Salons and barbershops: chair rentals and stylist commissions
Is your stylist an employee, a partner in the takings, or a tenant renting a chair? Each answer changes your paperwork.
Salons and barbershops run on arrangements that are rarely written down. A stylist keeps a share of what they bring in. Another rents a chair for a fixed weekly amount. A third is on a small wage plus commission.
Customers see one shop. On paper there are three quite different relationships, and the difference decides who owes what.
Three arrangements, three sets of consequences
The employee. Paid a wage, works set hours, uses the shop's supplies, follows the shop's rules. The shop is an employer, with payroll records and the contribution systems attached.
The commission worker. Keeps a percentage of what they take. Whether this is employment depends on the substance: if the shop sets the hours, the prices, and the rules, and provides the equipment, it looks like employment with a variable wage, whatever it is called.
The chair renter. Pays the shop a fixed amount for the use of a chair and works independently, setting their own prices, keeping their own takings, and bringing their own clients. This is closer to a landlord and tenant relationship: the shop earns rent, the stylist runs their own small business.
The third is genuinely different from the first two, and it is the one most often claimed and least often true in practice.
Why shops get this wrong
Chair rental is attractive because it sounds like it removes the shop's responsibility for the worker. It does, when it is real.
It is not real when the shop still sets the price list, controls the schedule, takes the customer's payment at a central till, provides the products, and treats the stylist as staff in every visible way. That is employment with a deduction, not a tenancy.
The consequence of getting it wrong falls on the shop, because obligations that should have been handled from the start do not disappear because of the label used.
What each side owes
If the shop is an employer, it has employer obligations for those workers, including the contribution systems.
If the shop rents chairs, the rent it receives is business income, and the stylist is running their own business: registered in their own name, keeping their own records, and filing on their own schedule. Plenty of independent stylists have never been told this, and find out when they need proof of income.
Either way, the shop itself is a business with sales to record. That includes product sales, which many salons treat casually. Selling shampoo and treatments is retail, and it sits alongside the service income rather than disappearing into it.
Practical footing
Decide which arrangement you actually have, per person, and write it down.
Make daily practice match the document. A tenancy agreement alongside a shop-controlled schedule and till describes employment.
Record service income and product sales separately. They behave differently and you want to know which one is carrying the shop.
Handle tips deliberately, especially if they pass through the shop.
Issue documents to customers. Low ticket prices and a fast queue are the usual excuse for skipping this, and it is the most common gap in the whole trade.
Running a shop with a mix of staff and independent stylists? Ask AskOnward for a plain answer from the official BIR rules, so each arrangement is what you think it is.
This article is for general information and is not affiliated with the government. For official forms and the latest rules, see the Bureau of Internal Revenue at bir.gov.ph.