Self employed or employees for your salon? Which is best?
Do you self employ or employ?
This is hard isn’t it? Do you have self employed or employees for your salon? Well, this is all very dependant on you and your business and also what business you want to create.
Firstly let’s take a look at what self employed actually is.
Self employed meaning
The number of room renters and self-employed contractors grows year on year in the beauty industry.
However, so too does the number of employment tribunal cases against companies who use their services. Contracting self-employed workers can be an attractive option for salon owners. Of course, less hassle with tax etc. But, HMRC has taken an increasing interest in the legitimacy of self-employment practice in salons as it loses them hundreds of thousands of pounds in revenue annually.
So what does it mean to be self employed?
The pros and cons of taking an employed position
- Weekly guaranteed income
- Holiday pay
- Limited salary
- Regulated hours
- Colleagues around to help or hinder you
The pro’s and cons of going solo
- You are your own boss and make the calls that will affect your business
- You are in control of tax and NI contributions so independent advice may mean you are better off than in an employed role
- You get to work alone (if that’s what you like to do)
- Like for like increase in wages (hard work depending)
- Develop your own client base
- Position becomes more than just a job
Going self-employed within a salon
You will find many job opportunities within salons that are on a self-employed basis, whether it be renting a chair or room for a fixed cost or on a percentage revenue basis. When accepting a self-employment basis you need to be aware of a few things;
- You represent the salon and its reputation
- You will most likely be responsible for the shared cleanliness of the salon
- The terms of building up and retaining a client base even if you leave will be within your contract, so check it.
- You will be responsible for building up your own client base
In a recent case a salon owner asked his self-employed therapist to arrive at work 30 minutes before opening time to set up the salon and join a daily team meeting. She grumbled to her colleagues about having to attend staff meetings when she wasn’t employed by the salon and so wasn’t earning anything at this time. The owner felt she was deliberately undermining him, decided not to use her services anymore and gave her notice.
She took her claim to an employment tribunal, saying she was effectively an employee and had been unfairly dismissed. The tribunal decided she was an employee as she worked to a rota, had a specific break time and had to be available even if she had no clients, so she wasn’t free to operate her business independently or work elsewhere. She won her case for compensation. The fact someone pays their own tax and insurance doesn’t automatically make them self-employed.
The Uber case
In another recent and highly publicised case, Uber taxi drivers won the right to be classed as workers rather than selfemployed. “Worker” is legally a different classification to “employee”, but the key issue is the drivers are now (subject to appeal) entitled to receive 28 days’ holiday and minimum wage.
HMRC has provided indicators of what self-employment is, and you can use them to check your own status or that of any individuals you give work to. These guidelines say the person in question:
• Should exercise independent control and judgement over how the work is carried out
• Would normally work for a number of people
• Has the right to appoint a substitute and is not necessarily required to carry out work personally
• Can decide whether or not to accept offers of work and has the option to determine their own working hours
• Has to correct faulty work at their own cost and in their own time
• Provides their own materials and equipment.
If you look at some of the features of the Uber taxi drivers’ case that were found by the court to be inconsistent with them being self-employed, you can see how they relate to the salon market.
1. Uber claimed each driver made a contract with each passenger and the company was merely their agent. In reality, the passenger booked through the company and the driver accepted the booking. You can see the vulnerability if a salon deals directly with clients for bookings and payment of a practitioner’s services
2. Uber interviewed drivers to assess their suitability, which looks like recruitment
3. Uber retained the passenger’s contact details and took their money. This is typical in many salons, indicating they are the salon’s clients
4. Effectively drivers had to accept trips – much like a therapist who has no control over bookings
5. Uber handled complaints against drivers and issued rebates. For salons, your contract should be explicit that the therapist deals with all complaints about their work.
The case is a useful reminder to review your current practices and written agreements. Remember, many individuals choose self-employment for the additional freedoms and earning potential, and they too face challenges if they are assessed as employees or workers. For example, if they earn enough, the National Insurance contributions are higher for a worker than someone who is self-employed. They would also become liable for PAYE and lose some of the advantages of self-employment.
See you next time