A clear checklist for beauty professionals
Now that you understand what misclassification is and why it is so common in the beauty industry, the next step is learning how to recognize the signs in your own situation. Most beauty professionals assume that if every salon in their town operates the same way, it must be legitimate. Many do not realize that the IRS evaluates worker classification based on control, not industry tradition or job titles.
This section will help you understand the signs in simple, real-world language.
How To Read These Signs
Not all of these signs need to apply for misclassification to occur. The IRS does not use a strict checklist. Instead, it evaluates the overall pattern of the relationship. One strong sign of behavioral control, financial control, or relationship control can indicate that a worker is functioning as an employee. The more signs you recognize, the clearer the picture becomes.
1. Behavioral Control
Behavioral control describes how the work is performed day to day.
You may be functioning as an employee if the salon:
• sets your work schedule
• requires specific days or hours
• controls how services are performed
• requires specific products or service protocols
• assigns clients to you
• requires attendance at meetings or trainings
• expects you to follow the salon’s systems or procedures
• evaluates your performance
• requires approval for time off
These expectations are normal for employees in most industries. They are not indicators of independence.
When a salon directs how, when, and in what way your work is done, that is behavioral control.
2. Financial Control
Financial control focuses on how money flows, who is responsible for business operations, and which party carries financial risk.
Ask yourself:
Does the salon process all client payments?
If clients pay the salon and the salon pays you a portion, this structure aligns with employment. Booth renters collect payments directly from clients.
Do you pay rent?
A true booth renter pays a flat rental fee. If you do not, you are not renting space. Commission or percentage splits usually indicate employee relationships.
Can you set your own prices?
If the salon sets or controls the pricing, that is financial control.
Can you offer discounts without permission?
If not, the salon is managing your revenue.
Do you purchase your own tools and supplies?
Employees typically use salon-provided tools. Booth renters purchase their own.
Does the salon require you to use their booking system?
Booth renters manage their own booking and scheduling. Required use of the salon’s system often indicates employment.
When the salon controls financial decisions, this points toward employee classification.
Commission Without Minimum Wage
Commission pay is common in the beauty industry, but it is only considered legal as employee pay when the worker is guaranteed at least the state minimum wage for every hour worked. Commission is generally considered an employee pay structure because it involves financial control and ongoing work that aligns with an employment relationship.
When a worker is paid commission while receiving a 1099, it often signals that the structure does not match IRS criteria for independent contractor status. This is one reason many beauty professionals face unexpected tax burdens during filing, because commission workers on 1099s often take on taxes that an employer would normally contribute.
Why a Salon Cannot Use Commission Pay and a 1099 at the Same Time
Commission pay and independent contracting are legally incompatible. They cannot exist together.
Commission means the salon controls the pricing, controls the client flow, controls the money, and pays the worker a percentage of revenue. This structure requires employee-level control, and that automatically aligns with employment under IRS and Department of Labor standards.
Independent contractors invoice for their work. They set their own rates. They collect their own money directly from their clients. They do not receive a percentage of the salon’s revenue.
When a salon pays someone commission and issues a 1099, it combines two systems that cannot legally coexist. The salon is avoiding employer payroll taxes, minimum wage laws, and overtime rules by labeling an employee as a contractor. It is not legal. It is misclassification.
Can a Commission Stylist Ever Be a 1099
Commission pay is almost always an employee pay structure. It only fits independent contractor criteria in very rare situations where the work is temporary, project-based, and fully controlled by the worker. Examples include editorial stylists hired for a single event who set their own rates, bring their own tools, control how the work is done, and invoice the business afterward.
This structure does not resemble long-term salon work.
In most salon settings, commission aligns with employee classification because the salon controls pricing, scheduling, client flow, and the overall working relationship.
3. Type of Relationship
This category looks at how the working relationship is defined and understood.
Ask yourself:
• Does the salon expect you to show up indefinitely with no end date
• Are you integrated into the salon’s operations and client flow
• Does the salon rely on you to serve its clients
• Does the salon market you as part of their team
• Does your daily work resemble that of an employee in any other industry
• Does the salon restrict you from working elsewhere
Contracts and labels do not determine classification.
