Do you feel like you were meant to have a kick-ass career as a hairstylist? Like you got into this industry to make big things happen? Maybe you’re struggling to build a solid base and want some stability. Maybe you know social media is important, but it feels like a waste of time because you weren’t seeing any results. Maybe you’ve already had some amazing success, but are craving more. Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer. Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists. I’m Britt Siva, social media and marketing strategist just for hairstylists, and this is the Thriving Stylist Podcast.
What is up and welcome back to the Thriving Stylist Podcast. I’m your host, Britt Seva. And today we’re talking about salon back bar fees and how they impact stylist commissions. So let me first explain what this is and then I’ll explain why I decided to tackle this topic today and basically what caused kind of a collapse of that system and model. So let me first explain what back bar fees are, if you’re not familiar with the concept. I don’t know when they started being used. I’m gonna guess sometime in the 1990s. I could be wrong. It could have been the early 2000s. I don’t think so. I think it was probably sometime in the ’90s there was a system and structure put into place that said, “Hey, before you cut a stylist commission, deduct the cost of the product used to produce that service and then give a commission on the net revenue produced.” Very common practice.
I know it was happening in the ’90s, the early 2000s. Then sometime in the last five years, there really started to get pullback away from that. I think what happened was stylists got more aware. They started talking about compensation. There was this demand for pay transparency. I think stylists started swapping notes. I think stylists started questioning methods and models. And the way that our industry is networked on platforms like Instagram is really, really, really unique. I want you to think about it for a minute. Like you know how when you look at your Instagram following or followers, there are dozens, sometimes hundreds, sometimes thousands of other stylists or salon owners you connect with, either you follow them or they follow you that you’ve never even met before. You just admire their work. We love this industry. We love the trade that we’re in. We like to be inspired by others.
That’s really powerful and magical. You don’t find that in other industries. You don’t find doctors who follow 30 other doctors on social platforms. They’re not studying 30 other doctors’ practices. Um, you don’t find it in, you know, the plumbing industry or the construction trade. There’s some networking that happens for sure. There’s trade shows, there’s people who connect through profession, but it is nowhere near at the scale our industry is. It’s one of the things that makes us very unique is that we are listening to stories from other stylists, other salon owners, we’re connecting with others, we’re having conversations. And there is more of an awareness around what is trending, what is phasing out, what doesn’t make sense. There’s just a lot more chatter. And I think what happened was as people started to bring up concerns and questions about industry norms, there has been this pretty radical shakeup in the last five years.
And there’s a huge shift away right now from back bar fees. So I will say in our coaching, we have never coached backbar fees. We have never advised salon owners to include that as part of their compensation method. It’s not part of our compensation method now. We don’t use that practice. So a traditional commission would say if a stylist has a haircut for $100 and they’re at 50% commission, they would make $50 on that service. That is how our compensation model works. Another example, if it is a $200 color service and they make a 50% commission, they make $100 on that color service. There is no product cost deduction. It’s not, here’s your commission, but it’s straight up and clean. A lot of salon models have a system where for that same $200 color service, what would happen is the stylist would do the $200 color service and then the salon would look at the cost of providing the color for that service.
Let’s say it’s a root and a gloss and the total cost to apply that is $25. Well, what would happen is the stylist would say, “Well, only $175 of this service is commissionable because we need to first take out the product cost.” And so now the stylists would make their 50% commission on the 175, not the 200. So their commission split would be, I don’t know, the high 80s, low 90s. I haven’t run the math on it, but they would make less because there would be this product cost charge taken out before the commission was split. This is one of those industry norms that had just become a thing that a lot of salon owners do. Well, I started seeing the chatter about it a few years ago where stylists started talking a little bit more on social media around how some stylists didn’t even realize it was happening.
Like maybe they signed to it in their offer letter, but you know when you’re a new stylist, you don’t kind of even know what’s going on or how things work and you’re just excited to start the job. A lot of these stylists kind of got caught up in that. A lot of stylists were aware of what was happening, but they realized how much they were losing on it and just started to question the model. And, and you know, the saying I kept seeing was if I’m having to pay for the cost of my color anyway, why shouldn’t I just go rent to this blah, blah, blah. Now, my stance is I always want the salon owner to be profitable. My whole method is based on salon owners making profit. However, I also really believe in pay transparency and think that when you promise a commission, that’s how much a stylist should get and it shouldn’t be complicated and the math should be easy and all the things.
