How do nail salons pay their employees? Your comprehensive guide on compensation and benefits

For any nail salon business to thrive, being able to hire and keep top talent is key. Not surprisingly, pay plays a big role in recruiting and retaining talent. It directly affects employee satisfaction, with staff retention having measurable bearings on both revenue and client loyalty. While keeping up with the competition in the beauty business may be challenging, giving fair compensation to your manicurists and pedicurists need not be.  

In this post, we give you the lowdown on the most common questions:

• How do nail salons pay their employees? What are the various compensation models used in industry?
• What are the legal considerations and factors affecting compensation?
• What are nail industry best practices around compensation?
• How can I use technology for nail salon payroll management?

So, whether you're a beauty entrepreneur thinking of opening a nail salon or a self-employed nail technician researching salary prospects, this guide offers insights into how nail salons pay their employees.

Popular compensation models in nail salons

Across the industry, nail salons use various compensation models. These range from hourly pay to booth rentals. Over time, these compensation models evolved to meet the changing needs of the industry. While hourly pay might work for full-time employees, booth rentals are sometimes the solution for self-employed nail technicians. Thus, having a good understanding of these models is crucial for both salon owners and nail technicians. Let’s explore these models in detail.  

Hourly wages

The simplest of the compensation models is the hourly wage system. In this model, nail technicians get a fixed wage for each hour they work. The model provides a stable income for nail technicians and easy payroll management for salon owners. Earnings are calculated based on clock-in and clock-out times for nail techs. The process can be automated using salon management software.  

As of 2024, a licensed nail technician may earn around USD 25 per hour in a city like New York. However, this rate varies based on factors such as geography, skill, experience, and the salon’s compensation policies.  

Commission-based pay

The second most popular compensation model is commission-based pay. In this model, technicians earn a percentage of the revenue. Over the years, this model has helped increase both the revenue of the store and the compensation received by individual technicians. Another name for this model is profit-sharing, with revenue distributed equitably among stakeholders. The split of revenue between the business owner and technicians stems from factors like experience, skills, and salon location. One way to grow both the nail salon’s revenue and the technician’s compensation is to deploy smart marketing using nail salon management software.  

Tips and gratuities

Tips play a significant role in a nail technician's income. Typically ranging from 15 to 25% of the service total, tips are seen as a way customers show appreciation for great service. Tips go directly to nail technicians, thus boosting their compensation. While there are no fixed norms around tipping, it helps when clients keep the complexity and quality of service in mind to calculate tips. For instance, tipping for routine manicures may range between 15 and 20% but for complex tasks like nail art it may go up to 25 to 30%.  

Booth rentals

Allowing experienced nail technicians to rent space in established salons, booth rentals are a unique system. This model essentially turns technicians into their own bosses within the salon, with the income earned being another name for a self-employed nail technician’s salary. The model works on the concept of paying a fixed rent to the salon owner for use of space and common utilities. While this gives the nail technician more freedom, it comes with added responsibilities, with technicians having to manage their own clientele and supplies.  

Hybrid models

As the industry keeps evolving, some salons use a hybrid model that combines the above methods. A popular approach is to offer compensation as a combination of a base hourly wage plus commission. This provides employees with a guaranteed minimum income while incentivizing them to perform well and attract more clients. Some salons might also incorporate performance-based bonuses or tiered commission structures to further motivate their staff.

Each of the above compensation models comes with its own advantages and challenges for both salon owners and nail technicians. When considering how nail salons pay their employees, several factors such as the salon's size, location, clientele, and business goals also come into play.  

Legal considerations

Now that we’ve got the hang of compensation methods, let’s focus on laws related to labor and other statutory compliances. Legal considerations and compliance with labor laws are significant for both the business and the nail tech. Let’s explore key legal considerations for salon owners to keep in mind.  

• Minimum wages
  Compliance with labor laws is non-negotiable. While the minimum wage does vary by state, a good place to start is to check the federal minimum wage and then also take state-level wages into consideration. As of 2024, the federal minimum wage is USD 7.25/hour. However, some states mandate higher minimum wages and other benefits to safeguard employee interests. As a nail salon owner, make sure your business complies with minimum wage rules and tax regulations.  