The actual working relationship does.
If the arrangement looks, feels, and operates like a traditional job, the IRS is likely to view it as employment.
4. A Simple Rule of Thumb
Here is an easy way to think about it:
If you show up to the same place every day, follow the salon’s systems, serve the salon’s clients, rely on the salon for your income, and operate with no end date, you are likely functioning as an employee.
This is not based on preference or job titles.
It is based on how the IRS evaluates control and the structure of the relationship.
5. Booth Rental vs Misclassified Worker
Inside the beauty industry, many people believe there are only two types of workers: booth renters and 1099 contractors. That is not accurate. There are three categories, but only two are legal structures.
A true booth renter (legal)
A booth renter is a small business owner who:
• pays a flat rental fee
• collects all payments directly from clients
• sets their own hours
• sets their own prices
• uses their own booking system
• purchases their own tools and supplies
• is not directed or supervised by the salon
• can work elsewhere
• operates independently inside the salon
This is a legitimate independent contractor model.
A true employee (legal)
An employee is someone who:
• follows salon systems and protocols
• works a schedule set or approved by the salon
• uses the salon’s booking system
• charges the salon’s prices
• uses salon-provided tools and products
• is included in team meetings and trainings
• is protected by wage laws and payroll taxes
• receives a regular paycheck with proper tax withholding (federal withholding, state withholding when applicable, the employee portion of FICA, and employer-paid contributions such as the employer’s half of Social Security and Medicare)
• may be paid hourly or commission, and both structures are legal as long as minimum wage requirements and payroll tax laws are followed
This is the only model that allows for wage protections, payroll documentation, unemployment insurance, workers’ compensation, and legal commission structures.
A misclassified worker (illegal model)
This is someone who is labeled a “1099 contractor” but works like an employee. They often:
• do not pay flat booth rent
• work on commission or percentage splits
• rely on the salon’s booking system
• charge the salon’s prices
• use salon tools and products
• follow salon systems
• cannot work elsewhere
• are financially dependent on the salon
• receive a 1099 instead of a paycheck with proper tax withholding, shifting employer payroll responsibilities onto the worker
This structure is not independent contracting and not booth rental. It is employment that has been mislabeled, and it violates IRS and Department of Labor standards.
Why this matters
These three models are not interchangeable.
Two of them are legal.
One of them is not.
Clarifying the difference helps beauty professionals understand their rights and identify when they are being misclassified.
6. Real World Examples
Example 1: Worker on a 1099 but functioning like an employee
You work a set schedule.
You use the salon’s booking system.
You follow the salon’s prices and protocols.
Client money goes to the salon first.
You are paid a percentage.
You attend required meetings.
Even if you signed a contractor agreement, this arrangement aligns with employee criteria.
Example 2: True independent contractor
A salon hires a makeup artist for a wedding party.
She controls her schedule, arrives with her own kit, sets her rate, and invoices the salon.
She does not work there long-term.
This is legitimate project-based contracting.
7. Why the No Tax on Tips Credit Exposes Misclassification
The new no tax on tips credit has created a lot of excitement, but many beauty professionals do not realize that this credit only applies to employees whose tips are processed through payroll.
If you are misclassified and receive a 1099, your tips are not being recorded in a way that qualifies for the credit. This becomes a major red flag during tax season.
You may not qualify for the new tip credit if:
• your salon does not run tips through payroll
• you must track and claim your own tips
• you receive a 1099 while being paid commission
• taxes are not withheld from your checks
• tips come through cash, Venmo, or Zelle with no payroll reporting
This credit was designed to provide financial relief to beauty employees. Misclassification often blocks access to it.
Part 2 Wrap Up
If several of these signs apply to your experience, it is time to take a closer look. Misclassification happens when salons adopt structures that shift financial and legal responsibility onto workers, even when those structures do not meet federal standards.
Part 3 will walk you through what to do next. You will learn what steps you can take, what questions to ask, and how to protect yourself once you recognize the signs.