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Poll: Do the techs in your salon accept tips?
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Just converted to a "No Gratuity" policy!
Yes & No.

No, the taxes don't cost more because it costs the same either way on tips or wages- as an employer you match social security, pay unemployment ins., and cc fees on tips and on wages. The only way an employer is not paying this is if tips aren't being properly reported - and many employers encourage under-reporting because it saves them on taxes, which also reduces any benefits you may get (retirement, unemployment, workman's comp). Also, salons and their employees undergo more scrutiny from the IRS due to tax fraud because of under-reported tips.

Yes, because you are in fact paying them more per service, but there's a higher service charge than in a non-tipping salon. Basically you have to calculate service prices to cover overhead, supplies/product, equipment/furniture, wages, taxes and salon profit (advertising, reception, paper goods, etc.). In a tipping salon - the salon doesn't truly pay out what a tech is worth, and in my opinion, they don't leave enough room to reward the really good techs. If you calculate all expenditures and charge properly and pay fair wages, tips aren't necessary. Really, with tipping, the salon pays a lower wage/commission and expects the tech to rely on the client for a good tip in order to really be making a decent living - just like in restaurants.
Nail Tech/Owner
I'm not saying that the taxes would cost more, I'm saying that as an owner/employer it would cost you more because you would be paying out higher wages instead. My tips account for at least one third of my total compensation, if not more. So theoretically if my employer were going to do away with tips and raise my commission to make up the difference, that's a lot more money coming out of their overhead. I don't know that a modest price increase would make up for it either.

I'm not saying that employers shouldn't pay techs what they are worth (thus making tipping uneccesary) I'm just saying that I can see why they don't. It costs them less in the long run, even though they do have to pay taxes and cc fees on those tips.

At my current salon we are taxed on all tips left on credit card or checks, but not the cash tips at all. I'd say at least 80% of my total tips are taxed/reported. Not all salons I have worked at have operated this way though.
I did cover that in the second part of my last post. I think I said it earlier - I already had the numbers put together for my original pay scale (it showed me hourly wage with and without tips, com amt. percentage of service, etc using my actual salon prices and service times). When I thought I might hire someone, I ran numbers side-by side to see where I would need to adjust the commission percentages so that whoever I hired would actually average more per hour without tips than they would with tips. Yes, it "costs" more for the salon, but it comes out pretty close to the same with the price change for both parties.
Nail Tech/Owner
Oh ok, my mistake. I had thought you were saying that a no tipping policy would save the salon owner money due to not having to pay out taxes and cc fees on the employees' tips. That's why I was confused.
Quick update after the two month mark with the new policy - I haven't lost a single client due to the change, and still regularly get positive feedback and many thanks at how simple checkout is now from my clients. I've had quite a few new clients in the past two months and I typically forget to even mention the new policy until checkout - people are pretty surprised (and often pleased) to find out about the policy - but the real point is that it hasn't made a bit of difference in booking new clients. Often people book their first appointment without much question to price (maybe they've already been on my website), but even when they ask, it's hit or miss whether I even mention the no-tipping policy over the phone, as I often just don't think about it.
Nail Tech/Owner
Like I mentioned before I have been a firm believer in no tipping policy in years.
Clients comment all the time (well, the new ones especially) how much they enjoy it.
It makes life so much easier especially if you are working with assistants or new techs.
I sometimes ask my tech to start the client or I move the clients to the new tech. If I wasn't getting tipped (as owner) clients would be hesitant to book with the new tech firstly because "they are not me" and also because then, they would have to tip them because they are an "employee".
I'm fully booked and I don't want to be working my butt off 12 hrs a day to pay for everything and have my employee sit less busy because clients still "prefer me"

Again, if you are working with an assistant then the client might feel that now they have to tip them because they did part of the service.

Clients comment that they really appreciate the no tipping policy because they don't feel pressured into paying more.

Overall I realized that the whole tipping issue is a bigger issue then we have are lead to believe.

I think the tipping system keeps "poor people poor and keeps rich people rich"
I know that this might be controversial and I'm really sorry, I'm not trying to stir the pot.
I realized that after having a conversation with a friend of mine who had a "real job" and was getting paid $15/hr.
Our mutual friend who is a manager at a busy chain restaurant offered my friend a job as a server. Of course the pay was less then a minimum wage but the tips "were good"
Apparently at that super busy location servers make about $4000 in tips a MONTH.
Awesome huh?

My friend was all over this job. She started dreaming that after 6 months she might be able to save up for a down payment for a house and after working there for couple of years she might be actually be able to get a mortgage.....

Well, hold on honey I said. Unfortunately you can't do anything with the tip money unless you claim that as income!!

Lets run the numbers.

Lets say that the servers make $8/hr. That's about $1200/month. A common practice here is that the servers have to claim 10% of THEIR INCOME as tips. That's an additional $120 a month that "they make". Wow.

Well, good luck getting a mortgage making $1320/month!!
In our area condos go for $300.000 and up. Average price of home is $800.000. I'm not even kidding!!
Even if you could find a home for $350.000 there is no way a single person or even a couple can get a mortgage.

With that type of income people can't get any loan.... even if they would like to start their own business.

I have a few servers as clients. They are super hard working, they make good money, they have nice clothes, they party a lot too. Other then that, they have nothing to show for.
They blow all the good money they make.. why? Because the system encourage them to do so.

If they invest the money, buy something significant and they get audited... GOOD LUCK.

Let me tell you, CRA (Canada Revenue Agency) is not something you ever wanna deal with. I recently got audited and it's not fun.
They can asses anything and then it's up to you to prove that you are legit/innocent (which costs you additional $ in accounting fees)

I'm so glad that I have no tipping policy and that everything runs through my books so I can sleep at night.

Going back to my friend and the manager guy. Why do managers become managers? As servers they make better money but as manager you get paid salary, you have no tips but with a higher salary you can actually apply for mortgage etc. The manager is a still manager and my friend got another job getting paid $17/hr. All legit. In my opinion it's better to make little less but to make it on paper. I realised that sure, people know kow to scam, how to hide money but to do it successfully they have to make very good money to begin with, to allow them for a certain lifestyle anyway. Then it might be worth to hide money in the off shore account LOL. That's what I imagine because I don't have that problem to worry about LOL LOL

The bottom line is that we are professionals and as such we do deserve a legit pay and not some cash under the table/whenever client feels like tipping/extra money that we can't do anything productive with.

The vast majority of my tips (anything left on a credit card or check) are on my pay stub and taxed just like any other income. I might get 100 a month in cash on average. The rest is "on paper". I make around 2400 a month not counting any cash tips, and I don't think that's too bad for part time work.
Anna, you do have a good point about "cash" that may come through tips and not really seem like income - because it comes in a bit at a time and is too easy to spend here and there and so we don't see what our true income is. Although that is more of a budgeting and money management issue than just being about accepting tips! Some people don't even claim service income if the customer pays in cash - so the problem with showing lower income would be even worse than just not claiming tips.

Nail Tech/Owner
I wasn't really talking about budgeting (although that's really important too) but rather that often tips are not claimed and because of that they don't benefit people when it comes to loans, mortgages etc.

I'm not saying that everyone that receives tips is not claiming them but I know many people don't.
Also I'm curious if the employers match the CCP (Canada pension plan) and other deductions/insurance/holidays on top of the wages including tips?
I don't think so but I'm not sure. I have no tipping policy so I have no idea.
Over here people are just often paid their tips in cash ...

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