Posted September 3, 2018
Renting a chair out in your salon is an easy way to add some extra income to your bottom line and introduce a whole new audience to your salon, retail offering and services. If done well, it can be a win for both salon owners and stylists – the salon owner gets someone paying rent or commission to them directly and the ability to influence customers coming into salon, while the stylist can run their own business and manage their own clients without the major overheads associated with running a salon. Sounds great right?
Unfortunately, renting a chair in your salon can be a legal minefield if not managed well by the salon owners. Here’s what you need to be aware of if you’re going to set up a rent-a-chair agreement in your salon.
We know how hard it is finding staff within the hair and beauty industry, and even though they aren’t joining your team directly you should pay just as much attention to choosing the right kind of person to rent a chair within your salon. Their presentation, client relationships and management of their business will all reflect on you as the salon owner because they are in your salon space – and the last thing you want is for your own clients to have a bad experience in the chair next to one of their clients. Look for a stylist who approaches their work and customer service in the same way you do and who creates work to a similar standard to ensure that the experience within your salon and the work coming out of your salon is at the same standard.
This is the most important part of organising a Rent a Chair arrangement within your salon. Generally speaking, a Rent a Chair Agreement includes details of how income which is generated is split between the stylist and the salon, and the nature of the working relationship. Most times, the stylist is treated as an individual contractor and is generally responsible for their own insurance, tax and with supplying an ABN, although it can also be set up as a licensee. Generally, renting a chair is arranged as a license to occupy the space, rather than a sub-tenancy agreement and the arrangements can be made month to month or at a set period decided between you. It’s important that you include a notice period within this agreement so either party can vacate the agreement, and ensure that any expectations around the use of common facilities (basins, tables, rooms, toilets etc) are detailed. This agreement should be signed by both the stylist and the salon owner and both should keep a copy for their records.
There are certain day to day functions that absolutely must remain separate for the agreement to stay valid and for the two businesses to operate effectively. The businesses should not be in any way connected to each other, and the use of EFTPOS and booking facilities should be completely separate too. The stylist should be able to come and go when they please, they should be able to delegate work to others and refuse to take appointments because it is absolutely their business. If the person renting a chair in your salon is wearing your uniform, using your booking sheets, your EFTPOS machine or equipment, it would be very easy for an investigator to assume they were an employee – which leaves you open to the very serious risk of fines and legal action.
There have been a number of cases in Australia where salon owners have (deliberately or not) done the wrong thing. The Fair Work Ombudsman’s office is actively and regularly conducting inspections into Rent a Chair Agreements and in 2011 they published a Report on sham contracting and the misclassification of workers in the cleaning services, hair and beauty and call centre industries. This highlights how seriously the law takes the issue of sham contracting.
Section 357 of the Fair Work Act states that it is unlawful to treat someone as an independent contractor when in fact they are an employee. There are significant fines and penalties if you are convicted of sham contracting, including the maximum penalty of $12,600 for an individual or $63,000 for a corporation, for each breach. In addition to the penalties imposed you will also be open to an underpayment of wages claim from someone who you paid as a contractor but was actually an employee. If you think you could be at risk, you should seek immediate legal advice or speak to the team at HABA today on (02) 9221 9911.
It’s important that salon owners know where the line is. If you are going into this kind of arrangement as a way to avoid paying payroll costs like leave entitlement or wages, then your rent a chair agreement will not provide you with any protection. However, if you structure your agreement correctly and enter into it with the right intentions, a rent-a-chair agreement can be quite profitable for both you and the stylist sharing your space. If you would like advice on drafting a Rent a Chair Agreement or on the day-to-day management of this kind of system in your salon, please speak to the team at HABA today by emailing firstname.lastname@example.org
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