and see what they say first. You may also want to file an SS-8 with the IRS and consider retaining an employee rights attorney. Nothing about that situation was appropriate. They took advantage of you and it sounds to me as if they did so knowingly and deliberately.
I am a booth renter who is REQUIRED be the State of Ohio to hold an Independent Contractors license. (I now believe this is because the State of Ohio can collect sales tax on my income as a “taxable service.”)
However, the salon I work in REQUIRES that I charge the same prices as everyone else and requires that I purchase and use a particular brand of product. The salon owner even asked me if I was unhappy working there when one of my clients (original from before moving to this salon) provided a bad review of the product on the salon’s Facebook page. I have to say… I agree with my client, it is a Shi**y product and I am looking for another salon to move to, but until I find one I am stuck with the owners “requirements.”
How can the State of Ohio and the Cosmetology Board require me to have an IC license if I’m not, technically, an IC?
Likely because they assume you’ll be treated like a proper IC, which the salon owners isn’t doing. If you were truly self-employed, the landlord would have zero input or control over your product selection, prices, or service protocols.
I am thinking about opening a salon and have a question about booth rental contracts. (I searched this site but didn’t find the answers I was looking for). In a booth rental contract is it legal to say “dress appropriately” or “proper dress required”? Is it legal to not allow them to sell retail from their booths but provide retail to sell through the salon and make commission on that salon product? Is it legal to include “cleaning up after yourself at your own booth and common areas (shampoo sinks dispensary towels trash)?
None of those things are illegal as they do not constitute an inappropriate degree of control. If you’re operating an open-air salon (no individual private rooms), you can set expectations for professional dress, behavior, and maintenance of that common area. However, you cannot require them to wear a specific uniform, wear your branding, or follow your protocols for anything else. You can’t put them on a “chore schedule” either.
It’s also legal to prohibit tenants from retailing if your salon has a boutique component where beauty products are sold, however, I discourage landlords from offering commissions on retail sales since that’s a scary gray area (and I venture far the hell away from scary gray areas).
Alright..I’m confused.. I own a salon and have a bather that I trained to be a groomer. At first they were paid by commission then I learned it was incorrect so we changed it to flat. This person has been paying flat monthly, makes their own schedule, charges what they like has her own tools. Their flat monthly included other things like phone, water, a grooming table, a drying table, dryers, a work station to put tools in, crates, a tub, and shampoo and other products. This person is classified as self-employed. After further research, I have determined we are still doing it wrong if they would like to be self-employed. So I worked up a contract that states they have until the first of October to get her own license, insurance, supplies/products, dryers, Etc, and my salon will not be providing them. Also, effective November the rent goes up by $200, mainly cause said person does not partake in any cleaning and im over it. If I have to do all the deep cleaning in the salon, then rent goes up. Am I doing it right? I know this completely irritated the groomer and they are arguing that I’m still to supply everything. Either they needs to get their own supplies, products, dryers, etc, and be completely self-reliant or be an employee and get paid a specific wage an hour (still haven’t decided what I can afford if we go this route-and I’m sure they will not like this either). Thank you for your help or advice!
It sounds to me like you are! They need to understand that as self-employed people, they’re business owners, and business owners buy their own stuff. Does the building owner or property manager of your grooming salon buy your supplies? Nope. So what makes them think they’re entitled to product from you? Just as you can’t have it both ways, neither can they.
Can I make booth rental based on a stylist’s commission on her services? I would have her pay me 30%of her weekly intake and she would be her own boss (set her own schedule), pay her own taxes, and supply her own products. Is this legal? She wants to build her clientele before going straight rental.
No. In that situation she would have an obligation to report her income to you. If you’re going to go that route, my recommendation is to cap it, and not to go as high as 30%. I’d say 20% versus $X (with $X being your normal rental rate). She would pay whatever is higher. I also recommend putting a time limit on that deal–no longer than 3 months.
Understand that this arrangement puts you at a financial and a legal disadvantage. You are doing a nice thing at your own legal risk, for very little potential reward. You aren’t obligated to help someone who clearly isn’t ready to rent. It’s a nice gesture, but it very likely isn’t worth the potential consequences.
Hi Tina! I’ve gone through so many of your posts and I’ve read so many comments but I’m still having trouble classifying what my husband is. He is a barber and works in a shop with four others. His set schedule is Weds-Sat from 8:30 am to 7 p.m. or whenever there are no more clients. At the end of the night they get paid whatever the computer says they made and the owner takes 20%. They do keep track of their own tips. They are not required to wear a uniform but he would like them to wear cargo shorts and plain tshirts. He gets a 1099 and has to pay all taxes himself. If he asks for time off (like maybe leaving an hour early to attend his sons baseball game!) He gets denied everytime. He does not get rest breaks or lunch breaks. He cuts between 20 and 30 heads every day. They have a sign in sheet for clients and they can choose who they want to cut their hair or say they have no preference, so when he has no cuts he’ll step outside or go to restroom but it is not often MAYBE once or twice a day. He left today to get some food because he felt he was going to pass out and was given a talking to for leaving. I know I’ve said a lot but I hope I haven’t missed anything. I feel he’s being taken advantage of.
