What is the definition of an employee?

In Australia, an employee is paid a set hourly wage for all the hours that they work for you. You’re pretty much responsible for everything:

Uniform

Hours of work

Break times

Conduct at work

How they do their job

Procedures and policies to follow

Paying for training (or an arrangement like they pay for the training and you pay them for their time there)

Superannuation

Worker’s Compensation Insurance

Annual and sick leave entitlements

They are employed in your business and you are responsible for them.

The alternative is having contractors.

The definition of a contractor is a person who leases space from you in your salon for an agreed price. It could be a weekly set rate (rental or sublet). The rate can be per hour it can be per day or per week or per month.

A contractor is someone that is not employed by you. 

You don’t pay them a wage.

You don’t have to pay their Superannuation or Worker’s Comp or leave entitlements.

They pay you a set price to use space or a room or a chair in your salon.

The PROS of Staff.

You have full control over what they’re doing when they’re at work – How they look, how they speak, what work they are producing in your business, their technique and how they do things, what products they use and how they present themselves. 

The earning potential is uncapped – you’re going to earn a lot more money from a fully booked employee than what you would a contractor.

The CONS of Staff.

You have to pay wages, insurance, super, holidays – you have that extra responsibility financially. Most of these things are pretty easy to do with the use of technology, so you don’t need to be a bookkeeper to be able to have staff.

The stress of being responsible. And perhaps the stress of marketing them so that they are getting a constant stream of clients through the door. It can also be stressful if they aren’t doing a good job, but at the same time you have the power to actually pull them up and fix it with training or talk to them and work through it. 

The PROS of Contractors.

You’re not really responsible for them at all. You don’t have the stress of having to do wages or the stress of needing to pay them when they’re not busy. If they haven’t got clients, you’re not needing to pay them, but they still have to pay you for renting your space.

The CONS of Contractors.

You don’t have any control over the level of work or how they conduct themselves in your salon. I’m just going to use a lash artist as  an example. If they are using 13 or 14 mm, Double D Curl, 10D Mega Volume on all of their clients, and you are trying to promote that you practice sustainable lashing and you pride yourself on the application and styling and you practice damage free lashes. You have a contractor whose work is not up to scratch and it doesn’t align with what you’re promoting and what you want your salon to be known for. 

This can be really difficult because if they are in your salon for an extended length of time and there’s people getting around out there in the local community wearing lashes that are not great, and they’re telling people where they get them done and they’re saying the name of YOUR salon, it could be very damaging for your business name.

And the trouble is, you can’t pull them up on it because they’re not your employee. You actually have no control with what they’re doing.

And perhaps the biggest CON of all is that your earning potential is capped. You’re only ever going to make what their rental is. Some people have commissioned style structures in place with contractors so it might be a flat rate per hour rental and 20% commission or 30% commission or they may have to pay for products. There’s lots of different arrangements that you can have with contractors but at the end of the day, your earning potential with them is capped. So for example, if you’ve got someone renting a space from you, for $500 a week, you’re only ever going to make $500 a week. And if that person was employed by you, and they are fully booked as a lash artist that is charging around $100 or more per hour, that person’s earning potential is $3,500, up to $5,000 per week if they’re fully booked working full time hours. 

That is a MASSIVE difference.

Yes, you do need to pay wages and all those other little bits and pieces, but you’re still profiting a lot more money than $500. So, if you have a salon full of contractors, your earning potential is capped. You might only really be earning enough to cover your rent and that’s okay if that’s your goal. That’s fine. But if you really want to grow your business and start to build wealth, having a capped income is not fun. You will still need to be “on the tools” yourself, working very hard to try and bring about growth in your business.

Another thing worthing mentioning is there are some new laws that have come about in the last couple of years in regards to contractors. So as I mentioned earlier, a contractor is someone that purely just leases space from you. But if you have contractors and you are dictating what they wear, what time they start, what time they finish and if you’re promoting them on social media, it could be argued that that person is actually a casual staff member. So in the future, you could be liable to pay superannuation and all the things that you would have to pay if you had an employee anyway. There are new laws coming into place for casual employees in Australia that they can be able to claim holiday pay etc if they’re working regular hours for a long enough time. So it’s very, very important to remember that a contractor is just that. You cannot dictate to a contractor what they are doing, what hours they’re working, what they have to wear that what they have to do, how they have to conduct themselves, what products they’re using, because it could be argued that they are actually a staff member in your business and not a contractor at all. I’d advise you to speak to a solicitor or even just contact fair work to get the full lowdown. Because some states can differ as well.

My opinion on this matter is that staff are always a better option. You’re always going to make more money and have more control over the work that’s coming out of your salon and how your business is represented with your own staff. 

I have seen it go so wrong for some salon owners with contractors, even though they’re not having to pay super and wages or save for holiday pay and sick pay and Worker’s Comp insurance etc, they’re still having all the other issues that they would have if they had staff. The bitching and the squabbling, complaining about things and the way things are run and that people aren’t cleaning up after themselves and and not doing what’s expected or they’re staying too late and abusing privileges or whatever it may be. A lot of the problems that happen in a salon space with contractors are very, very similar to those that would happen if you had employees anyway. And it’s funny because a lot of people will just go with contractors because they think it is going to be a lot easier but in reality it’s really not. And you’re still dealing with the same sorts of dramas and not making as much money which kind of sucks.

So in summary, like I would definitely always choose to have employees; making that little bit of extra effort to get them set up properly and give them the right training, provide them with uniforms. It’s really not that difficult. Yes, it involves a little bit of extra work on your part, but honestly, nothing good ever comes easy. It doesn’t come with little to no effort. So putting in that effort and getting the right information, the right guidance, learning how to be a good boss and learning how to be a good leader for your team really makes all the difference in regards to those little problems that I mentioned earlier with potential squabbling amongst the team and complaining about things and people abusing privileges and things like that. A lot of those things really don’t come into play if you are a good manager and you’ve got the right advice to get started off on the right foot. 

If you need help with building a team, I am always here to chat. Please feel free to reach out, I’m on Instagram – LaurenLappin_

Lauren x