When the majority of salons across the country reopened in summer 2020, it was not business as usual. Clients were desperate for appointments, owners faced social distancing and capacity restrictions, and stylists were scared to return to the salon.

But owners quickly conquered COVID-related issues, investing in PPE, rearranging or remodeling their businesses to accommodate new spacing between chairs, and adjusting hours to ensure guests got in and stylists worked their necessary hours.

Many owners also tacked on a sanitation fee or simply raised prices in order to pay for additional expenses and the rising cost of supplies. And when the long, bumpy road that was 2020 finally swerved into 2021, everyone was ready to pull over and catch their breath.

Higher Paychecks and Higher Profits

Going into 2021, owners found themselves struggling with new issues. At the forefront: recruiting and retaining new employees and meeting the demands of their current staff.

Stylists no longer wanted to work nights and weekends, valuing their personal time more than ever, and new stylists were few and far between.

The results? Owners are offering more flexible hours and better compensation packages to remain competitive.

While commission has always been the standard compensation structure of the beauty business, some owners are finding an hourly rate yields a higher paycheck for their team members and higher profit for their business.

To learn more, we asked a few of the 2022 Serious Business speakers to share their experience with compensation in the salon this year.

Shifting from Commission to Hourly

“During the closure, we knew we could reopen however we wanted,” Baudier says. “So we spent those two months working on company expenses and understanding what it takes to operate our salon per hour.”

Through detailed analysis, Baudier and her team learned it takes $108/hour to operate her business.

“We set our prices based on that hourly operation price,” she says. “Our prices were outdated and we realized if it takes us $100 an hour to operate, we can’t be charging $40 for a haircut.”

Bella Style’s haircuts now start at $60 for an hour (up from $45), and color starts at $200 per hour.

“With our hourly pricing, we had to shift to hourly compensation, too,” she says.

Moving a team from commission to hourly isn’t easy though—it takes clear communication and assurance that salaries will remain the same or higher.

“Anytime you’re dealing with compensation, you have to be able to answer all questions that come up,” Baudier says. “Or the team will interpret the change as making less.”

Bella Style stylists had been making 40 percent commission but were only charging $45 for a level one haircut.

“We were way off,” says Baudier. “We’re selling time and product. If a service takes an hour, we know the rate. We can divide that by four to get 15-minute increment rates.

“It doesn’t matter if the client is male or female, or what length of hair they have. We generated the same 15-minute rate based on whether you’re cutting or coloring. We’re also teaching the team to be more efficient with time so we can book and charge correctly.”

And if a team member is charging $60 for a haircut that takes 45 minutes, she can get to the $100/hour rate of operation by generating a $50, 15-minute chemical service.

To figure out hourly rates of pay, Baudier divided up the team into four tiers, most of them falling in Tier 1 or Tier 2.

Establishing Hourly Rates

Here’s how the structure breaks down:

Tier 1: Salon pays stylist $12-25 per hour; stylist charges $68/hour for technical (haircut or blowout) and $200/hour chemical

Tier 2: Salon pays stylist $27-44 per hour; stylist charges $80/hour for technical, $240/hour for chemical

Tier 3: Salon pays stylist $46-62 per hour; stylist charges $96/hour for technical, $288/hour for chemical

Tier 4: Salon pays stylist $64-100 per hour; stylist charges $116/hour for technical,  $348/hour chemical

“Currently we have one Tier 3 stylist, and the rest of them are Tier 1 or 2,” Baudier says. “It’s a 20-percent increase from tier to tier, so they live in each tier longer.

Baudier promised her team they would make the same or more when she converted to hourly. She figured out how by collecting their last 11 paychecks, taking the six highest, and finding the average. She then increased that number by 2 percent and shifted them into the tier where they belonged. They’re locked in until January or July when they become eligible for a raise based on hitting goals.

The Bella Style team is now paid every two weeks and is guaranteed a base salary no matter what.

 

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Bella Style employees discuss their favorite aspects of working at Bella and the perks of hourly rates.

“If they get no-shows or are training someone, they are paid the same as if they were seeing a guest,” Baudier says. “If you work 30 hours, you know exactly how much you will make, give or take (tips vary), and our average ticket is now $250 for a Tier 1 stylist.”

