Team-Based Pay in Salons: The Good, The Bad and The Ugly
I have often heard about but have never worked in a team based salon. Curiosity got the best of me, so I dug deep to not only understand team-based pay in salons but to give you an unbiased, uncompensated take on how it may or may not be a good idea for your career.
If we haven’t met, my name is Susan Wos, I am the owner and founder of Salonspa Connection. Our platform is non-brand affiliated, meaning, we don’t work for hair product companies and are not paid or sponsored to give one sided opinions.
Unbiased POV
Since I do not have a dog in the “best salon business model” fight, the following information comes to you from an honest POV, designed to help you determine the best path for your career. I will address both what I see for salon owners and for beauty pros in this blog, so feel free to skip to the table of contents to make the best time out of your mini- TBP education, if you don’t need ALL the deets.
I see my fair share of business models in salons, spas and barbershops. My job is to help stylists find salons to work in and to find salon buyers for owners who are ready to pass the torch. I’ve worked with countless owners, consultants, stylists and beauty professionals around the globe, so getting the full picture of how team based pay salons works, (and doesn’t work), for everyone involved, was top on my list to uncover.
I have read everything I can about TBP, and even asked around in some Facebook forums on this subject matter. Join me as I let you in on some of the best parts of this salon model, and discover the not so great stuff for both owners and salon professionals.
Table of Contents
What Is Team Based Pay for Salons, Spas and Barbershops?
A Team-based beauty business is an employee-based model that provides systems, standards, protocols and methodology to a career in the salon industry. This is achieved by setting a guaranteed hourly rate for employees and offering bonuses based on how well both the individual and the overall company performs.
This means, employees have guaranteed wages but are dependent upon subjective and non-subjective aspects of their own”performance”, and others, in order to increase their wages. Thinking through the team-based salon for what it would be like for owners and stylists, opened up a lot of different ideas I have about employment, and alternative ways to view this less common choice in salon employment.
Where did the Team-Based Salon Originate?
Neil Ducoff is the founder of Strategies Consulting, and long time associate of product company, Aveda. Team based pay for salons is his “invention” and the basis for Strategies consulting offerings.
Given that Aveda isn’t too keen on the salon suite or booth rental salon model, the team-based business model is geared toward pro-employment and is not for the independent hairstylist crowd.
“Commission and high payrolls have been the salon industry’s elephant in the living room far too long. ” -Neil’s quote from a LinkedIn post that has been removed, but documented in this article.
Neil is decidedly against the straight up hourly compensation model, commission-based salon model and booth rental model, offering the team-based pay salon as the solution to a host of industry issues. Before you buy into any salon philosophies, please understand that unless the leadership in your business is solid and fair, there is no strategy, consultant or idea will save your salon from failure.
Team Based Hourly Pay Structure: Is This a Unicorn or it is Real?
Teamwork makes the dream work, but does this work for creatives? Any business would dream of a cohesive and collaborative team, lifting each other up and accomplishing goals to reach the highest earning potential for both themselves, and the company.
Being compensated for overall performance really is a good thing, the problem lies in the judgement of said performance. Outside of service and retail sales or “numbers”, most every other evaluation point for a pay increase is… subjective.
Many stylists, including myself, have been a part of a wonderful and whole team where the management sucked. With poor leaders in place, over time, the salon environment erodes, stylists quit the salon and management stays in place, making everyone’s lives miserable.
In a perfect world, team based businesses are a great idea. The compensation structure works for everyone who is invested in the company’s growth, the model will keep payroll at a manageable rate and everyone wins.
But, this industry is full of creatives, “idea people” and most importantly, individuals who can be independent, very easily.
When a Stylist Wins, Everyone Wins-Especially the Salon Owner
Salons typically operate at a 10% profit margin, if all goes well. Salons can be and are profitable when you know how to manage money, be an effective marketer and pay your staff.
