False Self-Employment In Salons

In the hair, nails, and beauty sector, self-employment has become increasingly common. In fact, more than half of the professionals in this industry are now self-employed. People appreciate the independence of being their own bosses, while salon owners prefer not to have the pressures of managing staff and the associated responsibilities. 

However, it's crucial for both self-employed workers and salon owners to have a clear understanding of the tax obligations related to self-employment or "chair rental."

In a landmark case in 2020, false self-employment practices were uncovered in a salon, resulting in numerous court and tribunal rulings against individuals working in salons who were misclassified as self-employed. 

HMRC has issued rulings stating that self-employed salon teams should be considered employees, entitling them to benefits such as sickness, holiday, and redundancy pay. Additionally, the salon owner becomes responsible for VAT and relevant national insurance contributions (for both the employer and employee.)

Self-employed therapist’s need to make this clear within the salon and have a sign in their working area so all clients can see that they are working for themselves rather than the salon.  They also need their own insurance as typically salon insurance will not cover the work of a self-employed individual.  If it isn’t clear, it can become very complicated if there is ever a complaint or a claim.

Examples of situations where a self-employed person may be deemed an actual employee include when the business owner controls aspects such as working hours, holidays, pricing structure, offered treatments, and even dress code.

For salon owners to maintain true self-employment status for their staff, they must act as landlords rather than employers. Here are some key considerations:

• Allow therapists to set their own working hours and come and go as they please.
• Therapists should handle their own payments.
• They should maintain their own price lists and pricing.
• They wear their own uniforms, not uniforms provided by the salon.
• They have the freedom to perform treatments any day of the week.
• Avoid referring to them as "your team" or inviting them to your team meetings.

HMRC has been actively collaborating with industry governing bodies to provide clarity on their expectations, guidelines, and legislation that salon owners must adhere to in order to prevent backdated tax liabilities and other potential penalties.

You can refer to the Gov.uk website here for more information

28/09/2023