Hair Stylists

[Pacun]

My friend has a beaty salon and he has 5 hair stylists. He makes a schedule and gives each two days off at least every week. If a customer asks for a particular stylist, that stylist takes care of that customer. If not, the customer is assigned to the "next" stylist or whoever is available. Stylists must follow his schedule and must be there the whole day while the business is open. All of the stylists have their own licenses and tools but the salon provides the chair and mirors, etc. What is charged to the customer is divided 60%/40% with the bigger portion going to the stylist who is paid weekly. As part of "employment", stylists should promote and sell products available at the salon but sales are scarce. Are these stylist employees or contractors?

[TAXBILLY]

http://www.irs.gov/businesses/small/article/0,,id=210745,00.html

taxbilly

[mcb39]

My friend has a beaty salon and he has 5 hair stylists. He makes a schedule and gives each two days off at least every week. If a customer asks for a particular stylist, that stylist takes care of that customer. If not, the customer is assigned to the "next" stylist or whoever is available. Stylists must follow his schedule and must be there the whole day while the business is open. All of the stylists have their own licenses and tools but the salon provides the chair and mirors, etc. What is charged to the customer is divided 60%/40% with the bigger portion going to the stylist who is paid weekly. As part of "employment", stylists should promote and sell products available at the salon but sales are scarce. Are these stylist employees or contractors?

They absolutely ARE employees as opposed to the stylist or cosmotologist who rents a chair in a salon and runs her business herself; including hours of work, appointments, sale of product. I have a client who started out as an employee such as you cite. She left and rented a chair in a salon. She now needs not only an operators license but also an establishment license. Of course, these are WI laws and I imagine other states have other rules. However, as far as the IRS is concerned, she is a schedule C Sole Proprietor, pays quarterly estimates and makes a lot more money than she did under the percentage setup that your friend runs. She also buys and sells her own product.

[kcjenkins]

Absolutely they are employees, given the rules you listed. Needs to do W-2s. Withholding, the whole nine yards. It's not worth it to take the risk, he could end up hit with huge amounts for the payroll taxes, both sides, whether he withheld them or not, plus penalties and interest.

[jainen]

>>Are these stylist employees or contractors? <<

Depending on specific circumstances, they could be treated as independent contractors. Notwithstanding a shared schedule, as personally licensed practitioners they may not be subject to much control over how they work. Other factors might include how they are treated under state or licensing laws, local industry practice, whether the company had a ruling under an SS-8 or audit, and details of their contract with the salon.