Tag: services

What California Bill 1513 Means for Salons and Spas on Commission

The Real Hair Truth

About frigging time, say goodbye bye to free labor. People deserve to be paid. Especially for sitting there waiting for a customer. Time is money. The ol trick of hiring a professional and giving them a chair and telling them they have to build up there clientele when they answer a advertisement for employment will be gone. That old trick is history, and should teach salon owners labor is not free. Good for the industry this should keep the owners honest. The industry was built on free labor. Pay back time. How can a professional come to work worrying about rent, food, electric, transportation etc if they work on commission. Salon owners will say I can’t do that, then you shouldn’t have opened a salon. Now I will wait for all the know it all’s to reply. Please do I love debate. I have watch professionals I have worked with in my 33 years of this industry, ripped offed, taken advantaged of, and done so much wrong to they have gotten out of the profession. Its interesting how salon owners can come up and blame the professionals. And assume that with your words that all are alike. “Have to pay people to sit in the break room, on their cellphones, bitching about how they are not busy.” Well not everyone in this industry does what you say. I’m glad to see this, it should have happened along time ago. I love it! Boo Hoo for the salon owners, good for the employees. The employees are what make you. About time this happened, I love all the new ways and new roads the industry is changing. Be your own Boss everyone Don’t live other peoples dreams. You will have nothing in the end. Especially in the Beauty Industry!, Hah!

Note: Although CA employment attorneys were consulted when researching this article, we highly recommend that you contact a legal representative to discuss your rights and responsibilities on this topic. Strategies is not a legal counsel and the contents of this article should not be considered as such. We will be updating this post as more information is presented to us.

Commission salons and spas in California were just given the ultimate “Bad Hair Day”.

With the passage of California Bill 1513 “piece-rate legislation”, the rules have completely changed on how salon and spa owners can compensate their stylists and massage therapists.

For all intents and purposes, the traditional commission model is no longer compliant in California. Strict new laws now require salons and spas to drastically alter they way they compensate their commissioned employees.

And unfortunately, the potential financial impact of Bill 1513 on many salons and spas could be catastrophic. See the full bill here.

What you need to know

Piece-rate vs. commission compensation:

As per the Labor Code, compensation for salon/spa services is technically labeled as “piece-rate” work, and not commission. Confused? Let’s look at the Labor Code’s definition of each classification:

  • Piece-rate is defined as pay “based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods.”
  • Commission employees are defined as anyone “involved principally in selling a product or service, not making the product or rendering the service, and their compensation must be a percent of the price of the product or service.”

Because stylists and massage therapist are rendering services and not just selling them, their work is considered “piece-rate.” Why does this labeling matter? Because Bill 1513 only applies to piece-rate work and not commission work. But again, the Labor Code’s definition of commission is not the same as the salon/spa industry’s.

Big game changer #1…

Effective January 2016, all “piece-rate” California salons and spas must track, report and pay their stylists or massage therapists for “non-productive” and “rest/recovery” time.

“Non-productive time” is defined as the time employees are required to be at work, but are not actively servicing clients. This includes time…

  • Waiting for the next client to arrive
  • Folding towels
  • Sweeping the floor
  • Assisting at the front desk
  • Attending meetings
  • Technical training’s

“Rest/recovery times” is defined as time…

  • On break and meals

In other words, every minute that services providers are in the salon/spa and are not either servicing a client or on break, needs to be tracked, reported and compensated for.

The “non-productive” and “rest/recovery” pay rates must be at least the California minimum wage.

Big game changer #2…

And it’s a biggie…

The law states compensation for “non-productive” and “rest/recovery” time must be a separate pay rate from the rate paid for when services are being produced.

This means you are no longer allowed to average the total dollars paid by the total hours worked and let that cover both “productive” and “non-productive/rest” hours.

Previously, as long as the averaged hourly rate equaled or surpassed minimum wage, all was good.

This is no longer the case.