• Workplace safety
  Federal laws provide for every employee’s right to a safe workplace. For nail salons, this would mean ensuring employees receive the training necessary to maintain hygienic conditions and use proper personal protective equipment such as gloves and masks. Furthermore, it is important for salons to provide warnings and cautionary statements around the use of certain chemicals. To avoid the long-term side effects of volatile chemicals, it is important to keep salons well ventilated.  

• Differentiating between employees and self-employed nail technicians (independent contractors)
  Being able to distinguish between employees and independent contractors is very important for salon owners who rent out booths. Federal laws offer clear rules on the subject and factors affecting the classification. A U.S. Department of Labor publication on wage and hour rights for nail salon workers highlights the differences between independent contractors and employees. To learn more, we encourage to you do your own research too.  

Factors influencing compensation

To truly understand how nail salons pay their employees, go beyond compensation models and legal considerations to see factors that influence pay and benefits. Knowledge of the following factors helps salon owners manage payroll effectively and set realistic expectations for earnings.

• Location
  The primary factor influencing compensation is the location of the salon. Salons in bustling urban areas or up-market sections often charge more for services, leading to higher wages compared to those in less wealthy areas. Moreover, compensation is higher in states with a high cost of living, such as California and New York.  

• Experience and skills
  As it is with any job, seasoned professionals with years of experience and a proven track record can and often do command higher compensation. Additionally, nail technicians who specialize in intricate nail art and other advanced techniques can charge premium rates for their services.

• Professional development opportunities
  Investing in self-development, through courses offering comprehensive knowledge and training on new techniques, helps nail technicians' skill up. This is very important for self-employed nail technicians as it allows them to command a premium price for their services and increase their earning potential.  

• Type of services
  The types of services offered by a nail salon have a direct impact on how employees are paid. Typical compensation models are a combination of hourly wage plus gratuity or a fixed percentage of service cost and commission on sales. Often nail salons train their employees to upsell products and services. Nail salons also deploy tools like smart marketing to ensure big-ticket services are booked for busy hours and small-ticket services for lean hours. This approach offers the advantage of more revenue for businesses, with nail technicians getting better compensation too.

Related: Are nail salons profitable? Explore the secrets to success

So how do you ensure best practices and fair compensation?

Now that we’ve understood the factors that impact how nail salons pay their employees, you might ask, “How do I ensure best practices and fair compensation?” We’ll look at that next.  

A key aspect of fair compensation is transparency. This should include clear communication about well-defined employment terms, rules, and compensation bases. This step is crucial for building trust between employer and employee.  

Nowadays, most nail salons use a hybrid pay structure consisting of base pay and performance-linked incentives. This methodology works well as the base pay guarantees fair wages, with performance-based incentives keeping employees motivated to do well. Moreover, as nail technicians gain additional skills and experience, they help boost client loyalty, and their compensation should reflect their increased contribution to the business. This is best understood and captured through performance reviews and merit-based raises.  

How do I ensure transparency in my operations and compensation to my team?

The answer is straightforward: Start by implementing employee management software that is robust. While the market has many offerings, Zenoti offers payroll and analytics features that simplify nail salon management. The cloud-based platform is a boon for nail salons with multi-store operations and employees who work shifts across two or more locations.  

Zenoti's payroll reports provide for accurate log-in and log-out time capture and service history. Computing tips and commissions is a breeze, with employees choosing weekly or monthly payouts. Through myZen, the employee-facing mobile app from Zenoti, staff can own their performance by understanding client ratings, frequency of client visits, repeated client visits, and more. Employees can even provide better service as the system displays the purchase history for every client, helping staff personalize and upsell on every visit.

For business owners, Zenoti creates customized reports on employee performance, revenue per employee, high-performing team members, and those in need of coaching. The system supports a focus on core business activities for owners and client services for employees.

The compensation models, legal considerations, and factors influencing pay all play important roles in running a nail salon business. With a deep understanding of these factors and fair compensation practices, nail salon owners can create a positive work environment and attract and retain skilled professionals.  

Explore the Zenoti platform for nail salon business management

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