Commission is the part of salon payroll that causes the most arguments, and usually not because anyone is being unfair. It is because the rules were never written down clearly, or because they were written down but nobody worked through the awkward cases: a package sold in March and used in June, a colour service where two people did the work, a retail bottle sold at a discount.
This guide walks through the common commission structures and shows how to calculate each one. All numbers below are made-up round examples to show the arithmetic. They are not recommended rates. Your rates depend on your market, your margins and what you pay as base salary.
Start with the base: what is commission calculated on?
Before choosing a rate, decide what the rate applies to. The three common options are:
- Gross sales – the listed price of the service, before discounts.
- Net sales – what the customer actually paid, after discounts and before tax.
- Net sales minus product cost – net sales with a deduction for colour, treatment product or consumables used.
Many salons calculate on net sales, excluding tax. That way, a stylist who gives a discount shares the cost of that discount, and nobody earns commission on government tax. Whatever you choose, write it down and apply it to every staff member the same way.
Flat percentage commission
The simplest structure: one percentage on all eligible sales.
Example: A stylist earns 30% commission on net service sales. In one month she performs services worth 10,000 (in your currency), and customers received 500 in discounts on those services.
- Net service sales = 10,000 − 500 = 9,500
- Commission = 9,500 × 30% = 2,850
Flat commission is easy to explain and easy to check. Its weakness is that it gives no extra reward for growth, and at a high rate it can squeeze your margin on low-priced services.
Tiered commission
Tiered commission increases the rate as the stylist sells more. There are two ways to apply tiers, and mixing them up is a classic source of payroll disputes.
Stepped (marginal) tiers
Each rate applies only to sales within its band, like income tax brackets.
Example tiers: 25% on the first 5,000, 30% on 5,001–10,000, 35% above 10,000. A stylist has net service sales of 12,000.
- First 5,000 × 25% = 1,250
- Next 5,000 × 30% = 1,500
- Remaining 2,000 × 35% = 700
- Total commission = 3,450
Whole-amount (retroactive) tiers
Once a threshold is reached, the higher rate applies to all sales for the period.
Same example, retroactive: 12,000 is above 10,000, so the whole amount earns 35%: 12,000 × 35% = 4,200.
The difference in this example is 750 for one stylist in one month. Retroactive tiers are a strong motivator, but they create a "cliff" where one extra sale can jump pay a lot, which can tempt staff to move bookings between months. Stepped tiers are smoother. Whichever you use, state it explicitly in the employment terms.
Different rates for services and products
Many salons pay a lower rate on retail products than on services, because product margins are thinner and the stylist's time is not the main thing being sold.
Example: A stylist earns 30% on services and 10% on retail. In a month she has 8,000 of net service sales and 1,200 of net retail sales.
- Service commission = 8,000 × 30% = 2,400
- Retail commission = 1,200 × 10% = 120
- Total = 2,520
You can also set rates per service category or per staff level (junior, senior, director). The more rules you add, the more important it is that a system applies them automatically.
Deducting product cost before commission
For colour, keratin, facials and other product-heavy services, some salons deduct a product cost before calculating commission. This protects the business when a service uses a lot of expensive product.
There are two common methods:
- Fixed deduction per service – for example, a set amount for every colour service.
- Percentage deduction – for example, 10% of the service price is treated as product cost.
Example (percentage method): A colour service sells for 300 net. The salon deducts 10% for product, and the commission rate is 35%.
- Product deduction = 300 × 10% = 30
- Commissionable amount = 300 − 30 = 270
- Commission = 270 × 35% = 94.50
Keep the deduction simple and predictable. If staff cannot work out their own commission from a receipt, they will not trust the payslip.
Packages and prepaid credit: when is commission earned?
Packages are where commission rules most often break. Say a customer buys a 10-session treatment package for 1,000. Who earns commission, and when?
There are three common approaches:
- At sale – the person who sold the package earns commission on the full 1,000 when it is paid. Simple, but if sessions are performed by other staff, they get nothing for the work.
- At redemption – each time a session is used, the staff member who performs it earns commission on the session's value (1,000 ÷ 10 = 100 per session). This matches pay to work done, and nothing is paid on sessions that expire unused.
- Split – a smaller sales commission at sale plus a service commission at redemption for whoever does the treatment.
Example (split method): A package of 10 sessions sells for 1,000. The seller gets 5% at sale; the therapist gets 30% of the per-session value at each redemption.
- Seller commission at sale = 1,000 × 5% = 50
- Per-session value = 1,000 ÷ 10 = 100
- Therapist commission per session = 100 × 30% = 30
- If all 10 sessions are used, therapist commission totals 300
If the package was sold at a discount, use the discounted per-session value, not the normal single-session price. Otherwise you pay commission on money the salon never received.
The same logic applies to stored-value credit. Usually you do not pay service commission on the top-up itself (that is money paid in advance), but on the services later paid for with that credit.
Assistant splits
When an assistant helps with a service – washing, sectioning, applying toner – you need a rule for sharing the commission.
Common approaches:
- Fixed amount per assist paid to the assistant, either deducted from the stylist's commission or paid by the salon.
- Percentage split of the commission, for example 80% stylist, 20% assistant.
- Split by service step, where each step has its own value and commission.
Example (percentage split): A service has a commissionable value of 400 at a 30% rate, so total commission is 120. The split is 80/20.
- Stylist = 120 × 80% = 96
- Assistant = 120 × 20% = 24
Decide in advance whether the salon or the stylist bears the assistant's share. That single decision changes the stylist's take-home pay, so it must be clear to both people.
Refunds, redos and voids
Write down what happens when money goes back to the customer. A common rule is that a refund reverses the related commission in the payroll period when the refund happens. Free redos usually earn no new commission.
A checklist for your commission policy
- What the rate applies to (gross, net, or net minus product cost)
- Whether tax is excluded
- Service, product and package rates, and any per-level differences
- Stepped or retroactive tiers, and the period (monthly is most common)
- When package and credit commission is earned
- Assistant split rules and who bears the cost
- How refunds and redos are handled
- When commission is paid and how staff can check it
Doing it in software instead of a spreadsheet
Spreadsheets work for one or two stylists. Once you have tiers, packages and assistants, manual calculation gets slow and error-prone. Senvia POS lets you set commission rules by service, product, package and staff level, then run payroll with approval, adjustments and payslips. You can read how it works on the payroll and commission help page, or see how packages and credit are tracked. Plans and add-ons are listed on the pricing page (pricing can change after the time of writing).
Whatever tool you use, the goal is the same: a rule every stylist can understand and check for themselves.