The 70% Problem

Originally published on LinkedIn, 5 May 2026.

There's a conversation our industry needs to have honestly. And it isn't happening properly anywhere.

Disguised employment! Or hidden employment, false self employment, dressed up self employment. Whatever you want to call it. It has many names and it's everywhere in our industry.

I've held off writing about it for a while because I know how uncomfortable it is.

But it isn't going away. If anything, it's getting louder.

HMRC released brand new guidance specifically for hair and beauty in May 2025. There was a debate in Parliament about it the same year. Estimates suggest around 70% of the hairdressing industry is now operating under a self employed model. Beauty is not far behind. UK Parliament

So let's actually talk about it.

In its simplest form, it's when someone is treated like an employee, but classed on paper as self employed.

They're called self employed. They're paid a percentage, or invoiced as a contractor, or rented a chair. They're responsible for their own tax. But in reality, the salon owner is still controlling almost everything.

The bookings go on the salon's system. The payments go through one card machine. There's a uniform. There's a rota. There are products the staff member must use. There's a clean down list at the end of the day. Holidays have to be approved. Shifts are dictated.

If you read that list back honestly, that's an employee. Just one without holiday pay, sick pay, a pension, NI contributions, or any of the usual protections.

And on the staff side, often they think they're getting a great deal because they're earning 40% of their takings, or a pound more than minimum wage, and they feel like they have a bit of autonomy.

Many don't declare properly. Many don't budget for tax. Many have no idea they're walking into something that could blow up later.

I want to be really honest here. I get it.

Running a salon with a fully employed team is one of the hardest things you can do in this industry right now.

You're paying salaries. You're paying employer's NI on top of those salaries, which most staff don't even know exists. You're paying pension contributions. You're paying for sick days, training days, holiday cover. You're paying VAT once you cross the threshold. You're navigating ever changing HR legislation, which is a minefield. You're carrying the cost of recruitment, training, products, marketing, software, rent, rates and utilities. You're handling the personal dramas, the complaints, the no shows, the team fall outs.

And you're doing all of that while minimum wage rises every year, and your team will still tell you it isn't enough.

So when someone offers you a model that takes most of those costs off the table, of course it sounds appealing.

I'm not going to pretend I haven't considered it myself. I have. More than once.

But every time I've sat with it properly, I've come to the same conclusion. It might look tax efficient on paper. It might feel like the easier life. But the risks are stacking up faster than most owners realise.

This is the bit that genuinely worries me.

Every time I see this conversation come up in industry Facebook groups, the response is almost always the same.

"It's fine, my solicitor has signed it off."

"My accountant said as long as we have a contract in place, we're covered."

"I've had a template approved."

And here's my issue with that.

Solicitors and accountants are brilliant at their job, but employment status in hair or beauty is incredibly specific. If your solicitor's day to day work is family law, conveyancing, or general business contracts, they may not be up to speed with the very particular HMRC tests for hair and beauty.

It's like walking into a butchers and asking about seabass isn't it?

They might give you an answer. They might even sound confident. But they aren't a fishmonger.

A signed contract calling someone self employed means almost nothing if the day to day reality looks like employment. HMRC and the tribunals don't care what the paperwork says. They care how it actually works in practice.

After interviewing and recruiting hundreds of people over the years, here are the set ups I see come up most often, and worry about most.

The invoice their hourly wage model.

A team member is paid slightly above minimum wage, but is told to invoice the salon for their hours because they're "self employed". They wear a uniform. They follow the salon's rota. They use the salon's products. They book holidays around the salon's needs. They clean up at the end of the day.

That's an employee with extra paperwork. Nothing else.

And often the team member is part time, on a low income, and not managing their tax properly. Which means when the wheels come off, they come off for everyone.

The percentage split.

This one is trickier because it can be done legitimately. But often it isn't. The team member gets 40 to 50% of their takings, but the salon still controls the bookings, the products, the schedule, and the brand. Same problem dressed in a different outfit.

The unspoken VAT bombshell.

A lot of salons running this model have all the income going through one booking system and one card terminal. Which means HMRC sees one big revenue figure. And once that crosses the VAT threshold, the salon owner gets a bill they were absolutely not expecting.

The solicitor friend didn't mention that bit, did they!

This is the part most salon owners aren't braced for. We're seeing more and more legal claims from former staff. Owners moved to a self employed model, didn't make their existing employees redundant properly, and just asked everyone to sign a new agreement.

Then a year or two later, the team takes them to tribunal.

They claim back holiday pay. Sick pay. Redundancy. Sometimes years of it.

And because the relationship looked like employment all along, they often win.

This isn't theoretical. There have been a growing number of HMRC rulings finding that self employed salon teams are effectively employees, meaning they're entitled to sickness, holiday and redundancy pay, with the employer also liable for back national insurance and VAT. British Beauty Council

You don't just owe the team. You owe HMRC for years of unpaid employer's NI. You owe back VAT. You may owe penalties on top.

For some salons, that's the end of the business.

Here's the bit no one warns owners about.

If you genuinely set people up as self employed, with all their own clients and autonomy, you stop being a salon owner. You become a landlord.

You have no control over standards. You have no control over reputation. You have no control over consistency. You have no control over their performance, their hours, or their behaviour with clients.

And here's what happens next.

Three or four of your busiest "self employed" therapists realise they could rent a unit down the road together, split the bills, and keep more money. They take their clients with them. Because under a true self employed model, those clients are theirs.

You're left with a salon you now have to fill again.

The cycle starts over.

I've watched this happen to brilliant owners who thought they'd found the easy life. They ended up exhausted, stripped of their team, and watching their old clients walk past their window into the salon down the road.

If a salon genuinely wants to run a self employed or co working model, and do it properly, here's what that has to look like.

The therapist or stylist manages their own bookings. They manage their own clients. They set their own prices. They choose their own hours. They wear what they want. They use their own products. They take payments through their own system, separately from the salon. They market themselves under their own brand. They take holidays whenever they want, without asking anyone.

The salon is genuinely their landlord. Nothing more.

That's a legitimate model. It works for some businesses, especially smaller ones with one or two creatives.

But that isn't what most salons running self employed teams are actually doing. And that's the problem.

I think the next two to three years are going to be uncomfortable for our industry.

More tribunal cases. More VAT shocks. More HMRC investigations. More public conversations about this model.

The Government has been openly debating this. Industry bodies are pushing for clearer rules and a more level playing field. VAT registered salons paying their team properly are watching cash only competitors thrive on a model that, in many cases, simply isn't compliant.

It can't hold forever.

And as more team members realise what they're actually missing, paid holiday, pension, sick pay, security, structure, support, we're going to see the same swing back to employment that I talked about in a previous article here.

Just like that pendulum.

I'm not writing this to lecture anyone.

I know how hard it is out there. I know why the self employed model looks like a lifeline. I genuinely understand the pressure that gets owners to that decision.

But please. Protect yourselves. Protect the businesses you've poured everything into.

Get a second opinion from someone who specialises in beauty employment status, not just any solicitor or accountant.

If you're running a self employed model, look at the day to day reality of how it actually works. Not just the contract.

If it walks like employment and talks like employment, HMRC will treat it like employment. Eventually.

And the eventually is getting closer.

Lots of love

Amy x