TBP banks on employees buying into incentive pay, less responsibility than booth rental, stability and those who want to feel like they are part of a great company. In exchange for this salon agreement, marketing is provided as well as products, some hair tools and a host of perks for beauty pros who don’t want to be independent and handle it ALL.
While there are definitely beauty professionals who would thrive in this type of environment, our statistics show that this is not the preference of high achieving stylists.
“…raises are based on individual and team performance, not price increases. everyone gets bonuses, not just stylists- Top producing, fully booked, service providers gain most. When fully booked, commission service providers can hit a pay ceiling. (Yes, individual price increases can help, but ceiling still exists.)”. -quoted from Neil’s business, Strategies.
This means when the salon raises prices, the only people who get a raise is the owners. This is all good and fine but I can see where not getting raises and bonuses when the salon makes more, could cause some drama and salon issues amongst an entitled team.
Team-Based Pay Examples in Salons
So, what does it look like to earn in a Team-Based Salon?
• You receive a base pay for hours worked, starting with minimum wage. Every employee is given a different hourly wage which fluctuates based on your perceived performance. States like California are beginning to require double the minimum wage, so this varies according to state employment laws.
• Pay is given at a set rate for services performed. Bonuses and incentives are rewarded when expectations are met for individuals and the entire team.
• Upselling services yields additional pay.
• Retail sales yield additional pay.
• You get raises and bonuses based on performance. These can include: leadership skills, attitude, average ticket and retention rates. Rewards are given based on company expectations, how well your co-workers perform and how your performance compares to others.
Compensation is a mixture of tangible key performance indicators, (KPIs), as well as subjective performance standards. This method of compensation is less clear than it is as a commissioned employee, straight hourly wage or salaried position.
To be a successful salon owner in this business model, you must understand your numbers and be very clear about expectations and compensation.
14 Pros of Team-Based Pay for salon, spa and barbershop owners
- TBP can improve your profit margin when struggling to take home more pay is an issue.
- This business model helps to alleviate financial issues for owners with without current systems, structure and a profitability roadmap.
- The system is designed to get employees invested and actively participating in all aspects of business. The TBP claim is: this model alleviates typical staff complaints about doing duties and contributing to the team, even if it isn’t their “job”.
- TBP “guarantees” owners will take home a salary.
- The system is perfect for owners who want to get out from behind the chair, and focus on the business.
- TBP takes the “I” and makes staff focus on “we” or the collective greater good for the company.
- Client retention rates are higher for TBP salons since the staff tends to “share” clients rather than “owning” clients in like in a commission or booth rental salon. A quote from Neil on this matter- “The brand and reputation of the company is what attracts and retains clients, not the popularity of specific individuals.”
- Salon owners enjoy a more collaborative environment, making salon life happier and more cohesive for everyone who works in the business.
- TBP improves the salon owner’s profitability & overall growth of the business as a whole- it’s the full solution for owners who are struggling to grow.
- TBP employees tend to keep each other accountable because of the dependency they have on each other to make more money.
- This salon management system is designed to reduce payroll costs & get control on wages.
- Team based businesses claim to have a better salon culture.
- Many salons and spas feel employees may thrive under these pay systems, as they are designed to reward the “right” behaviors.
- If a team based salon, (or any salon, spa, medspa or barbershop), is ran well, this is more valuable when you go to sell the business.
6 Cons of Team-Based Pay for salon, spa and barbershop owners
- Salon employee motivation can be low to achieve the results an owner is hoping to get. This is especially true for stylists with an independent spirit and wants to be accountable only for themselves.
- Introducing this new pay structure can scare off current stylists. TBP is known to cause some serious disruptions due to the change in pay structure. To be fair, I don’t know of many salons that implement compensation changes without some kickback from existing staff.
- Moving to team based pay may not actually save the salon owner money. Without me knowing the way you pay, there isn’t a way to be sure you will profit more from this model.
- TBP discourages individual accomplishments according to what some stylists think. Not every stylist can handle being dependent on what others make or do, when it comes to compensation method.
