Defining the difference

• An employee works under an employee/employer relationship.
• A contractor carries out their work under an independent business/contractor relationship.
• Chair renters and room renters are self-employed.

Four major differences

We will explore 4 different categories to help you understand the difference between an employee vs contractor:

1. Working Conditions

👉 Pay Schedule

Employees are paid a wage, commission, or a combination on a regular schedule.

Contractors are usually paid solely on commission and receive payment after submitting invoices.

On the other hand, chair or room renters pay a monthly rent to the salon/spa owner.

👉 Training

Generally, the employer pays for an employee’s additional training. Meanwhile, contractors pay for their own training costs.

👉 Hours of Work

Chair or room renters may work during their hours of choosing within the salon’s hours of operation.

In contrast, the employer determines an employee’s hours of work.

2. Tools and Equipment

All necessary tools and equipment are provided and maintained by the employer. However, employees can choose to work with their own tools.

A good service provider will extend the life of any tool or equipment by using it properly and sanitizing it after every client.

On the other hand, contractors provide and maintain their own tools and equipment. Moreover, chair or room renters rent space to provide services.

3. Taxation Deductions/Reporting

A contractor’s pay does not include tax deductions. Subsequently, contractors submit their own federal and provincial tax deductions to the CRA.

On the contrary, an employee’s pay includes deductions. After that, deducted taxes are submitted by the employer to Canada Revenue Agency (CRA).

SPECIAL NOTE: It is the salon owner’s responsibility to pay EI employer premiums of chair/room renters.

Employees do not collect GST from their clients. Chair or room renters must collect and remit GST if their gross annual revenues reach over $30K.

4. Employment Laws

Alberta’s Employment Standard Code entitles employees to general holiday pay, overtime pay, and minimum wage, in addition to some other benefits.

Unlike employees, the Alberta’s Employment Standard Code does not protect contractors.

In conclusion, there are major differences between an employee vs contractors.

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EXECUTIVE SPA GROUP
Beauty Industry Resource Centre
(780) 604-2772
info@executivespagroup.com

How do I become a beauty educator in Alberta?

Service Providers who wish to teach esthetics or hairstyling in Alberta have different ways to become a beauty educator. It comes down to what one’s teaching goals are.

Working in a beauty school.

Working in a beauty school is a good choice for those that want to train future service providers without worrying too much about administrative details.

From Service Provider to Educator

Beauty schools have their own criteria when hiring beauty educator positions. Leadership and organizational skills are important qualifications.

Most schools require that Service Providers have at minimum 3-5 years of hands-on experience in their field before taking the next step into education. They usually have a syllabus ready for you to personalize and take guidance from. However, you are expected to prepare the worksheets and activities required to fill the entire day.

Teaching your own courses

Private trainers or private vocational training, is the path for entrepreneurs.

Private trainers develop their own syllabus. In addition, they are responsible for administrative tasks such as student recruitment and procurement of goods.

Many private trainers start with one-on-one training as it allows for low delivery costs with little financial risk.

Do I need a teaching license?

While Beauty Educators working in schools do not require a teaching license, while most private trainers do.

Consequently, there are many requirements to meet to achieve a training license. For instance, private trainers must show that they have consulted industry leaders in approving their curriculum.

Regulations for Private Trainers

Regulations exist at most levels of government to ensure private trainers meet minimum licensing requirements in their fields.

Not all private educators have courses that require a teaching license. There a few exemptions to licensing revolving around the price and purpose of your course amongst other factors.

Other Career Development Resources

You may find some of our beauty educator courses to be of benefit when bridging the gap from Service Provider to Educator.

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EXECUTIVE SPA GROUP
(780) 604-2772
info@executivespagroup.com 

DO I HAVE TO PAY EI FOR CHAIR RENTERS?

Did you think Employment Insurance and Chair Renters would never come up in the same sentence?

In 2019, CTV NEWS Saskatoon did a report on how salon owners that rent our chairs are impacted by Employment Insurance fees imposed by the Canada Revenue Agency (CRA).

The report focuses on Stacey Zielinski , owner of The Beach Beauty Bar in Martensville, Saskatchewan. Like many others, Stacey was under the impression that chair renters are independent contractors and therefore are not governed under employment laws and regulations.

Luckily for Zielinski, her tab was not too high, as only 1/5 hairstylists was a chair renter. This got us thinking though,

how does this impact the industry?

What does this mean for salon owners who only rent out chairs?

Renting out chairs to hairstylists has always been an attractive option for salon owners. Renting out chairs produces consistent income, removes employee-related issues, and was formerly believed to eliminate the cost of wages and MERCS.  

It is widely believed that the salon owner does not pay money to the renter; but they do however collect money from the renter. Typically, the hairstylist pays a monthly fee to offer services to their growing clientele from an already established salon.  In exchange for this fee, the salon owner allows use of the chair and fixtures during operating hours.

Contrary to popular belief, salon owners are liable to pay Employment Insurance fees to the CRA for chair renters. Normally, independent contractors from other industries are not eligible for EI, however, there is an exception for barbers and hairstylists.