Big game changer #3…

In addition to aforementioned restrictions, Bill 1513 also contains one final crippling blow for California-based commission salons and spas:

  • Employers are required to calculate and pay back wages for all “non-productive” and “rest/recovery” hours worked dating back to July 1, 2012. And yes, employees have started filing lawsuits demanding back wages for this time period.
  • Or… choose the Safe Harbor option: Valid until July 1, 2016, Employers may choose to pay each employee 4% of their total earnings dating back to July 1, 2012. The state must be notified by July 1, 2016 that this option is being pursued, and full payment would be due by December 15, 2016. Doing so will also make them immune from any future employee lawsuits specifically related to Bill 1513.

An Example…Salon Sacramento

  • Open since 2006
  • $800,000 in gross service sales every year
  • 10 full-time stylists, each paid 50% commission
  • Each stylist works 40 per week, and is 75% productive.
  • California minimum wage as of 1/1/16: $10.00 per hour

Now let’s do some math…

  • $800,000 / 10 stylists = $80,000/yr gross revenue generated per stylist
  • $80,000 @ 50% commission = $40,000/yr gross pay for each stylist
  • If each stylist works 40 hour per week and is 75% productive, this means that 30 hours are spent servicing clients, and 10 hours are “non-productive” or “rest/recovery” hours.
  • 10 “non-productive” hours per week for 52 weeks is 520 “non-productive” hours for per year, per stylist

How this scenario would look under Bill 1513…

  • In addition to the $40,000 paid to each stylist for their commissions on services, they would each be due an additional $5,200 in compensation for their 520 “non-productive” hours worked at the minimum wage rate of $10 per hour.
  • This brings each stylist’s pay to $45,200/yr, the equivalent of 56% commission.
  • Multiplied by 10 stylists, this is a $52,200 increase in total salon payroll.

Salon Sacramento’s back wages due on all “non-productive” hours since July 1, 2012

  • We’re going to round our numbers to 3 years for clarity-sake
  • $52,200 x 3 = $156,600 due to employees if paid in full without using the Safe Harbor Clause
  • Or, if Salon Sacramento chooses to use the Safe Harbor Clause and pay the 4% penalty on all wages paid since 7/1/12, the amount due by December 15, 2016 would be as follows:
    • $40,000/yr x 10 stylists x 3 years = 1,200,000 / .04 = $48,000

Compensation alternatives for California salons & spas

So where do commission-based California salons and spas go from here? One thing is clear, the days of easily calculating 50% for them and 50% for the house are gone.

Here are four employee-based compensation structures for California salons and spas moving forward:

  • Continue to pay commission/piece-work. The big challenge presented here is how will salons and spas be able to afford paying for “non-productive” and “rest/recovery” hours on top of the commission rates they are already paying? Yes, commission rates that fluctuate or are averaged based on weekly sales could be used, but these methods would also introduce substantial increases in bookkeeping responsibilities. They also may spawn confusion and resentment from service providers.
  • Hourly pay: Putting service providers on a fixed hourly rate is a sure-fire way to meet all California compensation requirements, as long as the hourly rate is at minimum wage or higher. However, if salons and spas don’t have the systems and leadership to drive sales and keep staff motivated, issues may arise.
  • Hourly plus commission: Keeping close to the current commission structure, employers could elect to pay service providers a set hourly wage (such as minimum wage), and then add a reduced-rate commission for each service rendered.
  • Team-Based Pay: Converting to a Team-Based Pay (TBP) structure not only meets all Bill 1513 requirements, but also offers growth and cultural benefits far beyond traditional salon/spa compensation models. TBP is an hourly and/or salary program with a team bonus that is tied the achievement of critical numbers (e.g., revenue, gross margin, client retention, productivity, pre-booking, retailing, net profit). Individual growth is tied to overall performance – not just the employee’s ability to generate revenue. A TBP system is designed to reward the right behaviors and performance – those that support the business’s goals and culture. RELATED: To learn more about the benefits and structure of Team-Based Pay, download Strategies’ free Team-Based Pay white paper report here.

