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All things London & Natural Hairdressing

The "Uberisation" of the UK Hair & Beauty Industry: Disguised Employment Practices and Unlawful Competition

In the bustling world of the UK hair and beauty sector, a significant shift has been noted with more than half of the industry embracing self-employment, chair renting, or contracting models. This change, however, brings to light the complexities of 'disguised employment'—a term gaining prominence amidst salon owners and hair stylists alike. The British Beauty Council has raised concerns over a prevalent lack of understanding regarding tax obligations associated with these employment models, which could inadvertently foster unlawful competition. The discussion gains further weight following a Supreme Court ruling in 2021 against Uber, compelling HMRC to tighten its scrutiny over similar business practices in the sector.

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Amidst these evolving dynamics, certain hair salons and salon teams fully adhere to regulatory expectations and invest in the professionalism and development of their hairdressers. These establishments not only ensure compliance with the legal framework but also highlight the importance of fostering a transparent and fair workplace.

Table of Contents


Understanding Disguised Employment

Disguised employment in the UK hair and beauty sector is a nuanced issue, reflecting the fine line between genuine self-employment and situations where individuals are treated as employees without the corresponding benefits. This phenomenon is particularly prevalent as the industry sees a shift towards self-employment, with more than half now identifying as self-employed. However, this trend has led to complexities around tax obligations and employment rights.

Key Characteristics of Disguised Employment:

  • Control Over Work: Business owners dictating working hours, dress code, and even holidays.

  • Financial Arrangements: The practice of salons taking payments on behalf of self-employed individuals, covering equipment costs, or contributing to running expenses.

  • Contractual Clarity: The absence of a clear agreement outlining the nature of the working relationship, leading to ambiguity.


Impact of Unlawful Competition on the Market

In the UK hair and beauty sector, the prevalence of unlawful competition has significant implications for the market, consumers, and legitimate businesses.

Financial and Legal Repercussions for Businesses

An estimated 70% of the industry operates under a self-employed model to circumvent PAYE, National Insurance, and VAT obligations.

VAT Avoidance

Payment tools like SlickPay facilitate financial transactions for those renting chairs or operating hybrid models, allowing payments to be directly deposited into the service provider's account. By doing so, a salon working with self-employed hair stylists can easily stay below the £90,000 PA VAT threshold and hence pay £0 VAT - where we're paying 20% VAT on all our income, even though up to 30% of our turnover is paid to our hairdressers in commissions.

PAYE, NI & pension contributions avoidance

Unfortunately, we know from experience that many, too many, salons exerce over self-employed hairdressers the exact same level of control than we do over our employees. Talk to any of our hair stylists and they'll confirm it. This allows many salons to get the best of both worlds:

  • On one hand, they retain a high degree of control over their "self-employed" stylists.

  • On the other hand, they're not liable for employers' national insurance and pension contributions.

  • As a bonus, their fixed wage bill disappears completely and is turned into a variable cost, with the risk now borne by the service providers.

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At this stage, you may think: why do hairdressers agree to this in the first place?!

While everyone's situation is different, here are some of the most common reasons:

  • First, this model is so widely spread that it's now become commonly accepted by most hairdressers. It's hard to challenge something that is now mainstream!

  • Secondly, many of them are not aware of their rights, and of the very fact that they may be in a disguised employment.

  • Some salon operators play by the book, giving their self-employed stylists a lot of freedom to run their "business" the way they see fit. This flexibility can be an attractive proposition to many people.

  • Finally, and it's probably the elephant in the room: as the self-employed stylists' earnings don't go through PAYE, it can be tempting for them to declare a lower income when filling out their self-assesment. It's very easy, and the risk of being caught by HMRC is generally deemed low within the industry.

To summarise:


Salon with self employed stylists

Salon with regular employees

VAT liability



Employer's national insurance contributions



Employer's pension contributions



Wage bill

Usually variable


As the wage bill of a hairdressing business is typically around 60%-70% of their (net) sales, we can see that all things being equal, a "self-employed" salon's margin is up to 30 points higher than a salon with employees.