Normally, EI is paid to employees based on the hours worked per pay period. Because chair renters dictate their own hours, the CRA calculates EI fees on the number of days the chair renter offered services in the establishment.

Why is there an exception for barbers and hairstylists?

As it was explained by a CRA representative, this exception was put into place to secure the income of a hairstylist in the event that the salon owner is no longer able to provide the chair renter with a space to work from. Examples are salon owners who are evicted from their rented space or go out of business.  

What is the difference between independent contractors in the beauty industry versus other industries?

Nothing really. We searched for answers but could not find a clear explanation for this exception.

The exception to the exception.

While a salon owner must pay the employer portion of EI fees for independent contractors, this fee is eliminated IF the chair renter is incorporated.

What is the difference between a sole proprietorship, a partnership, and a corporation?

All of the above are forms of entrepreneurship. They differ in a few ways including the annual costs and taxes payable to the CRA. The main difference is that in a sole proprietorship or partnership, the business is an extension of you (and your partners if applicable) whereas a corporation is viewed as an entity external to you.  It even has its own SIN, however, it’s called a BN (Business Number).

There are many benefits to registering your business as a corporation. Learn more.

Where does this legislation come from?

It is believed that this legislation was created to protect the income of women and single mothers based on the occupation’s demographic at the time the legislation was created.

Two conditions apply to this employment insurance regulation:

1. The barber or hairstylist offers services out of the establishment.
2. The barber or hairstylist is not the owner of the establishment.

What if the salon owner also owns the building?

Unfortunately, it doesn’t matter. Salon owners who own the building must also pay EI fees.

What if the hairstylist does not pay EI?

Unfortunately, it doesn’t matter. The onus is on the salon owner to pay the employer portion of a chair renter’s EI whether or not they pay their own premiums.

Does this legislation affect room rentals for esthetics services?

No, this legislation only applies to Hairstylists and Barbers at the time this article was published.

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EXECUTIVE SPA GROUP 

Beauty Industry Resource Centre

(780) 604 2772

Are home businesses lucrative?

You bet they are! As long as you manage your business with the same effort and respect that you would a store-front, these businesses can bring in a lot of income with fewer expenses, leaving more money in your pocket!

What do I need to have a home business?

First, register your business.

You must register your business name. There are a few choices for you when registering your business, most people who run a small business opt for a sole proprietorship.

You will also need a business license, not to be confused with your hairstyling license or esthetics certification.

You will also require a business license and a development permit. This type of license is granted by the city. Home-based business must follow special regulations since they are located in neighbourhoods designed for living, not business.

Zoning bylaws are used to determine whether the city can grant you a home business license. Don’t be surprised if your neighbours are contacted to ask if they are ok with your particular business being on the same street as them.

Beauty industry home businesses are MAJOR businesses.

Because beauty industry businesses have clients coming to the home for services that are not typical of a residential area, they are considered a major home business. Major home businesses cause a degree of interruption to the neighbourhood, for example, less parking available for residents and their guests, versus minor businesses that typically do not receive clients in their home.

What about insurance?

Insurance is important for any business, including a home business. There are some insurance companies that specialize in beauty industry insurance, an insurance broker may be able to help you find the right company for you. Your insurer should understand the specific challenges of beauty industry businesses. Some insurance companies serve both home and business.

Fees and other things to consider.

Registration/licensing/insurance all cost money. Luckily, home businesses today have the advantage of free marketing on social media! Instagram in particular is an excellent tool used by all beauty industry businesses, but has a spectacular impact on home businesses. Many clients use instagram as a way to find their service provider, who quite often has a home business.

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EXECUTIVE SPA GROUP

Tips as a self-employed person

All Service Providers know that tips make a big difference! They are a great way to plump up that bottom line. To a degree, entrepreneurs have the ability to maximize their potential for tips by controlling different aspects of service delivery.

Service Providers who are self-employed have control of every detail of the client’s experience. For example, décor, cleanliness, and punctuality are only ripples in the vast sea of customer excellence you can offer to attract a certain clientele.

Tips are a game changer, however, it can get a bit confusing when it comes to claiming them come tax time, especially if you pay yourself as an employee, or have employees.

Do I include tips when calculating CPP and EI deductions?

There are 2 types of tips.

• Controlled
• Direct

Controlled tips

Controlled tips are mandatory to the client. For example, spa parties may include a mandatory 18% gratuity that is included in the bill. If you include or “control” the tip amount in the final bill, then these tips must be included in the insurable earnings (wages + VAC pay + tips + commission). Anything considered “insurable earnings” must be accounted for when calculating the EI and CPP deductions.

Direct tips

Direct tips are out of your control. A client may or may not tip you or your service providers. Only the client is in control of the amount of tip they choose to leave. You as the employer are simply passing the tip from the hands of the client to the hands of your service provider. Direct tips are NOT considered insurable hours and are therefore not included when calculating EI and CPP deductions.

The declaration of tips is the responsibility of the tip reciever when filing their personal taxes.

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Learn more about tips and gratuities.

EXECUTIVE SPA GROUP

Beauty Industry Resource Centre

(780) 604 2772