This guide explains common structures in general terms. It isn't legal or tax advice; wage rules differ by state, so confirm your setup with an accountant or employment lawyer.
Straight commission
The stylist earns a percentage of the service sales they perform, often with a separate, lower rate on retail they sell. It rewards a busy book and keeps payroll in line with revenue.
Example: a stylist does $2,400 in services and $300 in retail in a week, at 40% on services and 10% on retail. Pay is $960 + $30 = $990, plus tips.
Watch for: slow weeks. If the stylist is an employee, their pay for each workweek still has to reach minimum wage for the hours they worked.
Tiered commission
The rate rises as sales grow, for example 35% up to $2,000 a week and 45% on everything above it. It rewards growth without giving away margin on the first dollars. Decide whether tiers reset weekly or per pay period, and write it down so everyone calculates it the same way.
Hourly
Hours worked times an hourly rate. It fits assistants, apprentices and the front desk, whose work doesn't map neatly to services. Hours come from a time clock, and overtime applies after 40 hours in a workweek for non-exempt employees.
Hourly plus commission
A base hourly rate plus a smaller commission on top. It gives newer stylists security while they build a book, and still rewards sales.
Example: $12 an hour plus 20% commission. A 30-hour week with $1,500 in services pays $360 + $300 = $660, plus tips.
Greater of hourly or commission
Each workweek the stylist is paid whichever is higher: their hours times the hourly rate, or their commission. A slow week never pays less than the hourly floor, and a busy week pays full commission.
Example: $15 an hour or 40% commission. In a 32-hour week with $1,400 in services, hourly is $480 and commission is $560, so the week pays $560. In a slow week with $900 in services, commission is $360, so the $480 hourly amount applies.
Salary, and salary plus commission
A set amount each pay period, sometimes with commission on top. It suits managers and full-time leads. Whether a salaried person can be exempt from overtime depends on their duties and pay level, not just the word "salary".
Booth rent
The stylist rents a chair or room, sets their own prices and keeps their service income. The salon earns predictable rent instead of a share of sales. Booth renters normally aren't employees, so they handle their own taxes, supplies and often their own booking and payments.
The wage rules to keep in mind
- Minimum wage is checked per workweek. Total pay for the week divided by hours worked must reach the federal or state minimum, whichever is higher. You can't average a slow week against a busy one.
- Overtime uses a regular rate that includes commission. For non-exempt employees, hours over 40 in a workweek are paid at 1.5 times the regular rate, and commission earned that week raises the regular rate.
- Tips stay separate. They aren't part of the regular rate and they belong to the employee.
- Some commissioned employees can be overtime-exempt. Federal law has a narrow exemption for certain commissioned employees of retail and service businesses when their pay is high enough and mostly commission. Check with an accountant before relying on it.
- Keep the records. Hours, sales, commission and tips for every pay period, with any changes noted.
Making it easy to run
Whatever you choose, the hard part is the weekly math: sales by person, tips, hours, overtime and the minimum-wage check. ShearCRM's salon payroll works these out for commission, hourly, hourly plus commission, greater-of and salary pay, with a built-in time clock, then gives you a file for QuickBooks Payroll or Gusto. It doesn't bill booth rent.
