Stylist as Employee vs. Independent Contractor

Many salon owners desire to designate their stylists as independent contractors rather than employees in order to avoid paying payroll taxes. In some instances this may be permissible, but owners should be very sure before doing it. If the Internal Revenue Service (IRS) determines that the stylists are employees and not independent contractors, the owner can be penalized up to 75% of payroll taxes owed. If you have several stylists, that could be a huge penalty on top of still having to pay the taxes owed.

Could we use independent contractor stylists?

When we were doing the research for opening our own salon, we looked at the options for paying stylists. Most salons in our area pay on commission. As we did our research, we were a bit shocked to find that in most salons around 50% of gross revenues go to pay salaries, commissions, and payroll taxes.