How much should you pay a senior stylist with 10+ years of experience? Here's a 5-step process.

When it comes to determining a fair compensation for a hairdresser, transcending the boundaries of experience and skills becomes essential. Basically, it's not about the "number of years of experience" nor "about the skills".

Instead, the focus should shift towards the individual's capacity to contribute meaningfully to the salon's financial success. This perspective emphasises the interplay between experience, skills, and profitability in shaping a well-rounded compensation package.

Yet, in situations where the precise value an employee can bring to the salon remains uncertain (for instance if you're recruiting and don't know yet what this person can bring in), a proactive approach can provide clarity and structure. The key lies in engaging in open dialogue and collaborative goal-setting. Here's a comprehensive approach to navigate this scenario:

1. Initiate a Goal-Setting Discussion:

Recognising that the direct monetary value a hairdresser can contribute might not be immediately evident, initiate a candid conversation. Sit down with the employee or future employee and discuss their aspirations, both in terms of their ideal earnings and their personal growth within the salon.

For instance: The stylist might say they wish to earn $1,200 net per week. You can use Pay Calculator to calculate how much this represents before tax.

In this case, $1,200 net per week equals $1,557 gross per week or $81,000 per year. Make sure you add the superannuation if the super is 11% then you need the total wage is $89,910 per year. Let's round it to $90,000 including super.

2. Calculate the Earnings Target:

Once you have an understanding of the hairdresser's financial objectives, work together to define a tangible earnings goal. This goal should not only align with their desires but also consider the salon's operational expenses. Calculate the amount they need to generate on a weekly basis to cover costs while accommodating their desired earnings.

For instance: In our case our stylist wants $1,200 net per week so we know it'll cost us $90,000 per year with Super. That's $1,730 per week. Which means that's the absolute minimum your stylist must generate to pay for his/her salary.

Now you also must pay for products (20% of total turnover), and overheads. A safe rule of thumbs is to have a total wage no higher than 45% of the total annual turnover. So if the total annual wage is $90,000 you can do: $90,000/0.45 = 200,000. So your stylist must generate $200,000 in one year to cover for the salary, product costs, rent, tax and other overheads.

3. Collaboratively Set Performance Targets:

With the earnings target in mind, set performance goals that reflect the activities contributing to the salon's success. These can include customer retention, upselling retail products, and maintaining a certain number of appointments. Ensure that both parties agree upon these targets and acknowledge their significance in driving revenue.

For instance: Let's assume your stylist has 46 working weeks. $200,000 divided by 46 is $4,347. So that's your average weekly target for your stylist. To reach that on a weekly basis there are several ways to do it but it's always #number of clients x $average ticket. For instance: 23 clients x $190 = $4,370.

4. Regular Progress Reviews:

Establish a recurring schedule for reviewing progress. A four-week interval is a reasonable timeframe to assess how the hairdresser's efforts align with the agreed-upon targets. During these reviews, discuss accomplishments, challenges, and any adjustments that might be necessary to stay on track.

5. Flexible Adaptations:

Recognise that the goals set initially might need adjustments as insights are gained and circumstances change. Remaining flexible and willing to recalibrate goals fosters a collaborative environment that encourages growth and success.

This approach transcends the traditional model of basing compensation solely on experience and skills.

Instead, it pivots towards fostering a transparent and productive working relationship. By involving the hairdresser in the goal-setting process, you empower them to take ownership of their contribution to the salon's prosperity.

In essence, compensation becomes an outcome of a dynamic collaboration rather than a fixed equation.

This approach not only aligns the hairdresser's financial goals with the salon's operational realities but also stimulates an ongoing commitment to growth and achievement.

By investing in open communication and shared objectives, both the salon and its employees can flourish in a mutually rewarding partnership.