The salon now has a fixed payroll and Baudier knows how much she has to generate in services and retail to pay payroll and expenses. After that, she pulls 15 percent off the top profit every month. Actually, 14 percent—because she has created a profit-sharing program with 1 percent of total revenue that she puts in a separate savings account. When the team hits quarterly goals, that revenue is divided among the team members who hit their goals.

“They have to work to sell time and retail all day long,” Baudier says. “But it helps us work together as a team. And individually, it gives each person a sustainable career they can depend on and make life decisions on.”

All of Baudier’s pricing is specific to her location, but she says anyone can implement it by properly understanding their operations costs.

Flexibility = Retention

David Bosscher & Cyd Charisse, founders of Destroy the Hairdresser, maintain commission salons are still a profitable, viable way for owners to do business, but it’s time to revisit the structure.

In a recent podcast, the duo says salon owners should let their commission stylists “build it up and let them thrive.”

And year-long education programs should be a thing of the past. “Training should be six months or less,” Bosscher and Charisse recommend.

And if you don’t have room for another stylist to hit the floor—don’t hire them.

The duo adds, “The idea of busy work is old school. If it’s a commission salon, it doesn’t cost you money for a stylist to do nothing. Let them sit and be on Instagram. They don’t need to scrub tile. They should be on their phone, taking selfies, creating videos, posting.”

And as for scheduling, Bosscher and Charisse say owners should be as flexible as possible and give their team the hours that work for them.

“They want to be part of a culture that’s open-minded and gives freedom. They want to feel trusted, and giving them the hours they want shows trust. If they are disrespectful, let them go.”

Bosscher and Charisse also recommend re-examining tipping in the salon. “Tipping is based on performance and is often sexist/racist. We don’t want people to rely on tips. People who work on tips make less than commission. Tipping doesn’t help you invest in properties, etc. because it’s not on your income.”

Many stylists are fleeing to booth rental in search of more flexibility, fewer rules and regulations and a higher salary. But it’s well within an owner’s ability to give them those things in a traditional commission-based salon.

Communicating Your Compensation Plan

“In our 2021 Talent Match survey, the second most important thing to a stylist when looking at taking a job is the ability to grow,” she says. “So as owners, we need to be clear about what their growth can look like and what it requires.”

And when it comes to compensation, Fox says there are a lot of misconceptions. In one of her recent surveys, more than half of new stylists said they wanted to earn $35k-$45k in their first year.

As an owner, it’s your job to communicate the growth path that will get them there.

“Show them what a new stylist historically earns at your salon by the third month and sixth month,” she says. “Then show them what can happen with extra effort—if they add on treatments, work to be more efficient and put in the work on social media.”

Fox adds, “You can’t just put a piece of paper in front of them and say, ‘This is how you get to level five.’”

She also recommends avoiding talking about an hourly wage or commission at first. “You’re dealing with a workforce coming into their first job,” she says. “They don’t understand what 40 percent commission looks like on a paycheck. They want to hear about money in relation to an average weekly income—what their paycheck will look like, and how it will grow at the six-month and one-year marks.”

Always make it clear that those average paychecks could go up or down depending on their actions.

But before the interview, your potential new stylist should be able to learn about your compensation package in the job description.

“There needs to be a clear range for people to understand,” Fox says. “Most successful salons have a visual breakdown of how the salon functions financially with an open, transparent narrative.”

This breakdown should include how much the salon is investing in the team, marketing, education, benefits, health care, etc.

And what about the six-figure salary conversation?

“That is the goal for stylists in some regions of the country,” Fox says. “But they don’t always understand what it actually takes to get there. So you need to show them how many clients they need to serve at what rate to earn that—you can back into a six-figure salary, but it’s not just some number in the air.”

By the second interview with a stylist, you should have some idea if they can succeed on your salon’s growth path.

“With good communication, you can form a partnership where you can be successful together.”

Compensation, Demystified

There’s good news for students at Aveda Arts & Sciences Institutes. Now, they’ll start
learning about compensation from day one. The institutes have incorporated new curriculum to teach financial literacy with Money by Qnity. This financial success program was created for visual learners, and gives students the practical financial education they need to succeed with their money and their craft.

Discover more about Qnity’s program here, and Learn more from Fox, Bosscher, Charisse and Baudier at Serious Business in New Orleans January 16-17, 2022. Get details and purchase tickets here.