Do freelancers have to cover their own costs?

One of the common misconceptions about freelance hairstylists is that they don't make more money than their employed counterparts because they have to cover their own expenses. However, this statement is false, and here's why:

1- Higher Percentage of Earnings Kept: While freelance hairstylists do have to cover their own expenses, they can keep a much more significant portion of their earnings compared to employed stylists. Employed stylists typically receive around 40% to 50% of the earnings they generate, while commission-based stylists may keep 50% to 55%. In contrast, freelance stylists renting a chair or a suite often manage to keep 65% to 75% of their earnings after paying their rent and product expenses.

2- Financial Comparison: To illustrate this point, let's consider a stylist generating $200,000 per year in revenue:

• An employed stylist would typically receive around $90,000, including commissions and superannuation.
• A commission-based stylist might receive $100,000 (they then have to pay their own superannuation out of that amount).
• On the other hand, a freelance stylist could keep the full $200,000, then subtract expenses such as products ($20,000) and rent ($30,000), leaving them with $150,000 to cover their superannuation and remaining salary.

3- Tax Optimisation: Additionally, having your own independent business allows for much more effective tax optimisation. Freelance hairstylists can deduct a variety of expenses related to their business, such as rent, products, equipment, and marketing, but also work travels, work clothing or work related food expenses which can significantly reduce their taxable income and ultimately result in more money in their pockets.

In conclusion, contrary to popular belief, freelance hairstylists can indeed make more money than employed stylists, thanks to their ability to keep a higher percentage of their earnings and take advantage of tax optimisation strategies. While they do have to cover their own expenses, the potential for higher earnings and greater financial control makes freelance hairstyling an attractive option for many in the industry.

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