In short

Salon and spa payroll handles commission, hourly and hybrid pay plans, minimum wage checks for commissioned staff, card tips paid through payroll, reported cash tips, product sales commissions and service charges. It includes withholding, federal deposits, quarterly Form 941 filings and year-end W-2s, plus clear separation between employees and booth-renting independent professionals.

Commission and hourly pay plans

Many salons pay a percentage of service revenue, sometimes with a guaranteed hourly base, plus a smaller commission on retail. We set up each component as a separate earning so pay stubs and reports are clear.

Minimum wage checks

Commission-only staff must still earn at least the applicable minimum wage for hours worked. The Department of Labor explains federal minimum wage; state rules may be higher. We check commission pay against hours each pay period.

Tips through payroll

Card tips are usually paid to staff through payroll. Reported cash tips are added to wages for withholding. The IRS explains employer duties in Publication 531. Service charges added to a bill are treated differently from tips, so we keep them separate.

Overtime

Non-exempt employees who work more than 40 hours in a workweek are owed overtime under the Fair Labor Standards Act, and commission can affect the regular rate used to calculate it.

Filings and year end

Federal deposits and Form 941 filings are reconciled quarterly, and W-2s include reported tips.

Before we start

We review commission structures, tip handling and booth-rental arrangements.

For employees paid by commission, we confirm that total pay for each workweek meets minimum wage and that overtime is calculated on the regular rate including commissions. Retail product commissions and service commissions are tracked separately for reporting.

Key terms

Definitions for terms used on this page:

  • Exempt and Non-Exempt Employees: Non-exempt employees must receive overtime under federal law; exempt employees meet specific tests that remove that requirement.

Salons & Spas problems this addresses

  • Tips paid by card must reach staff and be reported correctly
  • Booth renters and commissioned employees are paid in completely different ways
  • Retail product sales need inventory and sales tax tracking
  • Booking software totals rarely match card processor deposits
  • Gift cards and packages are sold long before services are delivered