Okay. So the reason why I’m talking about this now is I came across this very interesting case out of the state of Colorado. You can look it up yourself. It’s 303 Beauty Bar LLC versus the Division of Labor Standards and Statistics based out of Colorado here in the US. So there was a stylist based out of Denver, Colorado who had signed a compensation agreement allowing her to make commissions on services and retail, like very standard stuff. It said in that agreement that the salon would deduct the cost of products she used from her pay. She totally agreed to it. The method in which that was being done changed over the years for this particular stylist and this particular salon. So it started with the salon was gonna take $8 off every color service. Then it was a variable flat fee based on whatever service was being done.
So maybe a partial highlight was more and a gloss was less. I don’t know. It just said variable. Then a few years later, the fee changed to 4% of wages was taken as this product cost deduction. So there was three different variations of this deduction happening in this salon over a period of time. Now what this court case found is that $12,000 total was deducted from what would’ve been her compensation between 2021 and 2022. This went to court. This stylist decided to take legal action against her salon under the advisement of an attorney and the state labor division ordered the salon to pay $7,500 in unpaid wages plus $22,500 in penalties. And I’ve seen cases like this in our industry before where, yeah, there’s the back pay, the penalties are what gets you. I’ve seen that happen in break violation cases and other things too, but that’s a whomper.
And what’s hard is that the salon owner literally though what she was doing was fine. She argued that this was a historical practice in the industry, that she knew tons of other salon owners were doing it, and that her team had never made less than minimum wage, even with the deductions. The court said shifting the employer’s cost of doing business onto the employee was exactly the kind of exploitation the Wage Act exists to prevent. The judge is quoted as saying, “Accepting this salon’s logic would let any employer charge workers for costs built into their job.” For example, charging an architect for the draft paper or a dental hygienist for tooth polish. And even though this employee had signed on to this agreement noting that this is the practice they were aware of that the salon was doing, it did not make it legal and the salon lost the case.
Now, that being said, that is one case in one city and state based on one salon’s setup format. I’ve not seen the contract myself, right? But you can look up the details of the case yourself and it’s interesting. It at minimum makes you wanna pause to wonder, is the system I’m running making people question my compensation method? And if so, is it really worth all that? Now, what I will say is legalities and details around product costs and back bar fees do vary state to state. The tolerance of it is different all throughout the US specifically. New York specifically has Labor Law 193 that says employers cannot make deductions from wages except those required by law or authorized in writing by the employee and for the employee’s benefit, such as insurance premiums, pension, health benefits or union dues. So when we look at deductions from wages required by law, that would be like a garnishment.
I’ve received one before for a former employee where their wages were being garnished. I had to make that deduction from my employee as part of a legal order. I had to do that. There was no choice, right? So the gray area becomes whether or not under a law like New York’s law, if hair color is the employee’s benefit, is it a benefit or is it a tool of the job that they’re doing? That’s the gray area that could be negotiated. I’m not an attorney. I’m not a judge. I’m not here to decide how that case would go if it went to trial, but it’s messy enough that it makes you pause and wonder like, is it worth even potentially like dancing that dance? You look at a state like California and the way they have deeply regulated compensation for stylists here. I mean, there’s no margin for that kind of stuff.
It would be so difficult to put a structure like that into place and have it fit in with the new state guidelines under SB 490. It would be incredibly challenging. Now, that being said, another very common practice amongst salons is that in these written agreements, it’ll say that commission for stylists is calculated on service net revenue. So the gross cost of that hair color service we used, you know, 10 minutes ago in the example I was sharing, we talked about that $200 color service. If it was $25 to apply the color, then $175 would have arguably been the net cost retained from that service. And so that’s the verbiage that gets used in these agreements. In some states, that might totally fly. In others, it wouldn’t be enough to legally protect a salon. So if you do have back bar fees in place in your salon and you have not had your compensation agreement approved by an attorney who would be willing to go to court for you, if something did come up, I would do that ASAP to make sure that you have compliance and protection in the compensation method that you’re running.
