Guides
Pet Grooming Payroll: Turning Commission and Tips Into Clean Records
How grooming salons run payroll: commission splits, the $20 tip reporting rule, overtime on commission, and the pay-period records federal rules require.
What to take away
- Run commission, hourly pay and tips through payroll so every dollar has a wage record behind it.
- Employees who receive $20 or more in tips in a month report them to you, and you withhold tax on that amount.
- Overtime is computed on total earnings, so a commission-heavy week lifts the regular rate.
- Keep payroll records for three years and the time and wage backup for two.
- The IRS control test, not a handshake, decides between a W-2 and a 1099.
Pay models and where each one breaks
A salon can pay a groomer by the hour, by commission on each ticket, by base plus commission, or by a flat fee per finished dog. Each one lands differently on a pay stub.
Pay models and failure points
Hourly
- How earned
- Rate per hour
- Where it breaks
- Overtime after 40
Commission only
- How earned
- Percent of ticket
- Where it breaks
- Slow week under minimum
Base plus commission
- How earned
- Hourly floor plus share
- Where it breaks
- Commission joins overtime rate
Per dog
- How earned
- Flat fee per groom
- Where it breaks
- Bathing and no-shows cut rate
How the money is earned
- Hourly
- Fixed rate for every hour on the clock
- Commission only
- A percentage of each grooming ticket
- Base plus commission
- Hourly floor plus a share of tickets
- Per dog
- A flat fee per finished groom
Where it goes wrong
- Hourly
- Overtime still applies after 40 hours
- Commission only
- A slow week can fall under minimum wage
- Base plus commission
- The commission joins the overtime regular rate
- Per dog
- Bathing, drying and no-shows cut the hourly rate
Write the split into an offer letter or handbook before the first shift.
Turning a commission split into a wage record
- Close every ticket in the point of sale and tag it with the groomer's name.
- Pull the day's gross ticket total, separating add-ons such as nail trims and de-shedding.
- Apply the agreed split to the groomer's share of the ticket.
- Record base hourly pay on a separate line so overtime can be computed later.
- Print a pay stub that lists hours, commission, tips and each deduction.
Commission is earned when the groom is finished, not when the client books, so tagging tickets at checkout keeps the split accurate across a full weekend of appointments.
Commission split to wage record
- Close ticket in point of sale
- Tag ticket with groomer's name
- Pull day's gross ticket total
- Separate add-ons like nail trims
- Apply agreed split to groomer's share
- Record base hourly pay separately
- Print pay stub with hours, commission, tips
Unclosed tickets are the most common reason a commission total disagrees with the bank deposit.
Tip reporting and the twenty dollar rule
An employee who receives $20 or more in tips during a month must report them to the employer by the 10th of the following month. Form 4070 is the IRS form for that report, though a signed tip sheet works for many salons.
Is it a tip or wages?
Does the employee receive $20 or more in tips in a month?
report to employer by the 10th
no monthly tip report required
You then withhold income tax, Social Security and Medicare on the reported tips and include the amounts on Form 941.
A mandatory service charge is not a tip. If the salon adds a set percentage to every invoice and keeps it, that money is wages.
Tips follow finished grooms. A referral program for a grooming salon runs on completed appointments rather than discount coupons, and the ask belongs at pickup while the owner is still holding the dog.
Pay-period records worth keeping
- Full name, address and Social Security number for each groomer
- Hours worked each day and the time the shift started
- Straight time, commission, overtime and the regular rate used
- Tips reported by the employee and tax withheld on them
- Deductions, including tool or uniform costs charged to the groomer
Federal rules require payroll records for at least three years and supporting records such as time cards and wage tables for two.
Pet grooming bookkeeping starts by separating wages, taxes and tips from operating costs so the monthly total means something.
Example: one pay period, two groomers
Rosa works 44 hours at $12 an hour and earns 40 percent of her $1,600 in tickets, which is $640. Base pay is $528, so her regular rate is $1,168 divided by 44, or about $26.55.
Four overtime hours carry a half-time premium of about $53, bringing wages to roughly $1,221. She reported $85 in tips, so gross pay is about $1,306 before withholding.
Devon works 24 hours at $14 with no commission and reports $40 in tips. His gross pay is $376, and no overtime applies.
Payroll taxes on commission and tips
Social Security and Medicare total 15.3 percent of wages and reported tips, split between employer and employee. Federal unemployment tax runs at 6 percent on the first $7,000 of wages, reduced by a credit that brings most employers to 0.6 percent.
Wages, employer payroll taxes and workers compensation premiums are ordinary and necessary business expenses. Publication 535 from the IRS explains how those deductions work.
Before you hand a groomer a 1099, check the control test. The IRS definition of an independent contractor asks who sets the schedule, supplies the tools and controls the work.
In Canada, pet grooming is a taxable supply for GST or HST. The CRA guidance on which rate applies lists the provinces that use HST.
