Welcome to the Salon Owner’s Podcast, Phorest FM Episode 89. Co-hosted by Killian Vigna and Zoé Bélisle-Springer, Phorest FM is a weekly show that puts forth a mix of interviews with industry thought-leaders, salon/spa marketing tips, company insights and information on attending Phorest Academy webinars. Phorest FM is produced every Monday morning for your enjoyment with a cup of coffee on your day off.
Phorest FM Episode 89
Unwelcome news in the Irish hairdressing industry this month. On October 9th, 2018, the Irish Minister for Finance announced a VAT (Value Added Tax) increase for hairdressing services along with a rise in National Minimum Wage and employers PRSI contribution, resulting in an industry call-to-action held on October 23rd, 2018. To take the pulse on the matter, Killian and Zoe are bringing you straight into the action of the Hairdressing Council of Ireland’s Protest March to gather clips from the protest, interviews featuring Bridget Haren and Sean Taaffe, President and Vice President of the Hairdressing Council of Ireland as well as a discussion with Phorest’s very own Declan Kehoe and Lisa O’Brien.
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Sean Taaffe: We employ thousands of people! We need the VAT retained at nine percent. Support hairdressing, support the nine percent!
Protester Group: Retain the nine percent! Retain the nine percent!
Killian Vigna: Welcome to Phorest FM, episode 89. I Killian Vigna…
Zoe Belisle-Springer: And I’m Zoe Belisle Springer. This week’s a special episode. We’re taking the pulse on a subject of topical interest in Ireland. We’re bringing you straight into the action of the Irish Hairdressing Council protest march against the Irish government’s announced tax increase in hairdressing. As usual though, we’ll top everything off with our upcoming Phorest Academy webinars and announcements.
Killian Vigna: So, grab yourself a cup of coffee, sit back, relax and join us weekly for all your salon’s business and marketing needs. So Zoe, this week for you, I suppose as a bit of an outsider being kind of off our Eastern Time, we have a bit of an uproar going on here at the moment. As well all know Phorest fully supports the salon industry which is why we’re going to cover this topic.
We’re well aware we’ve a global audience spanning from U.S., across Europe, to Australia, but this week we wanted to focus on one market in particular and it’s the Irish hairdressing industry. So, we hope that all of our listeners can kind of get on board with us here. On Tuesday, the 9th of October this month, the Minister for Finance in Ireland announced that the VAT rate for hairdressing services was going to be going up to 13.5 percent from 9 percent. Last week our very own Ronan Perceval, the Phorest CEO wrote an open letter titled “VAT Increase Highlights Irish Government’s Lack Of Understanding Of Hair Sector.”
So today, I know it’s a Tuesday, we usually do this on a Monday, but today on the 23rd of October at 1:30, the Irish Hairdressing Council held an industry call-to-action at the DAIL which essentially the assembly or better known as the parliament of Ireland to protest this increase. It was cold, it was windy and it was a great turnout today.
Zoe Belisle-Springer: And Killian, I know you’ve had the chance to chat with people from the Hairdressing Council of Ireland who were organising this march – Bridget Haren, Sean Taaffe – let’s hear what they had to say before jump in to discuss this further.
Bridget Haren: Bridget Haren, president of the Hairdressing Council of Ireland. I come from County Clare today. So we’re here protesting outside Leinster House. We just wanted to have our voice heard within the industry. We’re all outside here protesting that we think it’s very unfair that the 9% VAT jumped up to 13.5%. It’s for the hospitality industry, we are involved in that, but there is 35 million that is actually put towards tourism but it actually hasn’t included the hairdressers. We’re not getting one cent of that. We want to know strategies they’re going to put in place by the government to help us to move forward as an industry. It’s very unfair.
They did say they would jump from 9 to 11, but the put it right up and it’s gonna cause massive increase in job loss come January our minimum wage was up and our PRSI —
So what we really want to do is shout out to them today and let them know we’re not happy as an industry that this has happened.
Sean Taaffe: Hi there, Sean Taaffe, Vice-President of the Hairdressing Council of Ireland and I’ve traveled up from Killarney and County Kerry today.
