A new trend popping up around Europe and the UK with hairdressers and Barbers of late is 'renting a chair' in their salon.
But would this work for you?
Benefits of chair rental
There is a clear financial saving and freedom from employment law restrictions can certainly be enticing for both for you as owner and the freelancer. But as with most things there is no one easy answer. There are pros and cons to both business approaches.
It’s your hair salon yet the chair renter is running their own business within it. This may lead to a perceived dilution of your role as Salon owner.
It's important to note, if you decide to go for the chair rental business model, it can be very hard to revert to an employee-only hair salon at a later date if you discover you’ve made a mistake. However, there are also advantages !
First, let’s look at the different ways to set up a hairdresser’s rent-a-chair or booth renting arrangement:
What’s the appropriate rent for your salon chair or booth rental?
These are three main methods:
- Charge a fixed weekly/monthly rent to the renter. Take a percentage of the chair’s takings rather than charge a fixed rent. You just receive a cut of the renters takings. This will be agreed between the parties and ideally should be subject to a legal contract being drawn up. This may be on a 50%/50% basis.This method can only work if there is trust between the parties. Such a simple thing as having a Receptionist dealing with all income may solve any potential problems. business.
- Take a percentage of the chair’s takings rather than charge a fixed rent. You just receive a cut of the renters takings. This will be agreed between the parties and ideally should be subject to a legal contract being drawn up. This may be on a 50%/50% basis. This method can only work if there is trust between the parties. Such a simple thing as having a Receptionist dealing with all income may solve any potential problems. Also, it is critical to have a modern Digital Cash Register that will give daily, computerised reports. You also need to trust the freelancer implicitly.
- A combination of the two. I think this works best for the salon owner. You charge a lesser fixed sum (but you still have some guaranteed income) plus you take a cut of the hairdresser’s takings. It can be like winning the jackpot.The downside?
It can cause resentment as the freelancer can feel you, the salon owner, are having your cake and eating it.
Why choose the rent-a-chair business model for your salon?
- Save money
- No Wages to be paid
- No holiday pay/sick pay
- No employer PRSI
- No pension contributions
- No employee contract
A rent-a-chair hairdresser can:
- Choose their own hours and working days to suit them
- Decide which services and products they offer.
- Worse: they can poach and walk off with your salon clients.
- Worse still: they can persuade your staff to come and work with them in another salon and bring their clients.
It's best to have a Service Contract between the two of you setting out the rules to avoid issues down the line. This way you’re both protected and know where you both stand.
Look at the following Link to Irish Revenue clearly setting out the rules whether a person is employed or self employed.
Some potential drawbacks for salon owners
- It may only be a chair but they are Self employed and they, like you want the best for their business ie Maximise Income and Minimise Costs. The person renting the chair is your competitor. Protect your Brand. Protect your Customer Base. The Nail Bar technician may offer an additional service to a client. This client may reduce their spend on their Hair , thus reducing your income. This may be happening under your watch. Be vigilant.
- Loss of Staff. Having a chair renter may cause animosity in your team. Some staff may also want to go self employed and this may lead to a loss of client revenue.
- Brand Dilution of your salon brand.
How to reduce the risks of rent-a-chair
If you decide to go down the hairdresser chair or booth rental route here are some sensible business precautions you can take to reduce your exposure:
- As you would with employees, set up a rigorous selection process. Verify references, have a couple of interviews and a trade test. Involve other team members especially if they are self-employed too.
- If they are currently working elsewhere how about a mystery shop?
- Do have that Service Contract I talked about earlier. It’s essential.
- Have a probation period of 2 or 3 months. If it isn’t working you can part company easily.
- Weigh up the pros and cons
If you’re a start-up salon with a tight budget and a small client base but don’t want the risk of employing someone, then renting a chair out is it’s a great way of getting a passive income for your hair salon and getting a contribution to your overheads. If you want to introduce a new service, like hair extensions, but can’t afford to employ a specialist then a freelancer may be an entry route.
The flip side is that if they are very successful then their earnings can be substantial and this could have been your profit if you’d taken the employee route.
How can M A Whately & Co help you make the right decision and grow your business?
We will discuss in detail the Pro’s & Con’s of your situation. We will take control of your Accounting and Taxation requirements, allowing you to concentrate on developing your business.
Some other services we can help you with:
- Monthly VAT Returns
- Monthly management Accounts
- Weekly PAYE Returns
- Weekly Staff Payslips
- Staff Contracts of Employment
- Annual Accounts
- Company Secretarial
- Tax Planning
We want to help your business to grow by allowing you to concentrate on business development, clients and being creative!
For any Queries please email us on Info@mawhately.ie