As counter-intuitive and debilitating Bill 1513 is to the California salon/spa landscape, it is not something not to be taken lightly. If you are not pro-active in making the necessary changes now, you could be facing state fines, employee lawsuits for back wages or both.

Where can you get help?

Your first step should be to talk to a legal representative to learn what your legal rights and responsibilities are with Bill 1513. They will also have a very firm understanding of the bill as more details and cases are presented.

Your next step should be to restructure your pay structure to meet all compliance standards. If you would like one-on-one help from our team of Certified Strategies Coaches to quickly execute the restructuring of your compensation system to Team-Based Pay, click the link below. Not only will we ensure you meet all Bill 1513 guidelines, we will help you implement a pay program that can increases sales and profits, motivate your staff to grow the business, and provide world-class customer service.

Click here for hands-on help from a Strategies compensation expert.

Note: We highly recommend that you contact a legal representative to discuss your rights and responsibilities on this topic. Strategies is not a legal counsel and the contents of this article should not be considered as such. We will be updating this post as more information is presented to us.

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For the entrepreneur the beauty industry is good news!

THE REAL HAIR TRUTH

Beauty Industry in 2013 at a Glance

Comprised of a diverse yet interrelated set of business lines, the beauty industry helps us look and smell our best. Before we leave the house each day, we have likely undergone our personalized beautification ritual. Included in this ritual is the daily shower and shave, the weekly nail trim, and the monthly haircut. And increasingly we are taking a more holistic view of our health, and our beautification ritual may now include a periodic massage and trip to the spa. But our concern with our appearance is hardly anything new; indeed the beauty industry has been expanding and growing for all of recorded history. For the interested entrepreneur this continuing growth and evolution offers a diverse menu of opportunity.

The beauty industry today encompasses far more than cosmetics and skin care products, though they are still a significant portion of the sector. A wide range of services and products are available to help us put our best face forward, and the beauty industry now also encompasses hair styling and hair removal, nail and tanning salons,massage parlors, shower and shaving products, perfumes, colognes and more. Many people now treat their beauty ritual as an escape from the hustle of the information age, whether its a few minutes spoiling oneself with a high-end product or a full day at a luxury spa.

Lotions, Treatments and Baths. Oh my!

Beauty industry opportunities can be broadly separated between products and services, though many providers offer both. Within both products and services, however, exist a wide range of business models based on target market, production processes and location.

From exfoliating soaps and volumizing shampoos to anti-wrinkle creams, the beauty industry provides us with choices galore to keep us looking younger and healthier. Cosmetics exist for every style and taste, as well as every skin tone, texture and even allergy. Rows of toothpaste stretch off into the distance at the local retail outlet, and it is no longer a choice only of brand, but between whitening, tartar protection, flavor, packaging styles and more! And a similar story is told in the aisles for perfume, deodorant and hair coloring. Certain businesses also distinguish themselves through manufacturing processes such as using all natural ingredients or a refusal to use animal testing on products.

While the diversity among service providers is not quite as extensive, there is considerable differentiation between offerings based on price, location and target markets. Some businesses target the inexpensive, fast hair cut market while others focus on providing a luxury spa experience. Franchise opportunities exist for hair salons, skin treatments, nail care, and tanning. Niche providers offer products and services focused on children, weddings,  and fashion, among others.

Different Beauty Franchise Opportunities

Hair Care Stylists, salons, shampoos/conditioners, coloring product, styling product (gels, sprays, etc)
Cosmetics & Skin care Make-up, moisturizing lotions, tanning salons, sun care products
Fragrance Perfumes, body sprays, cologne, deodorants
Miscellaneous Nail polish, shaving products, massage parlors, hair removal services

Beauty Industry Trends

Such diversity and innovation exists because we demand it. The beauty industry continues to expand globally, with some projections claiming 8.5% growth by 2014; revenue growth in 2010 is estimated at 3.3%. Several trends support this expansion and promise continued profitability into the future.

