Hair & Beauty and the minimum wage

The introduction of a higher minimum wage to fall in line with, or at least come closer to, the national living wage is a hot topic for many small businesses spanning a range of British industries. Unfortunately – or fortunately for those working on minimum wage – the hair and beauty industry is one which will be hard hit by the implementation of these government changes.

London by night

Londoners are often priced out of accomodation due to the low wages they earn.

Hair businesses are often small; the sector is competitive and relatively price-sensitive, with many companies managing the costly overheads associated with having properties in trendy, cosmopolitan or up-and-coming areas. Further to this, the surge in new self-starter businesses over the last few years suggest that many could still be in the early stages of operating on minimum profit.
For this reason, an increasing cost is easily interpreted as a sign of troubles ahead. While a skilled workforce is already likely to sit comfortably above the threshold and experience little change, most salons draw upon cheap resource for certain functions; from cleaners hired after-hours to Saturday staff and juniors learning trade skills whilst working. It’s understandable that many owners and managers are concerned about the rise in these labour costs; absorbing cost means lowering profit, while passing it on could see clients vote with their feet and easily find another salon in the competitive environment. This may seem to be a lose-lose dilemma.

In terms of overcoming this hurdle and staying afloat, small salons will have two main choices; operate on a leaner schedule in order to keep the labour costs to a minimum where possible or become ever more creative when it comes to keeping customers walking through the door. The industry should be prepared to fight to retain its clientele and encourage them to willingly accommodate for a possible price increase. Loyalty marketing may flourish at this time and it’s likely that more salons will fight to occupy the premium and luxury space in the market in order to justify price hikes.

busy shopping centre

Maybe it’s time to go upmarket?

All is not lost, however, as there could actually be advantages to the lift in minimum wage further down the line. Considering the swings-and-roundabouts result, the workforce currently paid below the living wage is unlikely to be regular clientele of hair salons and, certainly, not big spenders when in the hot seat. Paying this workforce more should, in turn, mean that the group eventually reaches new levels of disposible income – essentially meaning it could well result in more bums on seats in the salon.
There are also those that argue that better paid staff are better motivated staff. While it is tricky to prove that the rate of pay is in direct correlation to a staff’s motivation, it’s no doubt true that a valued workforce which feels taken care of by its employer is one that performs better.

Bearing this in mind, the biggest mistake that salon owners can make regarding a rise in the minimum wage is to complain about it in front of employees who may be affected. Although it could well cause repercussions throughout the business, from their perspective it will simply convey the message that they are not valued enough to warrant the rise in their pay; thereby effectively demoralising them and negatively impacting their performance and job satisfaction. The most important thing is to maintain healthy, positive relationships with staff members, regardless of their pay, and criticising improvements to their benefits will undoubtedly cause trouble.

A couple working on a computer together

Planning is key – there is time before the changes come into force.

It’s important that management members keep perspective and avoid panicked knee-jerk reactions. Measures to examine finances, research the impact and analyse where costs can be cut within reason, without compromising the business, must all be implemented in order for salon owners to feel well equipped to handle the oncoming storm. Equally, it’s important the management teams ensure they are not over staffed ahead of any changes, to prevent unnecessary costs hitting home which could otherwise be avoided. If there is little room to cut corners and the hit will be worryingly large, it’s also worth considering implementing a client loyalty scheme in order to ensure business levels will remain high – or even higher – regardless of their pricing. It may be tricky when anticipating trouble, but this change could well present an opportunity for many salons to review their business; putting truth to the saying that ‘what doesn’t kill you makes you stronger’.

Jason Phillips, Chairman of the British Association of Beauty Therapists and Cosmetologists (BABTAC)