Employee Classifications and Their Entitlements

Employee Classifications and Entitlements in the Australian Beauty Industry

Employing staff is an important step in growing a beauty business, but it also brings legal responsibilities.

Whether you operate a beauty salon, skin clinic, nail salon, lash and brow business or another beauty service, it is important to correctly determine how each person working in your business is engaged.

Terms such as full-time, part-time, casual and contractor are not simply labels a business can choose. The actual working arrangement matters.

Incorrectly classifying a worker or failing to provide the correct pay and entitlements can result in underpayments, disputes, back payments and potentially penalties.

This guide provides an introduction to employee classifications in the Australian beauty industry and some of the obligations salon and clinic owners should understand.

Important: Employment laws and pay rates can change. This article provides general industry information and is not legal, employment or financial advice. Employers should check current requirements with the Fair Work Ombudsman and seek professional advice where necessary.

Does the Hair and Beauty Industry Award Apply to Your Business?

Many employees working in Australian beauty businesses are covered by the Hair and Beauty Industry Award 2020 (MA000005).

The Award covers employers and eligible employees working in activities including:

beauty therapy
facial and body treatments
waxing
eyebrow and eyelash services
manicures and nail services
make-up application
skin analysis
massage and certain specialised beauty treatments
electrolysis and laser hair removal
treatments using various types of electrical beauty equipment
hairdressing and related hair services.

However, businesses should not assume that every worker is automatically covered by the same Award.

Award coverage can depend on the business, the work being performed and the employee’s classification.

Employers should use the current information provided by the Fair Work Ombudsman to determine which Award and classification applies.

Salon-Compliance-Documents-Australia-ABA

The Main Types of Employment

Under the Hair and Beauty Industry Award, an employee covered by the Award may be employed as:

full-time
part-time; or
casual.

Independent contractors are different because a genuine contractor is not an employee.

Understanding this distinction is particularly important in the beauty industry, where room rental, chair rental, commission arrangements and contractor agreements are common.

Full-Time Employees

Under the Hair and Beauty Industry Award, a full-time employee is generally engaged to work an average of 38 ordinary hours per week, which may be averaged over a period permitted by the Award.

Full-time employees generally receive employment entitlements including:

paid annual leave
paid personal/carer’s leave
compassionate leave
parental leave entitlements
family and domestic violence leave
public holiday entitlements
superannuation
notice of termination where applicable; and
other entitlements provided through the National Employment Standards and applicable Award.

The exact conditions depend on the employee’s circumstances and applicable workplace laws.

Part-Time Employees

A part-time employee generally works fewer than 38 ordinary hours per week.

Under the Hair and Beauty Industry Award, there are specific requirements concerning part-time working arrangements.

Employers should ensure that required agreements concerning working hours are properly documented and that variations are recorded where required.

Part-time employees generally receive many of the same entitlements as full-time employees on a proportionate basis according to the hours they work.

These can include:

annual leave
personal/carer’s leave
public holiday entitlements
superannuation; and
other National Employment Standards entitlements.

Employers should also be aware that hours worked outside agreed arrangements may attract additional payments depending on the circumstances and Award provisions.

Casual Employees

Casual employment is common within the beauty industry, particularly where staffing requirements fluctuate.

However, simply calling someone a casual employee does not determine their legal employment status.

Australian workplace laws contain a legal definition of casual employment, and these laws have changed in recent years.

Under the Hair and Beauty Industry Award, casual employees generally receive a 25% casual loading for ordinary Monday-to-Friday hours within the specified span of hours.

Different penalty and overtime rates can apply at other times.

Casual employees generally do not receive paid annual leave or paid personal/carer’s leave, but they can have other entitlements under the National Employment Standards.

Casual Employees and Superannuation

A common misconception is that casual employees only receive superannuation after earning a particular amount each month.

Employers should not rely on the old $450-per-month threshold.

That threshold was removed from Australia’s superannuation guarantee rules.

Casual employees may therefore be entitled to employer superannuation contributions even when they earn relatively small amounts.

There can still be particular rules and exceptions, including rules affecting some employees under 18, so employers should check current Australian Taxation Office requirements.

Changes to Casual Employment

Australian casual employment laws have undergone significant changes.

Older employment information may refer to a general rule allowing casual employees to request conversion to permanent employment after 12 months.

Businesses should not rely on that statement without checking the current law.

Current legislation provides a framework dealing with changes from casual to permanent employment, including circumstances in which an eligible employee may notify an employer that they believe they no longer meet the casual employment definition.

Different rules and timing can apply depending on the circumstances and whether the employer is a small business.

Because casual employment laws can change, salon owners should refer to the current Fair Work Ombudsman guidance rather than relying on old employment templates or salon policies.

Independent Contractors

Independent contractors operate differently from employees.

A genuine independent contractor generally operates their own business and provides services under a commercial arrangement.

Beauty businesses commonly encounter contractor arrangements involving:

room rental
chair rental
visiting therapists
freelance beauty professionals; and
specialists operating within another salon or clinic.

However, putting the word “contractor” into an agreement does not automatically make someone an independent contractor.

