Room to Grow

Room to Grow - BABTAC Expert Susanne Routledge talks renting a room!

We get asked so many times about the logistics of renting a room in a salon, so we decided to pose your questions to our business turnaround salon expert Susan Routledge. The answers provide plenty of food for thought.

Susan Routledge is a salon turnaround expert with a trademarked business formula that she utilises within her mentoring and online programmes. She is the founder of Beauty Directors Club, a monthly business advice membership as well as a salon owner, author, awards judge, speaker and industry advisor. You can contact Susan at susan@susanroutledge.com to book a complimentary strategy call, or learn more at https://susanroutledge.com/

I own a salon and would like to rent out a room to a therapist. How do I go about this? 
There is so much to consider and I speak to so many salon owners who have jumped into renting their space as a quick fix without care and attention and end up having huge regrets. Renting space can work fantastically well when done correctly. The first thing I would say is that you need to get really clear on your intentions and what you want to achieve from renting the space.
Legitimate reasons could be that you have too much space and need to generate extra income from the wasted area, or you may want to bring in a new service and don’t want to train your existing team in this field.
I would ask you to think long and hard if you see this as a way to bring in extra workforce so that you can save on payroll expenses such as tax, National Insurance, holidays, sick pay, pensions, etc. as you may get an expensive shock, if and when HMRC knock at your door.
If room renting is right for your business, then the next step would be to discuss fully with the therapist how you both see the arrangement working and fully document the outline together. You need to be 100% certain that the potential room renter fits with the standards of your business. It is your name above the door and your reputation at stake. Someone self-employed renting space from you can even send a replacement person to perform their services. You have to accept that you lose the day to day control over when and how they work. They can also service the clients from your business at other establishments, or from their home, as the clients are being treated through their own business and not yours.
There aren’t any post contract restrictions you can impose, so the self-employed therapist could use your business to generate a client base and then move and take the clients with them.

What do I charge and how do I work this out?
There are 2 common ways to gain revenue from renting a room. You could either have a fixed day rate charge or you could take a percentage of the revenue. By far the easiest and cleanest cut option is a day rate charge. This way you get paid whether the therapist is busy or not, or even not there. There are lots of grey areas around taking a percentage as the therapist may not be busy, yet you still have to provide the space. They also may have a period of consultations or free top-up treatments. It can be quite hard to establish what the exact revenue is, as a self-employed person should be handling their own payments.
To cost out your room charge rate, you really need to look at the revenue that you could have generated for the rental period, also how much the empty space is costing the business and come to a mutual rate. You must also take into account if you are renting equipment and if the therapist will be utilising your consumables and products or using their own.

Are there any legal considerations regarding licensing or contracts? 
As you can hopefully see, it is essential to get this right from the start. I would always advise to seek legal guidance to make sure that you are protected, as any errors are more likely to cost you, as the salon owner, and not the self-employed therapist. There have been a stream of cases where supposedly self-employed people have successfully claimed they were really workers and therefore entitled to the minimum wage and holiday pay.
I myself will always consult with an HR expert and I asked David Wright Personnel to check this article for me, as it is so important to have the right guidance. 
A self-employed therapist will need their own insurance cover, and also local authority registration if required for their skillset. They will need to be GDPR registered and compliant. 
Once you have your agreement fully documented, then take a final double check with all of the ‘What if’ scenarios covered, and then sign and date by both parties. Typically the agreement will be for 6 to 12 months

Do you have any other advice on this matter?
There is so much criteria to consider but some areas that stand out in our industry are that a self-employed therapist can charge different prices, work their own hours, wear what they want, they aren’t required to attend your meetings and are allowed to treat the clients as their own.
I cannot reiterate enough, the importance of researching all aspects of employment and working with someone who knows this area very well. Even big companies such as Uber have fallen foul of the laws.
Self-employment can work perfectly in your business…just make sure you have researched and implemented it correctly.