EMPLOYEE OR RENT-A-CHAIR

One of the most frequently asked questions by salon owners and beauty practitioners alike is: "Should I hire employees or rent out chairs?" This decision has significant implications for both parties, affecting everything from legal obligations to daily operations and financial responsibilities.

Let's explore the key differences between these two business models within the framework of South African labour law, helping you make an informed decision that suits your specific circumstances and ensure that you remain compliant.

Understanding the Fundamental Difference

The Employment Relationship

In an employment relationship, the salon owner is the employer and the beauty practitioner is an employee. This relationship is governed primarily by the Basic Conditions of Employment Act (BCEA), the Labour Relations Act (LRA), Main Collective Agreement of the National Bargaining Council for Hairdressing, Cosmetology, Beauty and Skincare Industry, and various other labour legislation.

Key Characteristic: The employer exercises control over how, when, and where the work is performed.

The Rent-a-Chair Arrangement

In a rent-a-chair arrangement, the beauty practitioner operates as an independent contractor or sole proprietor, renting space from the salon owner. This is essentially a commercial lease agreement between two independent business entities.

Key Characteristic: The practitioner maintains independence and control over their own business operations.

Quick Reference Comparison Table

Aspect	Employment	Rent-a-Chair
Legal Status	Employee under labour law	Independent contractor/business owner
Control	Employer controls work methods, hours, and procedures	Practitioner maintains independence and control
Income Structure	Regular salary/wage	Pays fixed rent, keeps all client income
Tax Obligations	PAYE deducted by employer	Self-assessment, pays own tax to SARS
Annual Leave	21 days paid leave per year	No paid leave entitlement
Sick Leave	66 days over 3 years (paid through Sick Pay Fund)	No paid sick leave
Maternity/Parental Leave	4 months unpaid leave	No statutory maternity leave
UIF	Employer contributes, access to benefits	No UIF (must self-insure)
Working Hours	Maximum 45 hours/week, overtime rates apply	Sets own hours, no overtime concept
Notice Period	Statutory minimums apply as per Main Collective Agreement	As per rental contract
Dismissal Protection	Protected against unfair dismissal	No labour law protection
Client Ownership	Clients belong to salon	Practitioner owns client base
Equipment & Products	Provided by employer unless otherwise stipulated in the Main Collective Agreement	Practitioner provides own
Professional Insurance	Employer's responsibility	Must obtain own cover
Business Registration	Employers and Employees must be registered with the National Bargaining Council for Hairdressing, Cosmetology, Beauty and Skincare Industry	Must register own business
Pricing Control	Employer sets prices	Practitioner sets own prices
Financial Risk	Employer bears all financial risks	Practitioner bears own risk, however may be held jointly liable in retrenchments when salon owner has to retrench support staff
CCMA/HCSBC Access	Can refer disputes to CCMA or Bargaining Council	Civil court jurisdiction only
Restraint of Trade	May be subject to restrictions	Not applicable

Detailed Comparison: What You Need to Know

1. Legal Relationship and Control

Employment:

• The employer has the right to supervise and control the employee's work

• The employer determines working hours, leave periods, and scheduling

• The employer sets service prices and business policies

• The employee must follow the employer's instructions and procedures

• The employer can discipline or dismiss the employee according to labour law

Rent-a-Chair:

• The practitioner operates independently with minimal interference from the salon owner

• The practitioner sets their own working hours (within agreed premises access times)

• The practitioner determines their own service prices

• The practitioner manages their own client relationships and bookings

• The salon owner has no disciplinary authority over the practitioner's work methods

2. Financial Arrangements

Employment:

• The employee receives a regular salary or wage

• The employer deducts PAYE (Pay As You Earn) tax and UIF (Unemployment Insurance Fund) contributions

• The employer is required to contribute to the HBSI Pension Fund

• The employee may receive commission on top of basic salary

• The employer bears the financial risk of quiet periods

• The employer provides all equipment (unless otherwise stipulated in the Main Collective Agreement), products, and supplies

Rent-a-Chair:

• The practitioner pays a fixed rental amount to the salon owner (weekly, monthly, or per day)

