Starting Your Lash Business from Scratch Pt 6 – Employee or Independent Contractor? Deciding What’s Best For You!

Starting from Scratch 6 Employee or Contractor?

Have you always wanted to have a team of staff working for you? Or are you the more solitary type, and would like to rent your extra booth space out to an independent contractor? Either business model can work wonderfully for you – depending on what you want.

Before you go ahead and make that decision, make sure you know what you are jumping into, and what it could mean for you. In this post, we’re going to explore what defines an employee and an independent contractor, and what separates them.

The Employee

An employee works for your business. They have to follow your rules, handbook policies, dress code, and hours that they work. Along with having employees, you will have certain financial responsibilities. These responsibilities are non-negotiable. There are government policies in place that you as a business owner must follow.

Firstly, there are taxes. And if you are in the US, there is:

  • Social Security
  • Medicaid
  • Federal, state and local taxes.
  • And, let’s not forget unemployment and workers’ compensation.

All of this can be cumbersome for many small businesses. However, don’t make the big mistake of opening up quickly, and calling your employees ‘independent contractors’. Any team member or person who has an issue with how you are operating, can report you to the proper authority for not deducting these line item taxes. So make sure to jump all the hoops!

Our staff and employees are very savvy, they have done their homework, and know in advance how they are to be paid, and what deductions are to be taken out of their pay. If you have ever been on the receiving end of a shorted pay-check, this can make your blood boil and cause hard feelings.

Being a good steward of your money – and your employee’s pay – is in your best interest. Make sure you have your ducks in a row before you open your doors, and open your business up to unnecessary scrutiny.

Under US Law, employers are required to pay their share and withhold the workers share of employment tax. Under the Fair Labor Standards, they must also meet the minimum wage and overtime obligations of their employees.

What Constitutes an Employee?

Generally, a person is an employee if the employer has the right to control the person’s work process. Here are three questions to ask yourself, before you classify your staff as an employee or independent contractor:

  1. Do you control your staff’s work schedule?
  2. Do you provide your staff tools and products?
  3. Do you have a dress code your staff must abide by?

If you answered yes to any of these questions, you have “employees”.

These rules can be a bit confusing, my recommendation is to seek the help of a tax professional, who is familiar with this type of business. There are variable factors in every situation. Many tax professionals can get the paperwork started for you to submit to the proper tax authorities.

If you are new to this, take my word for it, a payroll company is worth their weight in gold! I tried to do all of this by myself, and was overwhelmed by the paperwork, rules, and regulations. I finally caved to the tax professional with a sigh of relief. I thought by doing it on my own, I would save a few dollars – but it ended up costing me so much time. It’s just not worth it. Get your business on the right track from the very beginning to avoid any issues down the road.

The Pros of Having Staff

There are several benefits that come along with having employees. Most of all, you can control how you want your business to run:

  • Hours of operation
  • The shift scheduling
  • Dress code
  • Retail products
  • Disciplinary actions and termination control.

We will discuss these more in-depth, in a future post.

The Independent Contractor

Again, there are very specific guidelines to designating yourself or others in your business as independent. You must give them access to the business during normal operating hours. You cannot tell them when to work. You cannot provide supplies, business cards or any other items you would provide your employees, including a phone. You cannot force them to sell products or use products you want them to use. Any pressure on the independent contractor to conform to these issues could re-classify them as an employee.

Determining Factors

These are just a few of the details that can help you be clear on whether or not your worker is an independent contractor:

  • The worker controls details of the work
  • Worker operates in a business that is distinct from the employer’s business
  • Work is done without supervision
  • Skill level is specialized, is unique, or requires substantial training
  • Worker provides their own tools and supplies, and works at other site than the employer’s
  • Worker is employed for a specific amount of time
  • Worker is paid by the project
  • Worker is not part of the employer’s regular business
  • Employer and worker do not intend to create an employer employee relationship
  • Worker provides services to more than one business
  • Management has no right to control the work process

My first and best piece of advice here is to have a one-on-one with a tax professional. Plan ahead, get everything squared away before you even open your doors. It may seem easier to go independent, but you lose all control.

An Example of the Cons

I had four manicurists working as independent contractors, and they all charged the same price for their services. On several occasions, I was confronted by a client regarding why the three other manicurists were using a very popular professional nail polish, and her tech was using a drug store brand, and charging the same fee!

The client felt short-changed, she was insulted… And, rightly so! She felt she deserved the same high quality product our other clients had access to. I couldn’t agree with her more. I asked the independent contractor if she would purchase and use the higher quality product. She refused. I couldn’t do anything, I felt a little helpless. 

And of course, the other contractors ended up getting those clients in their chair due to the contractor’s indifference to the client’s wishes. I know this is a small example of how not having control can impact your business. But, it’s important. 

Is It For You?

If you are a control freak, going independent might not be for you. You will lose sleep, have moments of insanity, and never feel settled with your business. Trust me, your contractors will let you know if you cross the line with them. They know the rules. They know you cannot control any aspect of their business.

Frankly, it takes a very disciplined person to be good at independent contracting. You are solely responsible for everything, and you have no back up. If you get sick, you have no one to cover for you. If you go independent know your tenants, because you have to share your space!

