Team based pay in the hair salon industry is the newest solution for compensating employees and increasing the overall performance of a salon. IT WILL NOT WORK. This article is a critique of this program and provides several reasons why this management style is ineffective for a salon.
Types of Compensation
One of the forms of compensation is direct remuneration for services rendered by the employee. The term used for this is wages. It consists of four different types of compensation from the employer to the employee. They are salary, hourly, commission and bonus types of wages.
Payroll is envisioned as the simple employer employee agreement related to compensation for services. I often think of this as the simple handshake whereby the employer agrees to pay the employee a set rate per hour of work. This was true a hundred or more years ago, but over time; history and governmental regulations complicated this simple relationship.
One of the most fascinating business models is the hair salon industry. Many salons are poorly managed and rarely generate adequate profits. To make matters worse, the stylists are like professional sports players. One week they are playing for this team, and next week they are on a new team. In effect, they switch salons. It often happens because of personality conflicts, but the most common reason is that the grass is greener over at the other salon. That is; there is more compensation over at the other salon. How can this exist? How can one salon offer greater compensation than your salon? After all, they face the same economic barriers you deal with on a day to day basis. Given this, what is a fair compensation package? How do you create a model that not only entices better stylists but ensures adequate profit for your salon? This article is written to describe the current industry model, and then I’ll explain what is wrong with the model and finally how to change the model to create a fair compensation package for the stylist and still generate adequate profits for your salon.
Worker’s Compensation Insurance a.k.a Workman’s Compensation Insurance provides for the medical cost of the sustained injury and for lost wages during recovery. In addition, if the worker sustains permanent disability, the insurance provides compensation until the Social Security Administration’s Disability Program starts.
The Federal Labor Standards Act of 1938 sets the standards as it relates to Exempt and Non-Exempt employees and their associated compensation and work standards. The Labor Standards Act is located in Chapter 20 Section 201 of the Federal Code. This Act is applicable to those small business operations with more than $500,000 of annual revenues and who participate in interstate commerce.
Accrued payroll is a current liability comprised of four sections. The first is the amount of payroll earned by staff and not yet processed or paid. The second is the dollar value of personal time off accumulated for each employee aggregated into one number. The third consists of payroll taxes owed to the respective governmental authorities and the final section comprises the accumulated benefits payable such as health insurance, retirement contributions, and amounts owed to third parties as deductions from the gross payroll.
The employee manual is a guidebook and a tool to explain the policies and procedures for the small business operation. It addresses the basic expectations for performance and conduct of the employee. The manual is only a guide and the employee needs to understand its importance in the overall corporate policies and procedures hierarchy.