What’s The Best Employment Contract?
Choosing The Best Worker Contract Type: Salaried, Paid by the Hour or Zero-Hour!
Choose the best employment contract type for the job & worker!
As well as salon pay, consider if the position is salaried, paid by the hour or zero-hour!
When deciding how to contract your workers, whether to pay them by the hour, offer a salaried position, or use zero-hour contracts, it's essential to understand the nuances and legal implications of each approach. The type of contract you choose can shape your business culture and impact the financial stability of your operations.
Elements that may impact your decision include their position in the business, where the worker is in their career, the number of hours of cover required, and the investment in training required to deliver the role.
Salaried Workers: Stability & Simplicity
Ideal for workers on fixed contract hours, whether the same hours each week or fixed variable work patterns (e.g. a bi-weekly rota).
Advantages
Financial Security: Salaried workers enjoy a predictable monthly income, which is beneficial for those with recurring financial obligations (e.g., mortgage or rent, car payments).
Payroll Management: Handling payroll for salaried employees is straightforward, making budgeting easier and payroll processing less time-consuming.
Workplace Culture: Salaried positions foster stability and long-term commitment, potentially leading to higher staff retention.
Disadvantages
Paid Overtime: Salaried employees may need to work beyond their typical hours, requiring overtime management and additional holiday accrual.
Flexibility: Salaried roles may be less flexible for those with variable schedules, though flexible patterns can be managed within agreed hours or through a mix of overtime and unpaid leave.
Hourly Workers: Flexibility & Precision
Ideal for those who regularly work variable hours but are contracted to a minimum number of hours.
Advantages
Flexibility: Hourly workers are paid for the exact hours they work, providing greater flexibility for both employees and employers.
Cost Control: Employers only pay for hours worked, aligning labour costs with business needs.
Motivation: Hourly pay can incentivise employees to work efficiently, knowing they can leave once their tasks are completed.
Disadvantages
Payroll Complexity: Managing payroll for hourly workers is more complicated, requiring diligent record-keeping and more complex systems.
Income Variability: Hourly workers face inconsistent pay, which can lead to financial anxiety during quieter periods.
Workplace Culture: Variable work patterns may limit bonding and reduce commitment, with hourly positions often perceived as less stable or temporary.
Zero-Hour Workers: Maximum Flexibility with Challenges
Zero-hour contracts offer high flexibility but come with unique challenges.
Advantages
Maximum Flexibility: Employers can adjust the workforce based on demand, without the obligation to provide regular hours.
Cost Efficiency: Zero-hour workers are only paid for hours worked, helping businesses manage labour costs during low-demand periods.
Diverse Workforce: These contracts attract a wide range of workers, including return-to-work mothers, retirees, and those seeking supplementary income.
Disadvantages
Income Instability: Zero-hour workers face significant income instability, making financial planning difficult.
Reduced Benefits: These workers may lack benefits such as pension contributions and professional development, impacting job satisfaction.
Workplace Culture: Zero-hour contracts can create a transient workforce, reducing cohesion and long-term commitment.
Administrative Burden: Managing zero-hour contracts requires precise tracking of hours, schedules and holiday accruals, adding to administrative complexity.
Balancing Targets & Expectations
Setting clear targets and expectations is crucial, regardless of the contract type.
Steps to Communicate Expectations
Job Descriptions: Clearly define each job title and its responsibilities.
Performance Goals: Set clear, achievable goals and timelines.
Regular Feedback: Provide consistent feedback and performance reviews.
In the hair and beauty industry, revenue targets for staff typically reflect their base rate of pay and hours worked, making the type of contract less relevant for performance metrics. Some salon pay structures work best with salaried, others with paid by the hour. We are often asked how do salon owners pay their employees, to learn more about salon pay structures and salon commission structures see our video on salon pay (link).
Conclusion
Choosing between hourly, salaried, and zero-hour contracts depends on the role, required flexibility, and desired workplace culture. Each model has its advantages and challenges, and the best approach will align with your business goals and operational needs.
For more information on hair salon pay, salon manager pay, and salon commission structures, read our Blog. To discuss how to improve your pay structure book a discovery call with Ian Egerton, the Founder of Loop HR using the link below.
By carefully considering the pros and cons, you can make an informed decision that supports both your employees' well-being and your company's success.
For more information on salon management systems and ways to simplify HR tasks, chat with us, we can help you streamline the tasks that make running your salon or spa business easier and more efficient! Book a discovery call.
Ian Egerton, founder of Loop HR
