How to pay a stylist: commission, salary or chair rent

Short answer: salons in Estonia use five models to pay a stylist - an employment contract with a fixed salary (tööleping, palk), an employment contract with salary plus a bonus tied to turnover (tulemustasu), a mandate contract (käsundusleping), invoicing with a self-employed stylist (FIE or OÜ), and chair rent (renditool). There is no single "correct" model, but two things really decide it: the payroll taxes the employer pays on top of gross (social tax 33%, employer unemployment insurance 0.8%), and the risk of reclassification as employment if you dress a real job up as something else. Below are the figures as of July 2026 and a calculation you can run against your own salon.

Five models that actually exist in Estonia

All five are in use. Nothing in the open sources suggests one is a mandatory standard in Estonia - it is each salon's decision, and one worth taking to an accountant. But the tax burden and the legal risk differ enormously.

2026 taxes: the numbers the calculation is built from

Before talking about percentages, pin down the rates. As of July 2026:

Rates are confirmed on the Tax and Customs Board's tax rates page; the 1.6% / 0.8% unemployment insurance rates apply for 2026-2029 under a regulation in Riigi Teataja. The employee picks their own funded pension rate (Pensionikeskus); the state adds a further 4% out of social tax whichever rate they chose.

The line that matters most is social tax. It does not come out of gross - it is added to it. Every 1000 EUR of gross actually costs the salon 1338 EUR.

The minimum social tax base: where "pure commission" gets expensive

In 2026 the monthly base for the minimum social tax obligation is 886 EUR, giving a minimum employer obligation of 292.38 EUR per month (33% of 886). For a full-time stylist the salon pays at least that much social tax even if gross pay that month came in below the base. For part-time work the minimum can be reduced proportionally only in one case: the employee has another employer already paying their share of it, and has confirmed this in a written statement.

The practical conclusion: paying a stylist purely on commission under an employment contract costs more in a slow month than it looks. If the stylist earned little, social tax does not fall in step - the minimum obligation stays put.

Basic exemption 2026: the "tax hump" is gone

From 2026 the basic exemption (maksuvaba tulu) is 700 EUR per month (8400 EUR per year) for everyone in work, fixed - it no longer depends on how much you earn. For people of pension age it is 776 EUR per month (9312 EUR per year).

This is a real change. Previously the exemption shrank as income rose - the notorious "tax hump" (maksuküür) with thousands of gradations, which could swallow most of a pay rise. From 2026 the hump is gone (Ministry of Finance, 2026 tax changes on emta.ee). For a salon it means commission swings no longer move net pay unpredictably - the maths is finally linear.

To apply the exemption the employee submits a free-form application, and it can only be applied at one employer at a time. If your stylist also works at another salon, that detail matters.

The minimum wage only rose on 1 April

From 1 April 2026 the minimum wage (töötasu alammäär) is 946 EUR per month and 5.67 EUR per hour (Ministry of Economic Affairs, Riigi Teataja). Note the timing: the rise did not arrive on 1 January - until 31 March 2026 the 2025 rate still applied, 886 EUR per month and 5.31 EUR per hour.

That is the second floor under the commission model. A full-time stylist on an employment contract must be paid at least the minimum wage, even if their commission came out lower. Under an employment contract, commission is never "pure commission" - there is always a floor beneath it.

Worked example: what a stylist on an employment contract costs

Important caveat: the figures below are illustrative. There is no official statistic on what share of turnover Estonian salons pay their stylists - neither the Tax and Customs Board, nor Statistics Estonia, nor the Labour Inspectorate publish such a number. The percentage is a negotiation between a specific salon and a specific stylist, not a market standard. Use these numbers only to follow the logic.

Say a stylist performed 3000 EUR of services in a month, and the agreed compensation produces a gross of 1200 EUR.

Cost to the salon:

• Gross pay: 1200.00 EUR
• Social tax 33%: 396.00 EUR
• Employer's unemployment insurance 0.8%: 9.60 EUR
• Total for the salon: 1605.60 EUR

What reaches the stylist (basic exemption applied, II pillar at 2%):

• Unemployment insurance 1.6%: 19.20 EUR
• Funded pension 2%: 24.00 EUR
• Income tax base: 1200 - 19.20 - 24.00 - 700 = 456.80 EUR
• Income tax 22%: 100.50 EUR
• Net, roughly: 1056.30 EUR

One detail that trips people up: income tax is not charged on "gross minus the basic exemption". The employee's unemployment insurance contribution and funded pension contribution come off the gross first, and only what remains after the basic exemption is taxed.

So out of 3000 EUR of turnover, 1605.60 EUR went on the stylist and around 1056 EUR reached them. The gap - close to 550 EUR - is tax, and most of it (social tax) comes out of the salon's pocket, not the stylist's. Payroll does the exact sums; the point here is the proportions.

FIE, OÜ and the entrepreneur account

If the stylist is a FIE (füüsilisest isikust ettevõtja, sole trader), the salon is not their employer. The stylist invoices the salon and pays their own income tax at 22% and social tax at 33% on profit (not on turnover). A FIE pays social tax in advance four times a year, and the same 886 EUR monthly base applies - so a FIE does not escape the social tax minimum either, even after a quiet quarter (EMTA on self-employed persons).