GladGirl Rewards

Think it Over Carefully

Be prepared, and don’t rush in with this decision. Make sure to do your research and consult with a tax professional. I can’t stress this enough – they may just be your saving grace, a few times over!

So what’s your experience with independent contracting? I’d love to hear about what you think, so be sure to leave a comment. And, if you have any questions, I would be more than happy to help 🙂

 


Maryann Matykowski

Maryann has an accomplished, 30+ year background in the beauty industry. As a cosmetologist she opened her first salon in ’83. Maryann has specialized as an educator since 2006, and is now Master Trainer/Training and Education Coordinator here at Glad Lash Academy. Maryann knows what it takes to create successful salon businesses and is here to share her experience with you.

Disclaimer! Opinions expressed on the Glad Lash Blog are those of the author and do not necessarily reflect those of Glad Lash Inc. Content is provided for informational purposes only and should not be considered professional advice. You should always seek professional advice before making decisions that could affect your business or clients.

10 thoughts on “Starting Your Lash Business from Scratch Pt 6 – Employee or Independent Contractor? Deciding What’s Best For You!”

  1. Jada says:

    I am 20 years old. I am a certified lash tech and will be getting certified in microblading soon. Will I be able to own and operate a shop without an esthetician license?

    1. GladLash says:

      Hi Jada,
      From my experience, most States allow anyone to actually own a business. You should however check with your State Board for additional requirements. They may require a licensed professional with a few years experience be on site during business hours. Good luck!

  2. Arlisha Smith says:

    Hello, I have been a licensed nail tech for 17 years, and Esthetician for 5 years with 1 year of experience in lash extensions and I’m opening up my own salon in June. I have read this entire blog and I have covered everything but this section rather to do booth rent or commission? I have been planning on opening my own salon for some years now I just wanted to learn a few more techniques in the industry so that I’m able to be a leader for my staff in the future! Here in Detroit commission salons are not that prevalent but in the outer suburbs areas it is and I’ve experienced it both ways and a lot of salons in the inner city aren’t successful at all with commission but I am closer to the suburbs so I might be able to do a commission salon I’m just a little unsettled as to the investment part when it comes to payroll and hiring an accountant or tax preparer and also buying all the supplies upfront. But I know I’m the long run I’ll make my investment off the employee fast because lash extensions aren’t as costly as hair supplies! I’m paying $1,000/month currently to rent a small lash studio and the space I found for my salon is the same per month to lease so I can afford that part and I already budgeted out decor, beds, lights, carts, Etc. So Any further advice you could provide would be great!

    1. Glad Lash says:

      Hi Arlisha,

      Congratulations on your goals. I am very aware of the struggle of commission versus renters. I had salons in the Detroit Suburbs myself. The one thing I want to stress, if you are someone who needs to be in control, booth renters will drive you crazy. They can and will do their own thing, even if it doesn’t mesh with how you want to run your business. If you want to be in charge, then commission is the way to go. I would spend a few dollars on an accountant to walk you through the steps of what is legal in the commission status. There are very specific things you must keep in mind. I am not a tax professional and would be doing you a disservice to give you advice on how to set up your business. I hope this gives you a starting point, and let us know how things work out for you.

      Best of luck to you!

  3. Ana says:

    To open a lash business do you just need the businesses registration certificate or do you actually need the establishment license as well ? I’m already a cosmetologist, but I do lashes and want to do microblading so was wondering which licenses I need for my business in California

    1. Glad Lash says:

      Hi Ana,

      You should check with the City you are going to do business in to see if you need a business license. You will also need a Cosmetology Establishment license and a cosmetology or Esthetics license for services you personally will provide. Check with the state for the requirements for microblading. This is not under Cosmetology. You may need separate licensing for that.
      I hope this helps you.

      Good Luck on your new venture!

  4. Sheri says:

    Do all Independent contractors who work in a salon need to have their own DBA and business licenses? Even if the IC is just commission based and working at a couple of different places? Did that supreme court ruling that passed in May change the Lash Artist 1099 situation at all? I own 2 lash salons but I do not control what the artistes wear or when they work, I also do not supply anything but a space to use when they want me to book them. Is this okay?

    1. Maryann Matykowski says:

      Hello Sheri,

      I was with you on the Independent Contractor status until your last statement. As an IC, they are responsible for booking their own appointments. I am not a tax lawyer, however, you can go to the state website and get instruction manuals for who is an IC and the language that describes who falls in that category.
      Be very careful with this. I would consult a tax attorney just to be on the legal side of these new laws.

      Best of luck!

  5. Kris says:

    Hello
    about New California law, I heard No more Rent booth ,have to lease the space, and no More independent Contractor(commission work)
    Is it true?

    1. Maryann Matykowski says:

      Hello Kris,

      I checked into the new rules for the Beauty Business in California,It is confusing. It does seem that Independent Contractors will fit into a very small criteria. It will be difficult to work as a Contractor. It seems even leasing a space, booth or chair may be difficult as well.
      I am not an expert in this area, so my best advise is to contact a Tax Specialist in California and let them help you navigate the new laws and rules.
      Best of Luck in your business.

Leave a Comment

Your email address will not be published. Required fields are marked *