So let’s talk about the solve and how to just avoid this altogether. Like I mentioned at the top of this episode, I’m a big fan of very simple compensation and pay transparency where there’s not even room for confusion or misunderstanding. What I find is that when salons are scared to pull back the back bar fees, it’s because their margins are already so thin that when I say, “Well, you know, we can clean this up, pull this back and shift compensation accurately instead,” it feels scary because those back bar fees have been operating as this safety net that appeared to have always covered the cost of back bar, back stock of products, color, all that kind of stuff. And now I’m gonna use the word losing, although in the way I would do it, it wouldn’t be a loss. Losing that buffer feels way too scary.
It also makes a salon feel like, “Great, so now I have to eat that cost. The stylist doesn’t have to worry about it.” Well, now you don’t have to eat that cost, but investing that into, you know, stocking your back bar, that’s a tax write off for you. You don’t pay tax on that money that’s coming in. And when we look at how to make sure that cost of back bar and color gets covered, there’s two smart ways to do it. One, make sure that your service providers are priced properly. I have had the opportunity to coach three salons one-to-one in the last 90 days for every single one of them. There were stylists on the team who were underpriced and stylists on the team who were overpriced. Nobody was exempt for that. I was three for three, had to completely redo the pricing scale on every single one.
And when you have stylists who are not priced properly, you are immediately losing margin. Simply having your stylist priced for growth and priced to cover that cost takes care of it and negates it. You don’t need to take a loss. We just have to set up the front end better. Then we get to that second piece, which is compensation. And we set our compensation up in a way that makes sure that that product cost gets covered, but legally and way before a commission split is even considered or on the table. There is no per service anything. Instead, the way that we budget is compensation should be no more than 45% of any salon’s budget. If we’re spending more than 45% on service provider payroll, it becomes unsustainable. So we create a benchmark for all of the expenses in the salon. Controlling payroll at 45% is not a challenge for the salons that we’re coaching.
We put that into place and we set up a compensation system that is straight up, extremely clean commissions, uncapped, in a way that all of the salon’s expenses are covered because we’re running the business to budget, just like every other smart business in every other industry does. There is no need for a back bar fee. It’s almost like an afterthought. And if I had to like go back to 1992 or whenever this was born, I would imagine that some salon owner somewhere was looking at all of the expenses in their business and had this like aha moment where they were like, “Oh my gosh, I am paying for the cost of color, whereas an independent stylist would pay for their own cost. Here’s a way that I can have employee stylists pay for their own cost too.” And it got into that like gray murky area that happens a lot with our industry where it’s like, “Are they an employee?
Are they independent?” It’s like tail as old as time, like there’s so many little decisions that happen in, you know, salons that continue to dance around that. Like are we a professional industry or aren’t we? And this is another one of those like weird-isms that our industry has decided is like totally cool and normal, but that you just don’t see in other industries or elsewhere. And I think that’s why stylists are starting to be like, “Wait a minute. If you’re promising me, call it whatever you want, 46% commission, but then I’m paying, you know, $600 in back bar fees every single paycheck, then I’m only making 42%.” And that’s when they start to feel cheated. Versus if you would just promise 42% from the start and gave them a scale that they could grow down based on production, it doesn’t feel like a bait and switch.
So where do we go from here? If you’re a stylist, I strongly suggest that you spend time every single time you get a pay stub looking at your stub and understanding what’s happening. How much are you paying in taxes? How much are you paying in insurance? How much are you paying in deductions that you might not be aware of? What is your net pay? What was your gross? So often like that check just gets deposited or the direct deposit hits the bank account and you don’t even look twice. You don’t even look at the breakdown. Man, I would be looking every single time to make sure I understand what’s going on with my money, that nothing funny is happening. Look at your paid time off accrual if you have it. Like check all that stuff. You have a legal right to have it. If you’re not getting pay stubs, start there.
You should be getting a pay stub every single pay period one way or another, right? Then go back to your initial employment contract and look at your compensation agreement or your offer letter and what was spelled out there and how your compensation works. Do you understand it? And if you’re a salon owner who is relying on back bar fees and doesn’t know how to get out of it, we’re here. We’re happy to help reach out in other communities that you’re aware of where salon owners are networking and say, “Listen, how are some of you getting around this? How many of you have stopped charging back bar fees and are still profitable, maybe even more profitable than before?” And just look into other more modern methods of cleaner accounting, cleaner payroll, smarter business, simpler explanation, just cleaner business operations all the way around. Hope this was eye-opening and mind opening.
So much love. Happy business building, and I’ll see you on the next one.