• The practitioner keeps all income from clients after paying rent

• The practitioner is responsible for their own tax registration and payments to SARS

• The practitioner bears their own financial risk during quiet periods, however may be jointly liable for severance costs in the event that the salon owner needs to retrench support staff

• The practitioner typically provides their own products and equipment (though arrangements vary)

• No PAYE or UIF deductions are made by the salon owner

3. Employee Benefits and Protections

Employment:

• Annual Leave: Minimum 21 consecutive days per year (or one day for every 17 days worked/ 1 hour for every 17 hours worked)

• Sick Leave: 66 days' sick leave over a three-year cycle (33-days short-term illness and 33 days long-term illness – Sick Pay Fund rules)

• Maternity/Parental Leave: Four consecutive months' unpaid maternity/parental leave

• Family Responsibility Leave: Three days per year for certain family matters

• Public Holidays: Paid time off on public holidays or overtime when public holidays are worked

• Notice Periods: Statutory minimum notice periods before termination

• Severance Pay: One week's pay per completed year of service as a result of retrenchment

• UIF Benefits: Access to unemployment benefits if retrenched or in other certain circumstances

• Protection from Unfair Dismissal: Cannot be dismissed without fair reason and fair procedure

• CCMA Access: Can refer disputes to the Commission for Conciliation, Mediation and Arbitration or National Bargaining Council for Hairdressing, Cosmetology, Beauty and Skincare Industry (HCSBC)

Rent-a-Chair:

• No entitlement to paid leave of any kind

• No statutory benefits (sick leave, maternity/parental leave, family responsibility leave)

• No UIF contributions or benefits

• No protection under labour legislation regarding dismissal

• No severance pay entitlements, but may be liable for other support staff's severance

• The rental agreement can typically be terminated with notice as per the contract

• Disputes are resolved through civil law (breach of contract) rather than labour law

• The practitioner must make their own provision for leave, illness, and retirement

4. Working Hours and Conditions

Employment:

• Maximum 45 ordinary hours per week

• Maximum nine hours per day for a five-day work week

• Overtime paid at 1.5 times normal rate (or time off)

• Meal intervals required after five hours of work

• Daily and weekly rest periods prescribed by law

• Employer must maintain employment records

Rent-a-Chair:

• No prescribed working hours (practitioner sets their own schedule)

• No overtime provisions

• No mandatory rest periods (though premises access may be restricted)

• The practitioner determines their own work-life balance

• No requirement for the salon owner to maintain employment records

5. Health and Safety Obligations

Employment:

• The employer must comply with the Occupational Health and Safety Act (OHSA)

• The employer must provide a safe working environment

• The employer must provide necessary safety equipment and training

• The employer is liable for workplace injuries (Compensation for Occupational Injuries and Diseases Act - COIDA)

• The employer must ensure infection control and hygiene standards

Rent-a-Chair:

• Both parties have responsibilities under OHSA

• The salon owner must maintain safe common areas and premises

• The practitioner is responsible for their own work area, equipment safety, and procedures

• The practitioner should have their own insurance for liability and injuries

• Each practitioner is responsible for their own hygiene and infection control standards

• Liability for client injuries caused by the practitioner's services rests with the practitioner

6. Registration and Compliance Requirements

Employment:

• The employer and employee must register with the National Bargaining Council for Hairdressing, Cosmetology, Beauty and Skincare Industry (HCSBC)

• The employer must register with SARS as an employer

• The employer must register with the Department of Employment and Labour

• The employer must register with the Compensation Fund (COIDA)

• The employer must maintain various statutory records

• The employer must comply with Employment Equity Act requirements (if applicable)

• The employer must comply with Skills Development Act levies (if applicable)

Rent-a-Chair:

• The salon owner maintains business registration with CIPC (or as sole proprietor)

• The salon owner holds the business licence for the premises

• Each practitioner must hold a South African and industry recognised qualification

• Each practitioner should register their own business entity with CIPC

• Each practitioner should register with SARS and obtain a tax number

• Each practitioner should register for VAT if turnover exceeds the threshold

• Each practitioner should obtain their own business licence (requirements vary by municipality)

