Your chosen pay structure says a lot about your salon and your staff culture. This is why it is often so difficult for salon owners to decide how to pay their staff. Whether you have hourly staff or salaried staff, you will need to make a choice about how to structure their pay. 

Commission-based pay is a popular choice for salons that want to incentivise their staff to maximise bookings, but it isn’t right for every salon setting. While there are some clear advantages, there are also downsides you need to consider. In this guide, we’re looking at the pros and cons of commission-based pay so you can make a decision about which approach is right for you.

What is commission-based pay?

Commission based pay is when you pay your staff a basic salary or hourly rate and then give them the opportunity to earn commission based on the new clients they bring into the salon. It could also be a commission based on each treatment they provide, so the busier they are, the more they can potentially earn.

Benefits of commission-based pay

Commision-based pay can offer some serious advantages, including:

• Perhaps the biggest benefit of commission-based pay is that it will turn your salon staff into highly motivated sales machines. If they want to earn more money, they have to bring in more customers. This is a win-win for you and your staff.
• Another advantage is that you protect yourself during quiet periods by reducing your staff outgoings. Your staff will earn less during periods when they aren’t bringing in new customers, which can help to keep operative costs down.
• It will encourage staff members to utilise methods such as up-selling and cross-selling in their customer service. Without the incentive of commission, these simple steps might pass them by.
• Staff will have more flexibility in their role, allowing them to decide when they want to be less busy and when they want to fill their books. This level of control can be hugely beneficial for staff members juggling other commitments. 

Downsides of commission-based pay

While there might be some benefits to this pay structure, there are also downsides to consider. The potential pitfalls of commission based pay include:

• This will eat into your profit margins. You’ll be paying out a portion of every new client that comes into your salon, which is money that would normally go directly to the salon if not for the commission-based pay structure.
• It can get complicated when it comes to things like holiday pay. With a regular hourly or salaried pay structure, payroll will be so much simpler. It could also lead to conflicts if staff feel their commission hasn’t been calculated correctly.
• It could lead to a toxic environment in the salon where workers become overly competitive. Rather than working together, it becomes every stylist for themselves. This could lead to stylists trash-talking other stylists to your customers, which gives a really poor impression.
• Commission-based pay can lead to more stylists choosing to go freelance. They will see how their earning potential is linked to their input and might find that they don’t want to be bound to your employment. This could lead to higher staff turnover and less stability within your salon.
• It’s easier to fall foul of minimum wage rules if you are using a commission based pay system. You’ll need to check that your workers are at least earning minimum wage during quiet periods.

How to find the right balance for your salon

The best place to start is to speak to your staff and find out if this is something they even want. Some would prefer the security of a salaried role with predictable income, while others might feel strongly motivated to boost their earning potential.

Next, consider the cost implications for your salon. Run profit projections based on a number of different scenarios and decide if this pay model is right for your company. You could look at a quiet period versus a very busy period and see how much profit you stand to make with salaried employees and commission-based pay.

Finally, you could offer it on a trial period to decide if it works for everyone. After the trial is over, it will likely be very obvious if the scheme has been popular.

If you’re considering commission-based pay, take the time to evaluate its impact carefully and try a trial period to see how it fits your salon’s unique needs. Want to manage your payroll and commissions seamlessly? Explore our salon software demo and simplify your pay processes.