Globally, rising per capita incomes and greater access to international markets are increasing spending on discretionary items such as perfumes and cosmetics. Though the recent economic turmoil had decreased spending on some discretionary products in the United States, purchasing of beauty products has remained strong. Consumers did tend to be more price-conscious however, with over 70% of survey respondents claiming to give mass market products more consideration over high-end products during the downturn.

Perhaps not as surprising as it once was, one of the fastest growing segments of the beauty industry is products and services aimed at men. Traditionally focused on female consumers, men today are gaining increasing attention from the beauty industry. Of course most of us have been using deodorant and toothpaste for several months already, but increasingly men are being targeted for body sprays, specialty hair products, lotions and even nail care. Salons offer a menu of pampering services for men, including cuts and shaves, facials, massages and manicures.

Consumers of beauty industry products tend to be brand loyal, and share what works for them with their friends. 58% of those surveyed claimed that personal recommendations weigh more heavily than celebrity marketing, and only 44% bought a particular product for its claim of specific product attributes. Like many things, beauty products gain a level of familiarity and comfort for the consumer, and switching to a new product often takes some extra incentive. Popular and successful marketing campaigns in the beauty industry often include a free sample and discounts for referrals to lure new customers in, and loyalty programs to keep them.

Beauty Industry Franchise Opportunities

From product innovation, organic industry growth and continued growth into the male half of the population, the beauty industry continues to offer a diverse set of profitable franchising opportunities. Beauty franchises exist across the space with dozens of strategies reaching all types of consumer.

Retail opportunities include brick-and-mortar store locations as well as home-based businesses, and span across cosmetics, skin care, hair care, tanning and more. Frequently producers of beauty industry products will have a franchising distribution system, or even have training locations for service providers. Cosmetic and skin care entrepreneurs offer specialized services such as nail care and tanning, a complete menu designed for the full day experience and everything in between. Some salons offer an exclusive membership experience and others specialize on walk-in business.

Hair care opportunities exist for barbers and stylists alike, with a range of different franchises available based on cost, location, and gender. Many male-focused franchises offering everything from the basic barbershop have been springing up to complement the traditionally female-focused salon offerings. Franchise chains devoted to children offer a more entertaining environment for kids. There are also businesses focused on hair removal and coloring.

splish-franchise-opportunities

Eco-friendly salons such as the Splish franchise offer hair care in an environmentally conscious environment.

As we can see, the beauty industry encompasses a wide range of products and services, and franchising plays a major part in bringing them to the consumer. As the industry continues to grow and evolve, profitable opportunities will abound…the hard part is choosing which one!

BOOTH RENTAL CONTRACTS!!

THEREALHAIRTRUTH.COM

Booth rental is very important, and having a contract is the utmost of importance. If your problem is with walk-ins, many salons do not allow renters to take any salon walk-ins at all. You are responsible for your own advertizing and furnishing your own clients. If you are being treated as an employee, where you are required to answer phones, required to be in the salon specific hours, then you have a problem. First, you should never rent a chair in a salon without having a rental agreement which spells out everything in detail. Get the salons rental agreement BEFORE starting work and sit down with the owner and make sure you understand everything. The major things that should be in any rental agreement are, how much is the rent, when its due and when it can be changed and what exactly is furnished in your rent, how are walk-ins handled, when is the salon available for your use, do you get a key, can you sell your own retail, what services are you allowed to perform, what are your specific cleaning duties. As a booth renter you have certain basic rights. You have the right to schedule your own appointments, determine your own work hours, within the guidelines you agreed upon in your lease and very important, the ability to come and go as you please. You have the right to set your own prices and determine what products you use to perform your services. You also have the right to sell your own product lines. Cleaning of the shop is not your responsibility. Clean your work area, take out your own trash. And it would be good to start your own corporation, have tax ID, and occupational Licenses.