The actual nature of the relationship must be considered.

Factors can include how the person works, the degree of control within the relationship, how they are paid and the overall nature of the arrangement.

Businesses should be particularly careful where someone described as a contractor works in a way that closely resembles an employee.

Misrepresenting an employment relationship as an independent contracting arrangement can create serious legal problems.

Contractors and Superannuation

Another common misconception is that businesses never need to pay superannuation for contractors.

In some circumstances, a person engaged as an independent contractor may still be treated as an employee for superannuation purposes.

For example, particular rules can apply where a person is engaged principally for their labour.

Beauty businesses using contractors should therefore check their superannuation obligations rather than assuming that an ABN or contractor agreement automatically removes any responsibility for super.

Hair and Beauty Award Classifications

Employment type and Award classification are two different things.

After determining whether someone is full-time, part-time or casual, an employer must also determine the appropriate classification for an employee covered by the Award.

The Hair and Beauty Industry Award currently contains six Hair and Beauty Employee levels.

These range from Level 1 positions such as receptionists or salon assistants through to classifications covering different beauty and hair qualifications and competencies.

The correct classification affects the employee’s minimum rate of pay.

Importantly, employers should not choose a classification simply because it produces the desired wage.

The Award requires classification to reflect the competencies and skills the employer requires the employee to exercise in performing their principal functions.

Minimum Pay Rates

Minimum wages under the Hair and Beauty Industry Award can change.

Rather than relying on a pay rate copied from an old article, social media post or employment contract, beauty businesses should check the current rate whenever employing or reviewing staff.

Rates can depend on factors including:

classification level
age
employment type
day and time worked
overtime
weekends
public holidays; and
other applicable Award provisions.

Casual employees can also receive different rates depending on when they work.

Penalty Rates and Overtime

Salon owners need to consider more than an employee’s basic hourly rate.

Depending on the employment arrangement and hours worked, additional rates may apply for:

Saturdays
Sundays
public holidays
overtime; and
work performed outside particular ordinary spans of hours.

This is particularly relevant to beauty businesses because evenings and weekends are often among the busiest trading periods.

Employers should ensure their payroll systems correctly apply the relevant Award provisions.

Superannuation

Eligible employees must receive superannuation contributions in accordance with Australia’s superannuation guarantee laws.

The superannuation guarantee rate and associated rules can change over time.

For this reason, employment contracts and salon policies should ideally avoid relying on outdated fixed percentages without ensuring they are reviewed whenever legislative changes occur.

Employers can check current superannuation requirements through the Australian Taxation Office.

The National Employment Standards

The National Employment Standards (NES) establish minimum employment entitlements for employees within Australia’s national workplace relations system.

Depending on eligibility and employment type, these deal with matters including:

maximum weekly hours
requests for flexible working arrangements
casual employment
annual leave
personal/carer’s and compassionate leave
parental leave
community service leave
family and domestic violence leave
public holidays
superannuation contributions
notice of termination and redundancy; and
provision of the Fair Work Information Statement.

An employment contract cannot simply remove minimum statutory entitlements that apply to an employee.

Keep Employment Records

Beauty businesses should maintain accurate employment and payroll records.

Depending on the circumstances, records can include:

employment type
classification
hours worked
wages
overtime and penalties
leave
superannuation
employment agreements; and
changes to working arrangements.

Good record keeping helps businesses demonstrate compliance and makes payroll disputes much easier to resolve.

Review Employment Arrangements as Your Salon Grows

Employment arrangements that were appropriate when a business first opened may not remain appropriate indefinitely.

For example, a salon may begin with occasional casual staff but eventually develop stable staffing requirements.

Similarly, a contractor arrangement may change substantially over time.

Salon owners should periodically review:

employee classifications
employment types
Award coverage
pay rates
contractor arrangements
superannuation obligations; and
employment documentation.

Where to Check Current Requirements

Australian workplace legislation, Award provisions, minimum wages and superannuation requirements can change.

Beauty business owners should check current information through official sources including:

Fair Work Ombudsman
For the Hair and Beauty Industry Award, employment types, National Employment Standards, minimum wages and workplace rights.

Fair Work Pay and Conditions Tool (PACT)
For current Award pay rates and applicable conditions.

Australian Taxation Office
For current superannuation guarantee requirements and information about superannuation obligations for employees and certain contractors.

Key Takeaway for Beauty Business Owners

Employing staff involves considerably more than agreeing on an hourly rate.

A beauty business should determine:

Is this person genuinely an employee or contractor?

If they are an employee:

Are they full-time, part-time or casual?

Then:

Which Award applies?

What is their correct classification?

What minimum rate, penalties, overtime and entitlements apply?

Getting these foundations right from the beginning can help protect both the business and its employees.

Employment legislation changes, so reviewing these arrangements regularly should form part of the ongoing compliance processes of every Australian beauty business.

This article provides general educational information for the Australian beauty industry. It does not constitute legal, employment, taxation or financial advice. Requirements vary according to individual circumstances and may change. Businesses should confirm their obligations with the relevant government authority or obtain professional advice where required.