Australia is experiencing a skills shortage in the hairdressing industry. With many stylists leaving the profession during the COVID-19 pandemic, salon owners around the country are finding it tough to find talented stylists.

Rent-a-Chair agreements may be a viable option for boosting your bottom line and introducing new clients to your salon’s services. Also called Salon Licence Agreements, these contracts rent out a chair in your salon to an independent hairstylist or beauty therapist.

This can be a win-win arrangement for both—you get a cut of the stylist’s revenue, and they save on business overhead by using your facilities. However, before you start signing up freelance stylists, it’s important to consider the risks of inviting someone who is not your employee to share your business space.

BizCover explains the processes, risks, rewards and how to protect your business with this model.

Employee or Independent Contractor?

Rent-a-Chair agreements are an essential part of keeping each stylist’s business separate from your salon. They help class each stylist as an independent contractor, a key part of following Australian Taxation Office and Fair Work Ombudsman regulations.

Stylists working as independent contractors should have their own ABN. They are responsible for paying their own tax, superannuation and insurance. While stylists may rent a chair 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 common for Rent-a-Chair agreements to allow stylists to use basins, standing hair dryers, and other equipment that is awkward to regularly transport to and from the salon.

Managing Your Risks With Business Insurance

There are always risks when you invite an independent stylist into your salon. Managing these risks can help you address potential claims and protect yourself and your salon. Business insurance is one way to do this.

Public Liability insurance* is a common type of cover for salon owners. While you likely have your own policy, you may require independent contractors working in your salon to also have a policy. Requiring stylists to have cover helps you avoid needing to respond to claims about property damages or injuries to others with your insurance, which helps keep your premiums low.

Before signing a Rent-a-Chair agreement, ask for a certificate of currency from the stylist to verify that their policy is current. Insurance requirements can be written into the agreement itself, including if you prefer a stylist 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.

Misclassifying workers carries stiff penalties under the Fair Work Act 2009. Even with a Rent-a-Chair agreement in place, a stylist could still be deemed an employee by a Fair Work Ombudsman investigator. Your salon may risk fines or legal action even if you’ve accidentally treated an independent stylist as you would an employee. Many Management Liability policies offer cover to help you respond to Fair Work investigations and pay resulting penalties.

Get Covered Today!

BizCover understands salon owners and the risks they face as small business owners. Compare multiple business insurance quotes from a great range of trusted leading insurers online or over the phone. Select your preferred policies, and you’ll be covered instantly.

For more information visit www.bizcover.com.au

*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.