Employee Vs. Independent Contractor: Which Spa Business Model is Best?

Employee vs. independent contractor: which spa business model is best?

Whether you are considering spa ownership or are looking to potentially shake up your existing spa business model, deciding whether to opt for an employee structure or an independent contractor structure will shape both your day-to-day operations… and how efficiently you can feasibly hit your long-term career goals.

Budding esthetics entrepreneurs are often not 100% clear about the difference between the two types of work models, meaning that they can inadvertently find themselves in a financial, emotional, or (eek!) legal pickle.

As a spa owner, it all boils down to your level of control over the:

• Financial
• Behavioural
• And relational aspects of your workers

Ready? Let’s dive right in.

What is an Independent Contractor? What Are Their Pros and Cons?

An independent contractor is defined as a “self-employed person or entity contracted to perform work or provide services to another entity as a non-employee.” When using an independent contractor, spa owners are not required to provide them with employee benefits or be responsible for their taxes. Another popular term for independent contractors is “freelancers.”

In the spa industry, this model is often seen when you, as the owner, have multiple rooms available to rent to other service providers. Newbie spa owners in particular gravitate towards hiring independent contractors as service providers because of:

• The freedom and flexibility
• Due to not having to worry about the employment responsibilities mentioned above, there is less pressure to manage a team day-to-day
• Working relationships can be ended quickly and flexibly if need-be
• The money-saving opportunities
• Your facility can offer a wider variety of services without the added hassle or expense of having more employees
• The tax benefits
• Thanks to the nature of independent contract work, you can write off your biz expenses without extra labour withholdings 
• The reduction of liability
• Independent contractors should have their own insurance, meaning that you don’t have to pay out of pocket on their behalf
• The fixed income
• Fixed income every month from rented rooms can help you be your own boss while still receiving financial support for the spaces you’re renting

However, no business model is without its drawbacks. The same reasons that independent contract work offers flexibility also mean spa owners have less control over the quality of the work provided, less control over how each independent contractor brands themselves, and, as we sometimes see while working with spa owners here at Kirsten Foss Coaching, the tendency to misclassify independent contractors. Here in Canada, for example, spa owners cannot dictate independent contractors’ work hours and cannot provide them tools for work. Breaching these rules can result in both disappointment on the spa owner’s behalf and serious tax implications!

What is a Spa Business Employee? What Are Their Pros and Cons?

In direct comparison to an independent contractor, an employee is defined as “someone that another person or company hires to perform a service, which business owners compensate for. Employees typically have a specified pay rate and a written or implied employment contract with the party they work for.”

Pros of hiring spa business employees include having full control over the actions, decision, behaviour, and branding of your workers; having a team that is all working towards a common goal, versus contractors that have no direct loyalty to your business or long-term endeavours; and making it so there is one leadership train to consistently train and coach everyone.

In fact, the number one benefit of hiring employees instead of independent contractors is that you have your own built-in brand ambassadors! 

As for cons? While the negatives are worthwhile to work around, they include:

• The amount of responsibility
• To have a smooth-running team, you need to invest in your admin, recruiting, hiring, training, coaching, payroll, and marketing process
• The cost
• While you are more likely to achieve your long-term business goals with a team of employees, you are responsible for the labour costs typically associated with workers. On top of this, many spas are paying their employees too high of a rate and, in turn, struggle to stay afloat–or force their spa owner (you!) back into the treatment room to keep revenue flowing
• The lack of a “quick-fix”
• Adding employees doesn’t remedy a solo spa owner being overbooked, especially if you slack on your hiring protocols and end up with staff who don’t follow policies 

As a former spa owner myself, I have used both employees and independent contractors in my team over the years. My main takeaway? To be crystal clear on the differences ahead of time so that you know what you’re getting into!

Let’s Get Your Hiring Processes Crystallised in 2023

Speaking of getting crystal clear, our VIP Days are booking up fast–but our Spa Recruiting, Hiring, and Training System in a Day still has slots available.

Regardless of if you’re opting for independent contractors or employees (or are still undecided and want a professional opinion on what’s best for your biz), this comprehensive workshop has everything you need to ensure that your hiring goals align with what you want out of your biz… both long-term and short-term. Apply today!