• Each practitioner should obtain professional indemnity insurance

7. Client Relationships and Business Assets

Employment:

• The client base belongs to the salon/employer and all other intellectual property of the business

• The employer owns all business goodwill

• Employees may be subject to restraint of trade agreements

• The employer controls marketing and branding

• Client information and booking systems belong to the employer

Rent-a-Chair:

• The practitioner builds and owns their own client base

• The practitioner develops their own business reputation

• The practitioner is free to market their own services

• The practitioner can take clients with them if they relocate

• Restraint of trade is not applicable

8. Termination of the Relationship

Employment:

• Must follow fair procedures as per labour law

• Requires valid reason (operational, misconduct, incapacity)

• Requires notice period (maximum 2 weeks’)

• May require consultation and retrenchment process

• Risk of unfair dismissal claims and CCMA or Bargaining Council proceedings

• Possible severance pay obligations

Rent-a-Chair:

• Terminates according to the rental contract terms

• Usually requires notice period as stipulated in agreement

• No need to provide reasons

• No labour law procedures required

• No risk of unfair dismissal claims at CCMA or Bargaining Council

• Disputes resolved through civil courts (breach of contract)

The Risk of Misclassification

A Critical Warning

One of the most significant risks in the beauty industry is misclassifying an employment relationship as a rent-a-chair arrangement. South African labour law applies a substance-over-form approach, meaning that what matters is the actual nature of the relationship, not what the parties call it.

When Is It Really Employment?

Labour authorities and courts will look at the following factors to determine if someone is truly an independent contractor or actually an employee:

Red Flags Indicating Employment -

• The salon owner controls when and how the practitioner works

• The practitioner must seek permission for leave or time off

• The salon owner sets the service prices

• The practitioner uses only the salon's products and equipment

• The salon owner provides all clients through salon bookings

• The practitioner wears a uniform or branded clothing required by the salon

• The practitioner receives regular "rental" payments that resemble a salary

• The practitioner works exclusively for one salon

• The salon owner can discipline the practitioner for poor work

• The relationship has existed for an extended period with increasing dependency

Consequences of Misclassification

If a labour inspector, council designated agent or court determines that a rent-a-chair arrangement is actually disguised employment:

• The salon owner may be liable for backdated PAYE, UIF, SDL and Bargaining Council contributions

• The salon owner may face penalties and fines from SARS and the Department of Employment and Labour

• The "independent contractor" may claim employee benefits, including leave pay

• The salon owner may face claims for unfair dismissal

• The salon owner may be liable for unpaid overtime

• Reputational damage and potential criminal liability in serious cases

Decision-Making Framework: Which Model Suits You?

Consider Employment If You:

As a Salon Owner:

• Want full control over your business reputation, operations, quality standards, and service delivery

• Prefer to build a cohesive team and business brand

• Have the financial resources to meet salary and benefit obligations

• Want to own the client relationships and business goodwill

• Can manage the administrative burden of employment compliance

• Want to train and develop practitioners in your specific methods

• Have consistent cash flow to pay salaries during quiet periods

As a Practitioner:

• Prefer the security of regular income regardless of client flow

• Value paid leave, sick leave, and other statutory benefits

• Want the protection of labour law

• Prefer not to handle your own tax and business administration

• Are starting out and need the stability of employment while building skills

• Want access to UIF benefits if needed

• Prefer someone else to handle marketing and client acquisition

Consider Rent-a-Chair If You:

As a Salon Owner:

• Want to reduce administrative burden and compliance obligations

• Prefer predictable rental income without salary obligations

• Want to offer flexibility to experienced practitioners

• Have limited cash flow for salaries during establishment phase

• Want to minimise liability for services provided by practitioners

• Are comfortable with less control over day-to-day operations

• Want to create a collective of independent professionals

As a Practitioner:

