Streamlining Salon Payroll. How to Save Time and Reduce Stress

How to prepare payroll quickly and efficiently every time.

It’s a fact, in the salon industry we over complicate the payroll process!

At Loop HR we've spent years working on two complex areas of pay, pay structures and ways to streamline the payroll process. In this blog we breakdown the information you need to process payroll, quickly and efficiently.

Introduction & Payroll Prep for Hourly-Paid Employees

When it comes to payroll preparation in the salon industry, the process can be daunting and time-consuming. On average, salons spend over 11 hours preparing payroll each pay period. Dealing with complex commission structures, tracking work hours, holidays, and sick days, and ensuring all data is accurate before submission. Even with a bookkeeper, there are still many tasks that salon managers must handle to ensure payroll is processed correctly. But it doesn't have to be this way. In this blog, we'll explore how you can streamline your payroll process to save time and reduce stress.

Note, there are some processes that are specific to hourly paid workers and others to salaried workers. I have separated them out for clarity.

Four simple steps to focus on

When managing payroll for hourly-paid employees, accuracy in tracking work hours is critical. Here's a breakdown of what to focus on:

  1. Hours Worked: For hourly-paid staff, every hour worked needs to be accurately recorded. The hours include all work hours, time spent training, and any time taken off for holidays or sick leave. Recording all paid and absent hours is essential to ensure employees are compensated fairly – and you have precise records of such hours.
  2. Targets, Sales Data and Commissions: If your hourly-paid worker earns commission or bonuses, it's essential to calculate the target relating to the hours worked. Then accurately collate sales data, compare to targets to income and calculate commissions to ensure employees receive the correct pay.
  3. Holiday Pay: One common challenge in the UK for hourly-paid workers is calculating holiday pay. This is for two reasons: firstly, most salons manage holidays in days, but pay their workforce by the hour. This leaves a potential conflict as a day’s leave is deducted but the hours are still essential to calculate pay. Loop HR will manage this process automatically to ensure compliance.
    Secondly, it is a legal requirement (in the UK) to pay holiday hours at the average hourly rate earned over the past 52 weeks (if the worker earns variable pay). Loop HR automatically calculates the hours worked in the last 52 weeks and averages the hourly rate of pay for you. The final figure feeds into Loop HR payroll report.
  4. Sickness Absences: While hourly-paid workers are only compensated for the hours they work, recording sickness hours is essential for employment records and statutory sick pay (SSP). Loop HR's system automates this process, tracking absences, notifying managers, and feeding the absent hours directly into payroll (allowing the person processing payroll to process SSP if required).
The job description forms the foundation to your employee career progression mapping

Payroll Preparation for Salaried Employees

For salaried employees, the payroll process has different considerations. Here's how to ensure everything runs smoothly:

  1. Work Hours and Absences: Even for salaried staff, it's crucial to record all work hours, holidays, sick days, and absences. This ensures that any necessary adjustments, such as unpaid leave or overtime, are accounted for.
  2. Target Adjustments: Salaried employees may have targets set at the beginning of the pay period, but if they work variable hours, these targets may need to be recalculated before payroll is processed. Loop HR simplifies this by automatically adjusting targets based on the hours recorded in Loop HR central calendar.
  3. Holiday and Sickness Pay: For salaried employees, holidays would be paid at the standard rate with a top-up for variable rates based on the last 52 weeks. Sickness hours may result in deductions in pay, any deductions must show details in the payslip e.g. 8 hours sick at base rate per hour. If the employee is due SSP, this would be itemised too. Loop HR will automate the process, calculating any necessary deductions and reporting the hours, ensuring all records are accurate and up-to-date.
  4. Pro-rata Payments for Starters and Leavers: When salaried employees join or leave, their salary and holiday allowances need to be pro-rated. Loop HR handles this automatically, calculating the correct payments and ensuring compliance with employment law. At termination, Loop HR will produce a detailed report summarising the employee employment history.
  5. Custom Deductions and Compliance: Salaried employees may have custom deductions, such as unpaid leave or other adjustments. It's essential to keep a record of all deductions and ensure compliance with legal requirements, especially for lower-paid workers. Loop HR provides a detailed summary and compliance check for easy payroll processing.
Use the Tools available

Streamlining the Payroll Process

Overall, managing payroll in the salon industry involves a lot of detailed information, but it doesn't have to be overwhelming. By far the easiest way to manage your payroll process is to use Loop HR. With Loop HR you will collate the data needed as part of your day to day management processes. You'll not need to duplicate tasks as Loop HR will take care of everything. It will automate all of the complex tasks, from tracking work hours and calculating commissions to managing holidays and sick leave. The system provides a simple step-by-step process that allows you to get a high-level overview of your payroll while also drilling down into the details as needed.

Whether you're managing payroll for hourly-paid or salaried employees, ten employees or ten thousand, Loop HR simplifies the process, saving you time and reducing the risk of errors. With features like automated holiday pay calculations, sickness tracking, and custom deductions, you can ensure that your payroll is accurate, compliant, and easy to manage.

If you'd like to learn more about how Loop HR can help simplify your salon's payroll process, feel free to book a personal discovery call with Ian Egerton, founder of Loop HR. You can book directly from our website or through any of our social media channels.

Career progression planning

The pros & cons for hourly paid worker vs. the pros and cons of salaried workers

When deciding between hourly-paid and salaried workers, it's important to weigh the pros and cons from both the business and employee perspectives. Each approach has its unique benefits and challenges, and the choice can significantly impact the workplace's dynamics, overall job satisfaction and potentially financial stability.

Final Thoughts

By leveraging a streamlined system like Loop HR, you can reduce the time spent on payroll preparation from hours to around 15 minutes for the average salon. The result? More time to focus on what really matters – running your salon and serving your clients. If this blog has been helpful, you may like to see the video we did on simplifying payroll, go to our YouTube channel using this link.

Ian Egerton

Founder of Loop HR