Employee vs Booth Rental

As a salon owner you must decide to hire employees, contract with independent contractors (booth renters) or do a combination of both. The following are things to be considered.

• Does your state cosmetology and/or barber rules allow for independent contractors. There are some states primarily in the east that do not. Even in states that do not permit booth rental, there are Legal ways of doing it.
• What is the norm in your community
• Control is the "question"
• How are retail sales handled

Advantages of IC (Independent Contractors):

• Salon Owner eliminates paperwork
• It is attractive to potential stylists and techs who feel they are in control.
• Salon owner does not have to pay workman's compensation insurance on IC but in most cases they have to provide proof that the IC contractor does carry their own insurance. This varies from state to state.
• Salon owner does not have to pay the employers portion of Social Security taxes. However, they must have proof available for the Federal government that the IC is filing an income tax return. They must provide them with a 1099 indicating their earnings.
• Stylist provides their own product. Salon owner does not have to inventory separates product lines for individual stylist.

Disadvantages of IC (Independent Contractors)

• Salon owner loses control.
• They cannot tell the stylist/tech when to work or what to do. Charges can only be determined by contract.
• Storage area must be provided for each stylist/tech.
• If you plan to provide any type of group insurance, the IC may not participate and may keep the business from being eligible for group insurance.
• Salon owner must determine that taxes are being filed by the IC. This sometimes causes hard feelings as the IC feels this is not the salon owner's business.
• There is very little loyalty to the salon from Independent Contractors.
• It is difficult to encourage IC to attend educational events. Salon owner cannot force them to attend.
• A dress code becomes difficult to enforce.

Most salons will still have some employees such as receptionists, maintenance people, etc. even if the majority of the stylists/techs are IC.

It is not recommended that groups be split. If your stylists are Booth Renters, then they all should be. However, you may want to have all your stylist be booth renters and the skin care technicians be employees.