Tipping
According a recent article in the Chicago Tribune, (click here to read the article) tipped workers across all walks of life are beginning to feel the impact of what is more and more being called a “recession.” With tips accounting for as much as 25% of many salon professionals take home earnings, this news could translate into a big hit to your pocketbook - even if bookings remain even with last year.
To give a sense of just how a shift can impact you, consider the following example:
Assumptions:
- Mary averages $30,000 before taxes and not including tips. This translates into an average of $600 per week (assuming ten days during the year of unpaid time off).
- Her service bookings averaged $1,000 per week - or a total of $50,000 for the year.
- Mary average $180 per week in tips - or 18% of service dollars. This adds up to
$9000 in tips for the year bringing her total pay to $39,000 (before taxes). In this example, tips represent 23% of Mary’s total pay before taxes.
Now let’s change just one assumption - and bring overall tips down to 12% - or a reduction of $60 per week - or $3000 for the year. This is a change in total compensation from $39,000 to $36,000.
Translation - overall take home pay went down by 8% - at a time when the price of milk has gone up 12% since Christmas and gas prices are topping $4 a gallon in many markets.
We’d like to hear from you. Are you noticing a shift in tips? What’s your take on the overall economy and its impact on business? Do you find yourself reducing tips to other service workers in recent months? And most importantly, how are you working to offset any declines in your revenue?
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May 16th, 2008 at 1:38 pm
where did the 18% tips of services come from? That seems terribly high…Is that what the IRS thinks stylists get? I would like to hear from the stylists who get tips and then take a recount.
May 17th, 2008 at 1:59 pm
We’re a very established, mid priced, high value salon. We average 15% and agree 18 sound high. I do agree with the point that tips are a big part of our income. We’re seeing them drop slightly. Worse is the appointment stretching going on.
May 17th, 2008 at 8:16 pm
When we opened our salon two years ago we made it a no-tipping salon and raised our prices 25%. We added value to our services and encouraged our customers to spend the money on themselves instead. This has helped even out the budget for them and we are not seeing a decline in visits.
June 24th, 2008 at 1:09 pm
What about how much business taxes and property taxes, gas tax, sales tax, income tax, FICA, SSI, have all gone up? not to mention how the market and Mary’s 401k/SEP-IRA (If she can afford to put money in one) will be hurt if the Democrats pass a “windfall profits” tax on business, which only gets paid by the consumer, while the 401K dries up because the company is TAXED of any PROFITS! “Taxing the rich” doesn’t work and never has. Theres more to your income than tips and price of milk! As in how much can you keep, and how much do you surrender to a wasteful government?