How to Run a Commission Salon in 2022

Setting up a salon commission structure can have a lot of benefits for both the salon owner and stylists. Tracking commission rates, clients and services may sound challenging, but it can be a great alternative to paying hourly wages.

What You Will Learn

We’ll take a look at how salons set up stylists’ commissions, what commission rates and structures usually look like and how you can use these strategies.

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  1. How Does Commission Work at a Hair Salon?
  2. Salon Commission Structure
  3. 60/40 Commission Split Salon
  4. Salon Commission Rates
  5. Salon Retail Commission Scale
  6. Conclusion

How Does Commission Work at a Hair Salon?

 

So, how does salon commission work? Many salons pay their stylists a commission percentage for each of their services, in order to compensate them for their great work and incentivize bringing in new clients.

This commission rate varies between salons, but is often around 30-50% of the service’s cost, minus a small backbar charge to cover materials used (this is usually just a fixed amount of a few dollars and pays for the costs of things like chemicals or hair products).

Some salons in the industry pay less experienced stylists a lower commission rate, adjust commissions based on targets achieved- high commissions are earned when your stylists consistently hit or exceed targets, or even use a mixed hourly pay and commission model.

You can even offer your team commissions on product sales.

The terms of your salon commission agreement depend on your needs as a salon owner, what your stylists are happy to be paid, and any salon commission laws in your state or country.

Salon Commission Structure

 

Salon owners have a lot of options when it comes to offering stylists commissions.

Salons that pay commission can either do this instead of an hourly wage, offer a mix of both commission and hourly earnings, or even treat each stylist as an independent contractor and rent out a booth to them.

Let’s take a closer look at each strategy:

  • Commission-Only Salons

    Stylists working at these salons make money solely based on commission from services. Often this amounts to about 30-50% of the service’s fee, with a small amount paid back to the salons for the cost of backbar materials.

    One advantage of this structure is that it motivates stylists to make more money by actively marketing services, bringing in new clients, upselling and encouraging product sales. Salon owners are also less likely to lose money on wages during a slower week.

    Some disadvantages include the fact that a new stylist may struggle to make enough money this way because they’re still building their client base and haven’t had time to market their services, and if each stylist doesn’t make the equivalent of the minimum wage that week or month, you may be legally obligated to pay the difference.

  • Hybrid Pay Structures

    This kind of salon commission contract offers employees stability and the extra incentive to sell more products/ services and attract new clients. Everyone can expect to make a minimum amount but is responsible for earning extra on top of that.

    Some managers use a tiered commission salon sliding scale, whereby the employer pays each stylist more depending on whether they’ve hit or exceeded different sales and service targets.

    Advantages for salons that pay hourly plus commission include that it’s easier to attract new stylists (since they’re guaranteed a minimum amount), and the fact that owners can tailor this salon commission calculator to their specific industry needs (setting regular targets for product sales, specific services etc.).

    One disadvantage to this approach is that it could be complicated to keep track of everything. One of the easiest ways to track your team’s performance is by using salon software to see who is hitting their targets, which services are popular and when the slowest periods occur.

  • Salon Booth Rental

    While not technically a commission based strategy, this is another business model that you can explore if you don’t want to pay your staff hourly wages. This involves renting each booth or chair out to independent stylists and then letting them charge for services.

    A big advantage of this is that you’re guaranteed a rental income and don’t have to deal with setting a schedule or paying for things like health insurance and vacation time.

    The biggest disadvantages include the fact that you have little to no control over what these stylists do, and you won’t have the ability to earn more than what you’re already charging them if they bring in a lot of business.

To learn more please check out our post on Salon Booth Rental vs Commission.

60/40 Commission Split Salon

 

The days of 60/40 commission split rates in salons (40% to the salon) are long gone and frankly should have never happened. Sharing that much of your revenue could lead to financial suicide for your salon business.

When setting up your salon commission rates, you should consider planned profitability and work out the rates backwards.

Your salon should be generating 10%+ Net Profit AFTER you (the owner) are paid. This means that you might be able to share 30-35% of your total revenue (service and retails) for your commissions. Of course, this differs from 30-35% commission per service.

You also need to remember that it's not about the commission rate itself! It's how much money your hair stylists or nail techs can make. So you should consider that and see how best to fit this cost into your salon business model.

Salon Commission Rates

 

You might ask yourself: What is the best commission rate to pay salon staff?

Whatever structure you decide on, remember that your hair salon commission pay scale or fixed rates should reflect your business's overall expenses and profits.

You’ll expect to pay a large percentage of your business’s revenue out again as payroll, but this percentage shouldn’t exceed 35-40% at most.

Depending on your salon employee commission contract terms, you might offer anywhere between 30-50% commission. This number might be less if you offer other incentives and bonuses like health, vision or dental coverage.

You can also offer a salon retail commission scale or a tiered one that calculates these bonuses based on a team member’s overall weekly or monthly earnings.

You should not be asking yourself" "what's a good commission rate for my salon?" but "what percentage of revenue of your salon can be shared as service payroll expense?".

If you’re not sure where to start, many websites offer a hair salon commission contract template that you can download and customize to suit your needs.

Salon Retail Commission Scale

 

“What’s a good retail commission rate to motivate my hair stylist to sell?”

There is no single answer to this question. Some salons offer the following scales:

  • 10% retail commission
  • Sliding scale
  • Retail commission fund used for staff training

Before you set up your retail commission rates (if any) think about what will motivate your stylist to recommend retail. Professional product retailing in salons is about professional recommendations and a proper closing process at checkout. And no commission rates will replace that.

To learn more please check out our post on Salon Staff Motivation Ideas to Increase Their Performance.

Conclusion

 

Offering your team of stylists the chance to make commission can be a great way to motivate them and get them excited about bringing in new customers. This makes commission a powerful marketing tool.

Salon commission doesn’t need to be complicated- the trick is taking a look at your own salon’s needs and choosing a structure and percentage that works for you.

Citations

Organized business and the city commission and manager movements
https://www.jstor.org/stable/2205186

Regulating business by independent commission
https://www.degruyter.com/document/doi/10

Entrepreneurship, small business and economic growth
https://www.emerald.com/insight/content/do

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