- Working for team-based pay is an hourly model. This can be a harder sell to stylists for salon employment opportunities.
- Some feel the lazies win by being allowed to underachieve/ do the bare minimum and still earn with an hourly or annual salary system.
7 Pros of Team-Based Pay for Stylists, Estheticians, Nail Techs, Barbers and Massage Therapists
- You won’t get nickeled and dimed with product charges- everything you need is included to do your job.
- Done for you marketing, inventory, client booking, training, i.e everything is geared so you would make more money.
- Creates stability: You get a guaranteed hourly wage + commission/ bonuses when you and the team achieve. Hourly rates increase over time and with achievement, in most TBP salons you get an annual salary or guaranteed wage.
- You still get paid when a client no-shows.
- There is somewhat more freedom and control for stylists vs corporate/ straight hourly or commission salons.
- You are paid for all salon events, classes, and anything that is required or encourage to attend when it relates to the salon.
- In a team environment, co-workers tend to keep each other accountable, naturally eliminating those who are not team players.
7 Cons of Team-Based Pay for Stylists, Estheticians, Nail Techs, Barbers and Massage Therapists
- With team oriented compensation structures, motivation can be low to achieve. Pay based on what other people do, or not do, can hinder stylists motivation. Pay structures that revolve around anything but your specific performance discourages individuality & accomplishments- according to stylists. In this model, you are more or less responsible for everyone, not just yourself, making you dependent on what others make or do.
- Beauty pros who tend to be lazy are still compensated by being allowed to underachieve or do the bare minimum.
- Bonuses, rewards and compensation is very subjective in this business model without clear systems, fair management and software to track KPIs. This can also make pay stubs confusing and complicated.
- Team based pay salons are designed to reduce & control wages. This is not always a bad thing as some owners struggle to become financially stable. For example, take a look at this quote from the Strategies website when discussing owners converting their business to their model. “Depending on the company’s commission rates and service payroll percent at the time of conversion, it is possible to achieve a 10% or more reduction in total service payroll percent in one to six months. This reduction is based on increasing revenues and controlling payroll costs. It does not represent a reduction in actual service payroll dollars.” It would be nearly impossible to NOT reduce what YOU currently make working in this salon, transitioning to this model.
- Like most employee based salons, the goal of owners is to keep clientele, should you leave the salon, which is normal and OK. TBP designs their model around this sentiment, here is a quote from their website. “company is what attracts and retains clients, not the popularity of specific individuals.”
- Team oriented salons boast a “better culture”. While this may be true in some salons, there is no guarantee that this is actually true throughout all TBP salons.
- If you are sensitive to your clients seeing another stylist, this may not be a good fit for your employment needs. TBP encourages clients to see more than just one person, which is a good thing, but is designed around not creating client to stylist loyalty.
More Pay Structure and Team-Based Salon Facts
- The is no commission offered on retail. Individual sales are calculated into an hourly rate and then distributed throughout the team and to the individuals who sold the products.
- Team based pay models are more common in other industries. This is noteworthy since the salon industry tends to buck traditional business models, sometimes to their demise.
- TBP models tend to have a far more collaborative environment. This is great, and encourages a positive and friendly atmosphere where people care about each other, and the financial fitness of the company in order to stay working together.
- The best client experience. TBP is geared towards the clientele’s “comfort in seeing anyone in the salon”. When clients needs are prioritized, this tends to promote a ton of referrals and an overall positive attitude about the salon in general.
- When done correctly, there is more more transparency in pay & company earnings with all employees.
Conclusion
If you have made it this far, congratulations! Taking in all of this information means you are either a nerd like me who loves salon industry research or you are truly invested in finding the right business model for your salon career.
Either way, I hope you have enjoyed my honest take on team based pay in salons! Feel free to reach out should you have any questions or input on this blog on LinkedIn, Instagram or Facebook. I am always happy to hear what our members think, and getting feedback only helps us provide more value to the industry.
Best of luck to you in your career!
Yours in service,
