Looking for a way to boost a salon’s bottom line? Leasing salon space to freelance hairdressers could be a great way to earn more and introduce new services for clients. BizCover discovers the perks and pitfalls.
Rent-a-chair agreements, also known as Salon Licence Agreements, can be a win-win arrangement for hairdressers and salon owners. salon owners get a cut of the stylist’s revenue, and they save on business overhead by using the salons facilities.
However, before freelance hairdressers start signing up, it’s important to consider the risks of inviting someone who is not an employee to share the business space.
Employee or independent contractor?
Rent-a-chair agreements are an essential part of keeping each hairdresser’s business separate from a salon. These contracts help class each hairdresser as an independent contractor, a key part of following ATO and Fair Work Ombudsman regulations.
Hairdressers working as independent contractors should have their own ABN. They are responsible for paying their own tax, superannuation and insurance. While independent hairdressers may rent a chair in a salon during specific days or times, they are responsible for setting their hours and appointments.
Independent contractors typically use their own tools and equipment. However, it is standard for rent-a-chair agreements to allow hairdressers to use a salon’s basins, standing hair dryers, and other equipment that is awkward to transport to and from the salon regularly.
Managing risks with business insurance
There are always risks when an independent hairdresser is invited to a salon. Managing these risks with business insurance can help solve potential claims from clients, suppliers or members of the public by financially protecting business owners and small businesses.
While Public Liability insuranc may be in place, independent contractors working in a salon may be required to have their policies. Requiring each independent hairdresser to have a Public Liability policy helps avoid responding to property damage or customer injury claims through the salon owner’s insurance, which helps keep their premiums low.
Before signing a rent-a-chair agreement, ask for a certificate of currency from the hairdresser to verify that their policy is current. Insurance requirements can be written into the agreement, including requiring them to have a minimum amount of cover.
Salon owners may also consider Management Liability insurance to help protect themselves against personal liabilities for alleged or actual wrongdoing in the management of the business when there are staff. This type of cover may protect a salon owner against WHS dramas, unfair dismissal, sexual harassment claims and more.
Misclassifying workers carries stiff penalties under the Fair Work Act 2009. Even with a rent-a-chair agreement, a hairdresser could still be deemed an employee by a Fair Work Ombudsman investigator in some situations. A salon may risk fines or legal action even if they’ve accidentally treated an independent hairdresser as they would an employee. Many Management Liability policies offer cover to help respond to Fair Work investigations and pay resulting penalties.
Protect your salon today!
BizCover understands salon owners and the risks they face as small business owners. Compare multiple business insurance quotes on the go, choose your preferred policies, and get covered instantly.
For more information visit www.bizcover.com.au
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