Owners charging staff to off-set client credit card transaction fees

gr8nailz

Well-Known Member
Today our owner informed us of his intention to collect 3% of each employee's 2-week tips total to off-set credit card transaction fees. I can't wrap my head around this because if a client is using a credit card to pay for her service and decides to include a tip as part of that transaction, there isn't a separate transaction, hence a separate charge. So why do we need to pay a 3% off-set fee? To me this is the cost of running a business and since I already pay 15% product cost, this is a little hard to swallow.

To the Salon Owners out there, please enlighten me. I don't want to fight this war if someone can explain it to me sensibly, but seriously, it just doesn't make sense to me.
 

Dream Nails

Active Member
Sorry not a salon owner but where I work anyone paying on a credit card pays 2 1/2% charge. (travel agent not nails )
I'm in the uk so not sure if it's the same for where you are

Vicki xx
 

jacqueline

Member
Tammie I will try, I could explain it easily in a couple of sentences if we were face to face but let me see if I can do it electronically!

So, when a client leaves a tip for a therapists on a credit card what normally happens in the background is:

Salon owner will pay something like $20 a month for the privilege of having merchant credit account (after they have paid set up fee and either hired or bought terminal).

The cc company in this case obviously takes 3% of all individual transaction paid and they all take circa 30 cents per transaction also.

So lets talk easy figures and use a $100 treatment as an example with a $15 tip on top.

So the way I see it, the owner is paying the set monthly ammount of say $20 for account maint etc. and the 30 cents per transaction so the "problem" arises if the client leaves the tip on the cc and not cash because then the salon owner has to pay more to the cc company as treatment amount is larger now with the cc tip, so instead of paying the credit card company commission on $100 he is paying it on $115, so in this case I guess he is trying to claw it back as he probably gave you the full $15 in the past?

So in a nutshell, instead of the $0.33 which would be the fee for him if a a cash tip was left, the owner then pays 3% on the higher amount (treatment price plus credit card tip) making it $0.45 so it costs him $0.12 cents more for that transaction and that happens each time a client leaves a tip on cc.

Your boss is paying his monthly fees, his 3% of the treatment charges and the say 30 cents per transaction. He is now asking you to pay 'just" the extra 3% charge on the tip amount which in the example above is 12 cents.

Personally I pay my girls whatever the client leaves on the cc and take the hit. If I had a huge staff I can't say I would do the same and I would probably discuss it with them.

Phew that took a while, I hope it all makes sense Tammie.
 
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dandelionpoppy

Well-Known Member
I always tip in cash.
Last week I was in restaurant having lunch with OH, was paying by card and asked the waitress how much of the tip she would get if I added it to the card. I was shocked to hear her answer. 30%!
So, back to cash tips!
 

izzidoll

Strictly Scottish Geek!
I also never leave a tip using my card...always cash.

I would think though in the USA they tend to do it more by card as they tip everyone ;) :lol:

I was a bit outraged on gr8nailz behalf at the start but having read Jacquelines explanation I do see where the spa owners are coming from here. Although I think if I were gr8nailz I would be telling my clients and hoping they would then start to tip me with cash !!!
Spa's attached to large hotels here in the UK though tend to have a no gratuities policy !!!
 

gr8nailz

Well-Known Member
Jacqueline, thank you for the explanation. Now it makes sense to me. I don't mind policy changes if they can be explained...not sure why he didn't choose to explain it this one to us.

Thanks for taking the time. I'll share this info with my salon & spa colleagues.
 

jacqueline

Member
You are very welcome Tammie.
 

Lolly22

Active Member
Well my old boss used to take VAT off which in the uk just now is 20%. Work that one out lol?
 

gr8nailz

Well-Known Member
I've done considerable research today and have found that it's pretty standard to pay a monthly fee for the credit card machines plus a per-transaction fee anywhere from 2%-10%. Our salon owner is paying 2.3% per transaction.

What he has asked from us is that we off-set his 2.3% by paying 3% from our tips. He will keep 2.3% to cover his cost and will distribute the .7% among the non-service providers who do not receive tips but who are essential to everyday operations...spa assistants, launderers etc.

I'm cool with that.
 

persianista

Banned
Well my old boss used to take VAT off which in the uk just now is 20%. Work that one out lol?
If it goes through the card machine, it is subject to vat at 20%, it should then be added to your pay with your salary and subject to tax and NI.

Far better for clients to tip in cash. I dont allow tips to be added to cards for this reason.
 

Lolly22

Active Member
If it goes through the card machine, it is subject to vat at 20%, it should then be added to your pay with your salary and subject to tax and NI.

Far better for clients to tip in cash. I dont allow tips to be added to cards for this reason.
Oh really? She didnt always do things by the book so I thought she was just making this up lol! Thanks to clearing that up.

Yeah it's annoying, I'm like no cash will do fine lol!
 

gr8nailz

Well-Known Member
Apparently the word has spread to some of our regular clients about this new policy because two of my regular clients (who also receive other salon & spa services) came to see me for their appointments yesterday and told me they would be tipping me in cash from now on.

Okilee-Dokilee.
 

jacqueline

Member
Apparently the word has spread to some of our regular clients about this new policy because two of my regular clients (who also receive other salon & spa services) came to see me for their appointments yesterday and told me they would be tipping me in cash from now on.

Okilee-Dokilee.
Good, that is definitely the way ahead:biggrin:
 
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