Killian Vigna: That’s a good five, six hours isn’t it?
Sean Taaffe: Well it’s a good, it’s nearly four. I guess the point that I want to make is you know, it’s not just an immediate issue. We all know that, you know, the increase is gonna drive clients into the black economy into hairdresser’s kitchens, rather than actually into our salons. But what’s actually more worrying is the fact that salons will not be taking on trainees now as a result of it and if you don’t have trainees coming into our industry, what happens, the industry dies.
We’re already in crisis at the moment. We don’t have enough young people coming into the industry number one, or staying in the industry, number two. Then take, add to it, that salons are not gonna be taking on new trainees, then we’re in serious, serious trouble. And it’s not just a 12-month approach. This is, if this goes ahead, it’s gonna have a knock on effect for the next five, possibly ten years and that’s basically my point.
Zoe Belisle-Springer: Thank you so much Killian for being there and gathering all those snippets and those interviews. Now that everyone is back from the protest we’re joined with Declan and Lisa in the studio. Declan, Lisa, well you both worked for Phorest, but you have also worked in the industry behind the chair yourselves. Welcome to the show guys!
Declan Kehoe: Thanks!
Lisa O’Brien: Thanks, hey.
Zoe Belisle-Springer: Declan, for listeners outside of Ireland, what is VAT? What is going on essentially here?
Declan Kehoe: V.A.T. in Ireland would be the equivalent of sales tax in the U.S. We have a tax on our services and on our products. So currently in Ireland, VAT or sales tax on products is 23 percent and on services in the hair industry, it stands at 9 percent. So, the government’s proposed a 4.5 percent increase which will take it up to thirteen and a half percent. It’s quite a significant rise and that’s really what’s happening at today’s protest.
Killian Vigna: So, I know at the opener we were saying it’s pretty much gone up 15 percent, but when you strip it back, it’s nine percent moving up to thirteen and a half, which is what – four and half percent. Lisa, what is this four and half percent? What is the impact of this?
Lisa O’Brien: The impact of the 4.5 percent VAT increase will result in salons probably having to higher their prices. It also comes into play when the minimum wage has gone up and PRSI has gone up.
Killian Vigna: So it’s not actually just an increase in VAT we’re talking about here. Your saying PRSI and…
Lisa O’Brien: Minimum wage…
Killian Vigna: Minimum wage, which is going to have an effect on new staff coming in.
Lisa O’Brien: New staff coming and the apprentices being attracted to the industry. It will also come into play in January which is historically a quiet month for salons. So that might encourage clients to question their loyalty and go for more competitive rates.
Zoe Belisle-Springer: So then, what are exactly the knock on effects from this? How are salons going to be able to combat this?
Declan Kehoe: Well, some smaller businesses will probably have to have a very, very serious conversation with their accountant. A lot of profit margins are very, very tight for a lot of smaller businesses so how do they absorb the costs? That may result in letting a staff member or as Lisa said, they’ll have to increase their prices.
If you’ve got a client who visits quite regularly and has a good average spend, if their prices are increased, it might stop them from having as many services or spending so much in the salon as well. So it does have a really big knock on effect for smaller business.
Killian Vigna: And I suppose you could say then, like you were saying, you’re gonna have to increase your prices, kind of work it out. Your prices are probably gonna have to go up about five percent. The only real alternative here is if you don’t increase your prices, it’s coming out of your pocket then isn’t it?
Declan Kehoe: Pretty much.
Killian Vigna: Yeah. So something I just wanted to come back to there – we talked about the increased minimum wage, increase in V.A.T. – are there any other threats here for salons and I suppose more specifically, for smaller independent salons?
Lisa O’Brien: Well I think one of the biggest threats that we haven’t discussed is the black market. If prices go up that could see client numbers dropping and for hairstylists that are on commission, it might encourage them to do more hair at home. I think the black market in Ireland is a very real threat to a lot of legitimate salons.
Zoe Belisle-Springer: So Declan, I’ve been hearing through the branches that there’s somewhat of an assumption that we’re back to pre-recession times in Ireland. Have you heard anything about that at all?
