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Employee Agreements and Contracts Are For All Small Businesses

One of our favorite clients, a small business owner, has a fantastic Beauty Salon not far from our office where many of us get our hair cut.  As with many of our clients we have seen her business go from start up to prosperous.  With success comes many new headaches, however. 

During our last appointment together my favorite salon owner was discussing the difficulty she has in retaining talent.  I hadn’t thought about it too much but what she said made sense.  Professionals in the beauty industry don’t just graduate the beauty academy and find themselves ready to do great work.  Instead it is much more of apprentice system.  The new graduates try to find talented salon owner much like my friend who can mentor them.

[Read: Two Common Ways to Buy an Existing Business]

My friend is known in the industry for her hair coloring talents.  Being able to blend the perfect color, correct bad color jobs and not damage client’s hair is a difficult skill to master.  The hours she spends sharing her expertise with her new trainees is many.  Additionally, she will also send them to continuing education and on trips to study with other hair masters in different cities. (My favorite salon owner of course pays the tab.)  She also has her young talent spend time with product experts, so they understand the hair care products that are on the market.  Often, she will additionally cross train them in other services such as eye lash extensions or permanent makeup.    My friend also takes the time to teach young pupils the professional aspect of the salon and spa industry.  How to book appointments, how to talk to clients, how to manage their expectations, how to handle them when they are upset.  My friend invests in her young employees the way someone invested in her when she was starting out years ago.  The problem is, there is a reoccurring theme of all her meticulously trained employees being lured away from her salon right about the time they are really blossoming as beauty professionals.  

The Sasha Corporation averaged the results of 15 studies that determined average costs to replace an $8 per hour employee, determining an average cost of $9,444.47 per turnover. Even when the 33 percent of estimates with the highest prices were removed from calculations, replacement costs were $5,505.80 per turnover. 

The Average Cost to Train a New Employee; by Wilhelm Schnotz; Website

It seems that my friend is also known industry wide for the investment she makes in her new hires.  So, she is never without applicants for open positions.  The thing is though, once they have completed a certain amount of training, they will take the skills and know- how my friend lovingly passed on to them and market themselves to other salons as a seasoned stylist, with amazing training and experience for higher pay.   Let’s face it, as business owners we would always rather hire the experience candidate who doesn’t require much training over the novice.  So, obviously, my friends’ employees are in high demand!

[Read: Why You Should Be Comparing Your Employees to Furniture]

A good employment contract can specify a commitment from the employee

My friend is feeling exhausted, like she is always on the hire and train hamster wheel.  The thing is, she can very easily stop running on the wheel by simply making sure she has an employment agreement in place with her new hires.   A good employment contract can specify a commitment from the employee; that in exchange for all the expensive trips and valuable training, she can count on them to work for her for a certain amount of time.  If not, they need to reimburse her what she is out of pocket for their enrichment.  Moreover, it is a good way to give employees something to “target”.  If the employee knows that they will get certain pay increases at certain milestones, they are less likely to go shopping for a raise that really, only constitutes a small hourly increase.  

Call us up today if you would like to discuss creating employee agreements or contracts that make sure you are not always out of pocket money and needlessly running on the hire and train hamster wheel. 

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