Hidden Employment in Hairdressing: The Trap Salon Owners Don't See Coming
You've probably done what most salons do. You've got stylists on commission, maybe a chair renter or two, and everyone seems happy. But there's a quiet problem sitting in a lot of salons right now, and it's one that can cost owners thousands if it's ever looked at properly.
It's called hidden employment. Some people call it disguised employment or false self-employment. Whatever you call it, it's one of the most misunderstood areas in our industry, and after 35 years I've seen plenty of good salon owners fall into it without ever realising.
Let me break it down.
The three ways we usually work
In hairdressing, most arrangements fall into one of three camps.
Employed and on commission. The stylist is on your payroll. You set their hours, you set the prices, you provide the products and the kit. In return, they get holiday pay, sick pay, a pension, and proper employment protection. You handle their tax and National Insurance through PAYE.
Genuinely renting a chair. This person runs their own little business inside your salon. They pay you rent. They set their own prices, choose their own hours, buy their own products, book their own clients, and sort their own tax and insurance. You're their landlord, not their boss.
Two clear arrangements. Two very different relationships. The trouble starts in the gap between them.
Where it all goes wrong
Here's the situation I see again and again. A salon takes someone on and calls them self-employed, or "commission on a chair." Sounds simple enough. But then the reality looks like this:
They're told they must work set hours. They're put on a rota and expected to cover shifts. They have to do reception, cleaning, or cover for other people. Their prices are set by the salon. All the products and equipment are provided. They can't send someone else in their place, and they're not really free to work anywhere else.
Read that back. That's not a self-employed person. That's an employee wearing a self-employed label.
And here's the part that catches owners out: it doesn't matter what the contract says. HMRC and employment tribunals look at what's actually happening day to day, not the words on a page. If the salon holds all the control, the law will very likely treat that person as a worker or an employee, benefits and all.
The three questions that decide it
When HMRC looks at whether someone is genuinely self-employed, it comes down to three things.
Control. Who decides how, when, and where the work gets done? If it's you, that points to employment.
Substitution. Can they send someone else to do the work in their place? A true self-employed person usually can. An employee can't.
Mutuality of obligation. Do you have to provide work, and do they have to accept it? If yes, that's the hallmark of employment.
The more control you hold, the closer that person is to being your employee, no matter what you've called them.
Why this should be on your radar
Getting this wrong isn't a slap on the wrist. If HMRC or a tribunal decides someone was really employed, a salon can be on the hook for:
Back taxes and National Insurance, plus penalties. Holiday pay claims that can stretch back years. Employment rights claims like unfair dismissal, sick pay, and pension auto-enrolment. And nasty insurance gaps, where a "self-employed" stylist turns out to have been your responsibility all along.
That's real money. Enough to seriously wound a small salon.
So what should you do?
The honest answer is to pick a lane and commit to it.
If you want to control the hours, set the prices, run a rota, and have people do salon duties, that's fine. But that person needs to be properly employed, on the books, with holiday pay, sick pay, a pension, and all their rights in place.
If you want someone to be genuinely self-employed, then let them be. Real independence. Their own prices, their own hours, their own clients, their own products and insurance, backed by a proper chair-rental agreement.
What you can't do is take the benefits of employing someone while dodging the costs and responsibilities. That's the trap. And it's one that's getting more attention, not less.
If you're reading this and feeling a flicker of worry about how your own team is set up, that's a good thing. It means you can fix it now, on your own terms, rather than waiting for someone else to point it out.
Not sure where your arrangements stand? It's worth a proper conversation with an accountant or an employment adviser who knows the hairdressing world. Sorting it out today is a whole lot cheaper than sorting it out after a claim lands.
Useful links for salon owners
Not sure where your own arrangements sit? These free, official tools and guides will help:
Check employment status for tax (HMRC's CEST tool) — run a free check on any role
For anything specific to your salon, speak to an accountant or employment adviser.