With an OÜ, the stylist invoices through their own limited company, B2B. Simplest paperwork for the salon - but read the reclassification section below: simple paperwork does not mean low risk.

The ettevõtluskonto (entrepreneur account) is a simplified regime for smaller volumes: whatever lands in that bank account is taxed at a flat 20% of receipts (not profit - costs are not deductible). Of that, 22/55 is income tax and 33/55 social tax; if the person is in the II pillar, their pension contribution is added on top, making the rate 22%, 24% or 26%. The threshold is 40 000 EUR per calendar year: exceed it and you must register as an entrepreneur in the commercial register and as a VAT payer (Simplified Business Income Taxation Act; EMTA on the entrepreneur account). Fine for a stylist starting out or working part-time; a full-time hairdresser hits the ceiling quickly.

Chair rent: how to structure it, and what happens with VAT

In the chair-rent model the stylist is neither an employee nor a subcontractor but a tenant: they rent a workplace (chair, room) from the salon for a fixed fee or an agreed share of turnover, and operate as a separate business. Legally this is usually a lease of commercial premises or equipment. Two VAT points trip salon owners up regularly:

1. Leasing immovable property is exempt from VAT by default under § 16 (2) 2) of the Value Added Tax Act (maksuvaba käive). So by default there is no VAT on chair rent.
2. The lessor may voluntarily add VAT to a commercial lease under § 16 (3), but only after notifying the Tax and Customs Board in writing in advance (or within the same taxable period). Without that notification the supply stays VAT-exempt even if VAT was mistakenly written on the invoice - and the tenant gets no input VAT deduction.

In practice: if you want to deduct input VAT on your premises costs, register that choice with the Tax Board first. See special VAT provisions and VAT on rental invoices.

The biggest risk: reclassification as employment

This is the section the rest of the article exists for. If a salon papers a stylist as a FIE, an OÜ or a mandate contract but in reality treats them as an employee, the tax authority or a court can treat the contract as an employment contract. Per the Labour Inspectorate's guidance, the decisive criterion is subordination (alluvussuhe): does the salon determine where, when and how the stylist works?

Signs of employment:

• the stylist is subject to the salon's work organisation and control (schedule, instructions)
• uses the salon's equipment and materials
• works on the salon's premises
• receives a periodic fixed payment
• the relationship is long-term

Signs of a genuine service relationship:

• the stylist decides how and when to do the work
• bears their own entrepreneurial risk
• is independent in organising their time

And the crucial point: if a contract shows features of both an employment contract and another type, and its nature cannot be determined unambiguously, it is presumed to be an employment contract - the burden of proof sits with the employer (Labour Inspectorate, types of contracts).

The consequence is all payroll taxes assessed retroactively (social tax, unemployment insurance, funded pension) plus possible interest and penalties. Because only a natural person can be an employee under the Employment Contracts Act, reclassification also erases the OÜ as a contracting party where a specific human being actually did the work. Estonian accountants have a name for it: OÜ-tamine, the sham provision of services to conceal employment (rup.ee).

On chair rent specifically: if the salon still controls the schedule, the clients, the prices and supplies the materials, the lease is only a form. The substance is employment.

So which is better?

On direct tax alone, FIE and chair rent are cheaper for the salon: no social tax, no unemployment insurance on the stylist. But that comparison is only honest when substance matches form.

• Employment contract (salary, or salary plus commission) fits when the salon runs the schedule, the prices, the client base and the service standard. Dearer, but predictable and risk-free. Commission sets motivation; the minimum wage and the social tax base set the floor.
• FIE / OÜ / chair rent fits when the stylist is genuinely independent: own clients, own price list, own schedule, own materials. Then the tax saving is legitimate.
• Käsundusleping suits one-off or project work; the salon pays income tax (22%) and social tax (33%) on the fee and declares it on form TSD.
• Ettevõtluskonto works for small volumes and simplicity, up to 40 000 EUR a year.

The most expensive option is not the employment contract. The most expensive option is an employment contract papered as a lease that surfaces three years later.

How Tervita takes the arithmetic off your desk

When pay depends on turnover, the tedious part is not the tax - it is reconstructing the turnover: who did which service, at which promotional price, what they upsold, and what actually landed in the till.

Tervita has a compensation module for exactly this: for each stylist you can set a percentage of the service, a percentage of retail sales, or a fixed salary - and the amount is calculated automatically from completed appointments and POS transactions. At month end nobody adds up receipts in a spreadsheet: the number is already there, ready to hand to your accountant. For setting up your team, see Staff, roles and invitations.

Reviewing your salon software more broadly? See also how to choose scheduling software, the online booking guide and how to reduce no-shows - an empty chair hurts a commission model more than anything.

Want the system to calculate your stylists' pay instead of you doing it on a Saturday night? Create a free Tervita account and give every stylist their own pay model.

Informational only, not a substitute for an accountant or lawyer. Figures are current as of July 2026 and come from the Tax and Customs Board (Maksu- ja Tolliamet), Riigi Teataja and the Labour Inspectorate (Tööinspektsioon).