He is. This is a classic misclassification situation. A self-employed person doesn’t work a schedule or answer to anyone else. They collect their own payments from their customers directly. They can’t be controlled or managed in the way your husband’s salon owner is attempting to control or manage him.
Since this article is dated 2014 I wonder if there are updates or changes.
I was told I am an independent contractor receiving a 1099. I am paid a sliding scale comission of 35%-50 based on totals. We are expected to do towels, clean, adhere to a dress code. She doesnt want to be booth rental We all charge the same but we make our own hours.
This article is updated every year (mostly to expand and/or change some wording), but nothing has changed. You’re misclassified. She wants to have her cake and eat it too. I recommend reading this article, and this one.
I have a rental salon and have a question regarding employee versus independent contractor status. I just recently had a new hair school graduate contact me about working at my salon. She says she has some clientele but obviously can’t afford rent as of yet. I can tell she is a real go getter and probably would build her clientele very fast. Would it be possible to have her pay commission to me (60% to her) and she would make her own hours, take all her own payments, no dress code, pay her own taxes, supply everything she needs to work behind the chair etc. When she has built enough clientele she could go to straight rental. Is this a possibility? I obviously would rather just have someone with enough clientele rent from me but how do new stylists straight out of school start off? She doesn’t want to be an apprentice at the larger chain salons as some of her fellow graduates are doing so and say all they do is clean the salon and shampoo and are not getting any further education that they thought they would get so they could start working and taking clients themselves
She’s absolutely right to avoid those “apprentice” scams. I’d recommend setting a flat rate OR 60% commission, whichever is lower, for the first few months. That arrangement makes it clear the system is designed to benefit her. Because there’s an expiration date, it’s a clear introductory offer. (That also covers you, so if she turns out NOT to be as motivated as you believed, you won’t be losing revenue indefinitely.)
Is it legal to be an independent contractor and have your employer take 50% of your pay?
Using the information found in this article and this one, you should be able to determine whether or not your arrangement is legal. Typically, in a salon setting, if the business owner has control over the money and how it is distributed, you are not self-employed.
I feel I fall into a grey area as many do. i love the new salon I am currently working in but have had many discussions with other stylists at other salons. I have my own LLC and carry my own cosmetology professional insurance. The salon where i work hired me for a specific time, 1 year to fill the gap they had for experienced stylist they were looking to hire. I decided what days and times I can work and was not required to sign a non-compete agreement. I can and do work somewhere else on other days. I have a key that allows me to come and go during the times and days I choose when the owners or other stylists aren’t there and choose a booth that is completely my own. I use my own tools but they do provide the hair color and skin products as the ones they have are very much top shelf. I work on commission, but had a choice to work as an employee. As work was slow for the new salon they offered me 100% commission to start, tapering to 50% after 6 months. They market the salon and are willing and have marketed me as much as I want them to and they have encouraged me to come to networking events to not only help them but to actively promote myself. My attire is not completely controlled, they just asked that I were casual business appropriate to the industry. They’ve been very transparent and said they understood all the issues stylists face and that they were trying to in favor of the stylists and still keep their new salon above water. Other stylists tell me I’m still an employee but there seems to be a big difference between this salon and the ones my friends work at.
Where do I stand ? Can the IRS come after me ?
In your situation, the IRS wouldn’t come after you–they’d come after the salon owners, but I find that prospect quite unlikely, given that you’re clearly the primary beneficiary from the arrangement and have no complaints. You enjoy an extremely high degree of freedom. Aside from the fact that the salon owners are paying you like an employee, you appear to be independent in every way.
I’m extremely cautious about worker classification, and while I’m not an attorney, I feel strongly that you and the salon owners have little–if anything–to worry about.
