Commission, how high could have you gone?

[mjpuds]

OK I'm in the position to take on a new member of staff , the tricky thing is they have been rent a chair for a good few years and built up a good client base , but Im not sure about mixing rent and salary together and have offered salary based and to try and match rental..so my question is has anyone heard of salary based being around the 50/50 mark.. I know it seems very high, leaving me with very little return. but it would bring in something . maybe 55/45 . sadly when they have had a package like that before , the saying of have all the cake and eating it comes to mind..and only offering a basic salary when holiday is taken. and sick pay.

 

[AcidPerm]

What do you mean by 50/50? Are you proposing to only pay them for each client they service?
If so, it sounds like you’re really talking about self employment and you will be their landlady, not their boss.
Otherwise, you need to pay a minimum salary with commission on top so that they end up being paid more than minimum wage, with full sickness and holiday pay etc.

Read the following sticky thread as it helps explain the differences between employed/self employed. Hopefully, it will help you work out which option is best for your salon.

https://www.salongeek.com/threads/hmrc-guidelines-for-determining-self-employment.295298/

Self employed people run their own independent business within your salon but they’re responsible for their own advertising, client records, taking monies, purchasing insurance, paying tax and NI etc. If you try to control how they do this as if they were a member of your staff, you could get into trouble with HMRC as they class that as a sham employment arrangement and you could end up being prosecuted.

 

[mjpuds]

I know the way S/E and E works, my question is as a fully employed member what is stopping me from paying them a commission rate which matches that of 50/50 half of what they bring in they get back.also a basic salary within the package . and all the other bits ..smp..sp..pen..

 

[AcidPerm]

As long as you’re paying them at least minimum wage, you can pay whatever commission split you choose on top of the basic weekly salary.
In which case, 50/50 sounds overly generous to me at the outset. What about commission on product sales?
Are you certain that they will be fully booked every day because you’ve still got to cover their wage regardless.
Wouldn’t it be safer for you to offer a sliding scale until they’re established?
Can you be certain that all her clients will come to the salon?
Maybe consider starting with basic set wage plus 20% commission with a review after a month? Whenever I’ve employed anyone, I think it takes a good 3 months or so to really get the feel for their strengths and weaknesses.

 

[mjpuds]

The problem with moving anyone over from s/e 50/50 that are busy , Is tricky where they are easily hitting a take home of 600 p.w after tax ni has been removed . Matching this with any normal commission ratio ( which is how the rest of my staff work on and have on for the last 25 years) ..but they need to be clearing 7500 gross p.m . Which is very a achievable . But its alot of pressure . Where as if they were s/e and clearing these figures the take home is hitting the next TAX bracket ..

 

[nailpod]

So why are you asking if you already made your mind up?

I understand you want to keep a certain person in your salon and to do that you want to offer them a favorable salary and commission to be worth them changing over from SE to now being your employee.
Short term it might work and is fair to the employee however if you offer too high to begin with you run the risk of people being less motivated to work if they going home with a set salary which is high, so having commission higher is always a smarter move.

As long as you have got your salon pricing done very well.
For my personally I don’t have that much of a markup to pay staff and myself plus 50% as I’d be pricing my salon out of the local market.

So your question to answer :
Is yes it sounds fine
Only if you have done your research first .

Making choices based on emotion can kick you in the long run.

Is there not another person you could hire at a more reasonable split rate and salutary basis?