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Understanding Salon & Spa Pay for Time Worked

July 9, 2018 | By Neil Ducoff | 3 Comments

You hire a service provider to work full time. Full time, according to basic labor law, is 40 hours a week.

  • If this full-time service provider is scheduled to be at work for 40 hours, the employee needs to be compensated for all 40 hours at no less than minimum wage.
  • If you hire a service provider to work part time, the employee needs to be compensated for all part-time hours worked at no less than minimum wage.

You’re probably thinking that this is pretty basic employer/employee information that all salon/spa owners understand.

Unfortunately, it’s not always fully understood.

When it comes to service provider compensation, the prevailing thinking at most salons/spas is, “I only want to pay them when their hands are generating money.”

What does it mean when a salon/spa only wants to pay service providers when their hands are generating money?

It usually means the following:

  • No pay for time in training.
  • No pay for the educator doing the training.
  • No pay for staff meetings.
  • No pay for down time if there are no clients to service.
  • No pay for off-site training.

The “Mandatory” factor

The instant the word “mandatory” is connected to time at work, that “time” becomes compensated time.

  • It doesn’t matter if the service provider is working on clients, in a meeting, being trained, or sitting in the break room on Facebook or Instagram, the employee is at work and must be compensated.

Many salons/spas have “required” training that service providers must participate in. Too often, the prevailing thinking is that the training being offered is a benefit provided in exchange for the employee’s time.

  • If the training is mandatory (or a requirement of employment), the employee must be compensated.

FACT A: Any “time” that employee attendance is “mandatory,” it is compensated time. This includes staff meetings, daily huddles, downtime, off-site training, events, etc.

FACT B: If you don’t use the word “mandatory” for meetings, training, huddles, etc., then attendance is optional. You can’t grow a competitive salon/spa or a culture of accountability by sprinkling “optional” over your information-flow and skill development systems.

Yes, it’s commission thinking

Commission, by design, IS a “pay them when they sell something” pay method. It creates the impression that the salon/spa isn’t paying service providers for any time not working on clients.

The thinking is that a salon/spa can have a service provider “working” full time but only pay for the time the service provider is generating revenue.

This thinking is inacurate and can cost the salon/spa dearly if payroll and time records are scrutinized by the Department of Labor.

  • The Department of Labor will examine scheduled employee hours per pay period versus pay.
  • Department of Labor takes gross pay for a pay period and divides by scheduled hours, or the actual clock-in/clock-out hours, to arrive at the employee’s average hourly rate. That average hourly rate must be minimum wage or higher.
  • If your company does not keep accurate employee time records, you should. It’s the law. Time records are not optional. The pay method does not matter.

FACT: All time at work is compensated time. That’s how the Department of Labor views time and fair pay. The law doesn’t care whether their hands are generating money or not.

Educator/Trainer Compensation

I’m singling out compensation for service providers that also train and educate other staff members simply because it’s a question we’re often asked.

Educators are typically experienced senior team members. They’re also busy and generate significant service revenue.

Some commission salon/spa owners say, “It’s just part of their job responsibility and there’s no additional compensation.

  • NOTE: The Department of Labor regards this as “time at work” and therefore compensated time. If there is no agreed upon pay rate for training time, the employee’s average hourly rate could be used.

Some owners have a separate rate or fee to pay their educators. This cannot be equal to less than the minimum hourly wage rate.

At Strategies, we feel that service provider educators are worth as much while training as they are servicing clients. That’s how it works for salons/spas on Team-Based pay.

  • At commission salons/spas, you need to calculate the employee/educator’s average hourly rate on commission. (Gross pay ÷ scheduled hours for that pay period = Average Hourly Rate)

This is where many owners get stuck. The cost of paying a productive service provider his/her hourly wage rate, missed service revenue, and compensating the employees receiving the training adds up.

FACT: You cannot promise and deliver the level of service quality to clients without investing in skill and customer service training. This is why creating and following a Cash-Flow Plan is non-negotiable.

California is one of a growing number of states to pass aggressive new laws to ensure that employees are properly compensated for all time at work including breaks and downtime.

California passed SB 490 to allow salons to pay commission as long as the employee’s base hourly rate is at least two times the state minimum wage rate in addition to commissions paid. This means traditional commission rates no longer work.

Lastly, California has followed Massachusetts and New Jersey in restricting the ability of employers to call workers independent contractors to avoid minimum wage laws and push the withholding tax burden onto service providers.

Here’s my challenge to you: It’s time to bulletproof how your salon/spa pays its employees. Invest the time to understand the Labor Laws in your state, specifically what is considered compensated time.

When it comes to fair and proper wages for time worked, whether that time is delivering services or down time, the best way to protect your company is to be fully compliant with state and federal tax law. Take the time to understand state and federal laws.

Here’s the link to the US Department of Labor Regulations for “Hours Worked.” All owners and managers should read this PDF. Click Here

Categories: Compensation

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Comments

  1. We do all of this, feel good about it, and are performing well financially. We beat competitors who are exploiting their own team. That being said, what seems to be missing is enforcement of these regulations. I can’t imagine how many more clients, employees, and dollars would come our way if these other owners had their one competitive advantage (artificially low payroll costs) shut down by labor departments across the country.

  2. We have been team based pay for several years and we have been watching the issue of non-compliant salons since 1982. Honestly, there has been very little change in our state. The Departments of Labor in many states are much more interested in lowering licensing requirements and Tax Commissions are not inclined to investigate either. Do you have an opinion on whether independent contractors are different than booth renters?

  3. I used to think this was impossible and on commission it was. Now that my company is on Team Based Pay I’m able to be compliant with the labor laws and that feels REALLY good!

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