I am a massage therapist at a salon/spa I am most definitely misclassified as an independent contractor when I in fact am an employee. The spa owner is new to this industry, in fact is still learning the in and outs. We are an Aveda spa. So there are rules to follow and meetings we are expected to attend etc. I’ve brought this up before with the owner about misclassified status, the response was that the CPA said that it could be done either way meaning either giving a W-2 or 1099 I told said that was inaccurate but could tell I was getting nowhere so I dropped it. Well fast forward a year the owner attended a management convention put on by Neill Corp and ended up having the head of Neill put them in contact with consultants. I was told some new policies would be implemented and I said I wouldn’t abide by them because it went against my practice act in regards to client intake and reviewing medical history, basically that I wouldn’t no longer be allowed to view that information only given my soap note. Was told the consultants instructed them to implement this, and also that they were told that as a small new business they had to classify us a independent contractors also that we would be signing new contracts with non-solicitation and non-compete policies, also they have been blocking out the total service sales on our check stub. We have a right to view that to make sure our check is correct. We can still view it through our scheduling app but when I brought it up that we could do that she seemed like she wasn’t aware that we were able to do so I said that they couldn’t hide that from us. I questioned all this as I’ve been in this industry 10 years and told her she needed to research this for herself cause I felt she was being given the wrong information. She told me that the consultants she was speaking to were lawyers that work with salons and spas all across our area that is why she chose them cause they know our state laws. My question is if they are lawyers why are they basically setting her up for legal trouble by telling her she has is classified right as well as telling her she can treat independent contractors as employees, we live in a small town, me signing a non-compete policy means that I would be unable to support my family if I chose to work elsewhere within a certain mile radius for 2 years. I stated I would never sign that. While I won’t report her myself for the misclassification because she is a friend and is just really being misled, how would I go about making her see what these “lawyers” are telling her to do is in fact breaking the law. And that misclassifying us can cost her because they have put up everything to buy this business. She is convinced I’m the one that is misinformed because these consultants are lawyers referred to her by Neill Corp so they no what they are doing and are know the law. I mean if the irs would do that 20 point test it would be determined she misclassified several employees as independent contractors. IRS penalty is $500 for each 1099 that should have been a W-2 as well as being responsible for all back taxes that she never paid on each of those 1099s she would lose everything. How should I help my friend/boss?
Normally, I try *real hard* not to work on nights or weekends, but this comment is killing me right now. I see this happen to far too many women who often don’t have ill intentions but are sorely misled by people who have ZERO business consulting them. Tell your boss/friend that I’m willing to speak with her for free about this. (Email me here to set up a time.) She is absolutely being given the wrong information.
The fact that the people she’s speaking with are attorneys bears no relevance. Ask her, would she seek family law advice from a bankruptcy attorney? Or contract law advice from a real estate attorney? No, because that’s a bit like going to a podiatrist for a cardiac issue, or a gastroenterologist for a mole removal, right? Law and medicine are both huge, complex fields. They’re so large that it’s impossible to master everything, so most professionals in those fields choose a specialty, or a few closely-related specialties. If she’s not speaking to employment law attorneys, she isn’t speaking to the right type of lawyer. I can guarantee that an employment law attorney would have a significantly different opinion about the advice she has been given. (I work routinely with employment law attorneys, so I know for a fact they’d advise the exact opposite of what they’re telling her to do.)
I would recommend that she ask for their qualifications and for the relevant statutes that back up their claim that what they’re advising is legal. I would also recommend that she bring up the fact that attorneys who advise clients to break the law could have their license suspended–or they could end up disbarred entirely.
I’ve provided a ton of links here, but I could also forward her state-specific information.
Anyways, when you approach her, reiterate that you’re her friend, and you don’t want her to end up on the nasty end of an IRS/DOL/state investigation. Let her know that for the last ten years, I’ve worked with salon owners just like her who were misinformed by CPAs, attorneys, and “consultants.” Luckily, a good deal of these salon owners find me before the authorities find them (usually thanks to professionals like you who genuinely care about the people they work for), but many don’t. Those salon owners only find me after they’ve been reported. I’ve seen women from the latter group lose literally everything, and it’s absolutely gut-wrenching.
There’s too much on the line. She needs to seek outside opinions. I’ll give her one for free if she wants it, but she should also seek out a local employment law attorney as well. Like I said, I’m willing to provide her with all the information she needs to verify my claims. Are they? If they aren’t, she should really be questioning why. She should also be questioning why the IRS and FLSA directly contradict what these “attorneys” have been advising her to do.
Seriously. Tell her to contact me. I almost *never* give people time for free at this point in my career, but if I can stop her from making what could turn out to be the biggest mistake of her life, I’m happy to do it.
Thanks so much, I will give her the information to contact you.
Wow! Back story! We were told today that going forward we will be 1099 from commissioned w-2 employees. I’d like the pros and cons of this. We will still be commissioned and back bar (color, shampoo, keratins + $5 service fee)will still come out of our total before split. It’s under the guise of ” it will be better for us because it’s as if we will be owners”..” We can write off everything”..With that being said do we now need owner license and managers lic? My question besides the miss classification is it booth rental? Paying the the other part of commission…..???? Help!
It won’t be better for you. That’s unlawful misclassification. I recommend reading this post and this post to learn more.
[…] on working in someone else’s salon, you still have the potential to be your own boss as an independent contractor. You need to know how to run a business, even if it’s on a small […]