Again, let's emphasize that not every self-employed hairdresser and salon operator in the UK is knowingly and willingly running tax avoidance schemes. However, it is both so incredibly easy to do and so much more profitable to set up a hair salon with self-employed stylists, that it's no surprise it's become the mainstream model.


Impact on the Industry And the Community

This shift towards salons working exclusively with self-employed hairdressers comes with a significant impact on the community, the industry, the hairdressers and the consumers:

  • These salons essentially thrive off tax avoidance. If less businesses and individuals pay tax, the burden becomes higher for the remaining tax payers and/or the quality of the public services decrease.

  • Such salons often have a very short term view. They're far less likely to invest in their team and help them grow professionnally. They won't take on apprentices or junior stylists. This, over time, leads to an overall drop in the level of service provided by hairdressers in the UK.

  • The hair stylists themselves are worse-off in the long run as they're likely to have lower state and private pensions. They also tend to bear a heavy financial risk with no fixed income. Lastly, they're completely disposable and have no long term stability either.

  • Finally, the rise of untrained or poorly trained hairdressers poses health and safety risks to consumers and undercuts prices, creating an unfair competitive environment. Consumers also pay a heavy price due to a somewhat random, often poor quality of service.


Regulatory and Community Response

The Competition and Markets Authority encourages reporting of anti-competitive behavior. Meanwhile, the government is enforcing stricter licensing laws, and the NHBF calls for consumer education on the risks of using unlicensed practitioners. It's essential for consumers to support salons that adhere to legal and ethical standards, fostering a healthier, more competitive market.

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HMRC's Response and Guidelines:

  • Following a landmark Supreme Court ruling in 2021, HMRC has intensified its scrutiny of disguised employment, leading to significant tribunal rulings against non-compliant salons. HMRC is proactive in investigating cases where businesses might have misclassified individuals to evade tax obligations.

  • The UK Government, recognizing the complexities around the 'rented chair' model, is focused on tightening enforcement against disguised employment. To mitigate risks, it is advised that businesses ensure self-employed individuals retain control over significant aspects of their work, from setting their prices to choosing their working hours. Additionally, payments should be processed separately to reinforce the independence of the self-employed individual.

  • To assist salons and self-employed individuals in navigating the legal landscape, the government offers guidance on tax expectations and employment status. This includes specific guidelines developed in collaboration with the National Federation of Hairdressers. HMRC guidelines stipulate that a specific contract or agreement must be in place, detailing the working relationship to avoid the pitfalls of disguised employment.

Legislative Measures

  • IR35 Legislation: Enacted to combat disguised employment, the IR35 rules require businesses to accurately determine the employment status of their workers. This is particularly relevant for medium and large salons working with Personal Service Companies (PSCs).

  • Digital Markets, Competition and Consumers Bill: A proposed bill to empower the Competition and Markets Authority (CMA) with enhanced enforcement capabilities, including imposing fines on businesses violating consumer protection laws.

Support and Resources:

  • Employment Status Manual and HMRC Tool: Resources such as the Employment Status Manual and the Check Employment Status for Tax (CEST) tool are available to help businesses determine the correct tax status for their workers, thereby avoiding penalties for facilitating disguised employment.

These initiatives underscore the government's commitment to fostering a fair and competitive environment in the hair and beauty sector, ensuring that salons like ours, which invest in their staff and adhere to legal standards, can continue to thrive.



The journey through the nuances of disguised employment and the battles against unlawful competition has brought us to a critical juncture. As we've explored, the landscape of the UK hair and beauty sector is complex, with a blend of self-employment models and traditional employment setups. It becomes evident that while a significant portion of the industry leans towards self-employment, there remain those few salons that epitomise the essence of lawful operation and employee investment.

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The implications of disguised employment and unlawful competition extend beyond mere legal compliance, affecting the fabric of our sector's reputation and sustainability. As we move forward, let us champion the cause of transparency, integrity, and professionalism, ensuring a fair, competitive, and thriving hair and beauty sector for years to come.

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