• Have an established client base you want to maintain

• Value independence and flexibility in your work

• Are comfortable with variable income and financial risk

• Want to build your own business and brand

• Can manage your own tax, insurance, and business obligations

• Prefer to set your own prices and service offerings

• Are willing to forgo employment benefits for entrepreneurial freedom

• Have the financial resilience to manage income fluctuations

Practical Tips for Implementation

For Salon Owners Choosing Employment:

1. Ensure Proper Contracts: Use written employment contracts that comply with labour law

2. Register Correctly: Complete all employer registrations with relevant authorities

3. Maintain Records: Keep meticulous employment records as required by law

4. Stay Compliant: Regularly review compliance with BCEA, LRA, and other legislation

5. Seek Advice: Consult with the Employers Organisation for Hairdressing, Cosmetology and Beauty (EOHCB)

6. Budget Appropriately: Factor in all employment costs beyond basic salary (UIF, leave provisions, etc.)

For Salon Owners Choosing Rent-a-Chair:

1. Written Agreements: Always use comprehensive written rental agreements

2. Verify Credentials: Check that practitioners are properly registered and qualified

3. Insurance Requirements: Ensure practitioners have their own professional indemnity insurance

4. Clear Boundaries: Maintain the independence of the arrangement (don't exercise employment-like control)

5. Health and Safety: Ensure common areas comply with health and safety regulations

6. Regular Reviews: Periodically review arrangements to ensure they remain genuinely independent

For Practitioners:

If Employed:

1. Understand your rights under labour law

2. Keep records of your employment terms and payslips

3. Raise concerns about non-compliance with your employer or seek advice

4. Know the proper procedures for disputes

If Renting a Chair:

1. Register your business with CIPC and SARS

2. Keep proper financial records and file tax returns

3. Obtain professional indemnity insurance

4. Maintain your professional qualifications and credentials

5. Build financial reserves for quiet periods and leave

6. Consider opening a business bank account separate from personal finances

Common Questions Answered

Q: Can I have some employees and some chair renters in the same salon?

A: Yes, this is legally permissible provided each relationship is genuinely structured and operated according to its classification. However, be careful to maintain clear distinctions in how you manage each group to avoid misclassification claims.

Q: If I start as an employee, can I later transition to renting a chair?

A: Yes, this is common as practitioners build their client base and seek more independence. However, the employment relationship must be properly terminated, and a new, genuinely independent arrangement must be established.

Q: What if a chair renter wants to work only for my salon?

A: Exclusivity alone doesn't automatically create employment, but it's a factor that could contribute to a finding of disguised employment if combined with other employment-like characteristics. Many genuinely independent practitioners choose to work primarily from one location, but they should maintain the freedom to work elsewhere if they choose.

Q: Do I need to provide training to chair renters?

A: You can offer training, but be cautious about requiring specific training or controlling how practitioners perform their services, as this could indicate employment. Chair renters should already be qualified and competent to perform services independently.

Q: What happens if a chair renter injures a client?

A: Generally, the practitioner is liable for injuries caused by their own negligence or improper procedures. This is why professional indemnity insurance is crucial for independent practitioners. However, if the salon owner is negligent (e.g., unsafe premises), they may share liability.

Q: Can I deduct costs from a chair renter's income?

A: No, this resembles salary deductions and could indicate employment. Rental should be a fixed amount agreed in advance. Any shared costs (utilities, products) should be clearly specified in the rental agreement and invoiced separately if necessary.

Both employment and rent-a-chair arrangements have legitimate places in South Africa's beauty industry. The key is to choose the model that genuinely suits your business needs and circumstances, then implement it correctly and consistently.

Remember these fundamental principles:

• Be honest about what type of relationship you're creating

• Structure the arrangement according to its true nature

• Maintain proper documentation

• Ensure compliance with applicable laws

• Review arrangements regularly

• Seek professional advice when uncertain

The choice between employment and rent-a-chair is not about finding loopholes to avoid obligations—it's about selecting the business model that aligns with your operational needs, financial capacity, and business philosophy whilst respecting the legal framework designed to protect all parties.

By understanding the genuine differences between these models and implementing your chosen approach correctly, you can build a sustainable, compliant business that serves both your interests and those of the practitioners who contribute to the beauty industry's success.