There are pros and cons to both having a boss and being your own boss so before you make the decision of whether to go solo, Vitality Editor, Becci Vallis looks at what you need to consider…
BABTAC research found 65% of people working in the hair and beauty sector are self-employed and it’s a number that’s continuing to rise. While the pandemic was a disaster for the industry, it did give those working within it time to reassess their work life balance and as a result, more and more people have decided that going it alone has its perks. Offering therapists and professionals the freedom of creating their own hours to suit their personal schedule, it also provides an uncapped earning potential.
However, HMRC have recently reported a growing number of cases where some salon team members are still effectively behaving and being treated as employees - despite leaving as a permanent member of staff to become self-employed. “If you decide to leave a permanent place of work and switch to self-employed within the same salon this is a grey area as you need to ensure you’re not an employee in disguise,” warns Ria-Jaine Lincoln, director and founder of The Beauty Accountant. “The HMRC CEST tool (Check Employment Status for Tax) is a great starting point to seek advice and they also operate a self-employed/rent a chair model for those considering making the transition.”
Incredibly important to get right, you and the salon could be in danger of backdated tax and penalties if HMRC judge that you have not followed the correct protocol. You also don’t want to be missing out on employment rights you might otherwise have as a full time staff member, such as holiday days, sick leave and maternity/paternity pay.
THE CORRECT PROTOCOL
To ensure all the i’s have been dotted and t’s have been crossed, the first thing you should do when you go self-employed is notify HMRC. “This ensures that the correct public liability/business insurance is in place,” continues Ria-Jaine. “You may also need to check with the local council to see if any work permits are required and if working from home you will need to check any rental/mortgage agreement as well as the home insurance. Planning permission might also be needed if you’re setting up a work location within the home and if using a vehicle within your self-employed business your car insurance will need to be updated to cover business use.”
HOW TO MANAGE YOUR MONEY
Without employer benefits you need to make sure your cash flow is healthy so you don’t fall into the trap of taking no holiday or panicking if you become ill. The best practice is to set up a separate business account. “I like TIDE to track business income as it can be set up easily and quickly online but there’s no legal requirement to have a separate business account as a sole trader, it’s just that you may have limitations on your personal current account that prevents you from using it for business so check the terms first,” advises Ria-Jaine. “Using a receipt capture tool to track all of your expenses and a bookkeeping app such as Quickbooks is also good practice and will help to track business profits such as taxable pay which will help manage your cash flow for future sick leave or holiday.”
THE PROS AND CONS OF BEING SELF-EMPLOYED
Being your own boss means you tow the line on what you want and don’t want from your beauty business but if you’re not sure if it’s for you, use this as your checklist and if it doesn’t align with your strengths and non-negotiables, that’s ok. It’s not for everyone.
Pro’s:
- No set hours: you get to make your schedule work for you so if you need to work around childcare, spouses, your own body clock (some of us function better in the evenings than the mornings), you can decide how and when you want to see your clients.
- You pocket the profit: there’s no employer waiting to take a fixed fee.
- A tailored clientele: when you work in a clinic or salon, you can’t pick and choose your clients, when you work for yourself you can build your client base around who you like seeing and treating.
- Holiday on your terms: if you want to go away you don’t have to negotiate with anyone else or worry about your request for days off being denied.
- No commute: depending on where and how you work, your journey time might get cut or, if you’re setting up at home, completely eliminated saving you time, money and stress.
- You make the rules: decorate your treatment room how you want to, play the soundtrack that suits you and your clients best and choose the products you prefer because you represent everything you stand for and there will be no red tape in the way.
Con’s:
- Money matters: you have to take responsibility for your cash flow, expenses, tax, insurance, liability and even your own pension so it’s important you stay on top of things.
- Motivation mishaps: if you’re working in a salon they might have training programmes and progressive paths you can follow to drive you up the career ladder. If you struggle with procrastination or self-motivation, you may find you struggle to upskill and expand your repertoire. It also means self-funding.
- Promo pitfalls: a regular and committed client base is key to success and when you’re self-employed the only person who can bring in the business is you so you need to have a promo platform to ensure people can find you rather than relying on a salon to secure clientele.
- Team spirit: working on your own can be lonely if you’re used to the hustle and bustle of a staff room so consider this if you’re someone who thrives on other people’s energy.
For more information and guidance, visit https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper69100 and https://www.gov.uk/guidance/check-employment-status-for-tax