Declan Kehoe: Yeah, there’s been quite a bit in the media about that. Again, because hairdressing has been put in with tourism, the assumption is there that restaurants and hair salons are back to a hundred percent occupancy and it’s really just not the case. I mean, maybe for city centre salons or salons that are in the capital that might be the case, but where this will really, really effect salons and small businesses is – businesses that are in smaller more rural areas. So I don’t think it’s fair to say that we’re back to pre-recession times. The VAT decrease, initially, was to stimulate the hair industry and right now it’s just, it’s not back to where it was ten years ago.
Zoe Belisle-Springer: So you guys were at the march today, what’s next in terms of this whole matter?
Declan Kehoe: Well a letter was submitted today at Leinster House so, a petition has been signed as well so, next steps really is, obviously support. Phorest will continue to support all of our clients here where it effects it and we’ll keep everybody up to date if we hear any more.
Killian Vigna: Well thanks very much Lisa and Declan for joining us on the show today.
Declan Kehoe: Thanks for having us.
Lisa O’Brien: Thanks for having us!
Killian Vigna: No worries at all. So as this story is in development there’s still more to come out of this but for anyone listening to the show, here are some snippets that we got from the protest outside the DAIL today.
Bridget Haren: We need to make sure we all stand together, we’re all united. I think the nine percent VAT was a huge thing to us before the recession kicked in and like now it’s gone up to 13.5 percent. What are we gonna do about it? We have to stand up to these people. Our job, even in January when the minimum wage goes up again, what’s gonna happen? We’re gonna have to go back to our salons and it’s gonna be job losses for people.
We need to stand up and be united as one. So I’d just like to thank you all very much for coming out today and for supporting us.
Protestor #2: The black economy is a huge, huge concern of ours and we won’t have any hairdressers left in the industry because they’re all working on black economy. So it’d be a loss of income for salons and it would also a big, big loss to the government too because they would have lost the revenue. So please support us and help us retain the nine percent VAT.
Protestor #3: The one thing that’s lacking in government at present, and I’m not here to make a political speech, but you’ll know I’m telling the truth when I tell you this – there is one thing lacking in government and that is people in government, in power, who have a knowledge and understanding of what it means to run a small business.
I believe that to know what politics is about you have to know what business it about and the reason why I like dealing with people is the problems that every business person have, I have those problems myself every day of the week. Because when you’re employing people and when you’re paying tax and being a revenue collector for the government, you know what it’s like to run a small business and to keep the door open. I know how hurtful this is to each and every one of you. If you’re operating on a margin of five percent or six percent, to have this imposition of tax on you, it could easily mean the difference between keeping your door open or seeing your door close.
Protester #3: Over thirty years ago, with a couple thousand people here organising this walk and it was fantastic and the VAT was cut down from 23 percent down to 13.5 percent. [inaudible 00:11:20] My attitude toward V.A.T. is this: that there should be no threshold in hairdressing at all. The 37,500 should be abolished and we should be paying only [inaudible 00:11:43] or seven percent maximum for barbering and hairdressing across the board.
In Europe, in Sweden, and Finland and all these places where you pay 40,000 euro – 40 euro for a haircut for a man and maybe 100 for woman, it’s only seven percent VAT in Europe. So either we’re in Europe or we’re out of Europe. Okay?
Sean Taaffe: Hi guys, Sean Taaffe, vice-president of the Hairdressing Council. Just a couple of last points before, before we close. We all know that the VAT rate is gonna stop job growth in the industry and salons are not gonna be taking on new apprentices. We know this is a crisis at the moment because we haven’t got young people going into our industry and those that are going are not staying.
If the VAT rate goes up, it’s gonna drive clients into the black economy, into the kitchen chairs where we don’t want to see them. The increase in the minimum wage is also gonna hit us and the VAT rate on top of that is gonna compound us. Thirty-five million euros for the hospitality industry. What’s the hairdressing industry getting? Absolutely nothing –
Protestor 4: Nothing!
Sean Taaffe: Retain the nine percent! Thank you.
Protest Group: Retain the nine percent! Retain the nine percent! Retain the nine percent! Retain the nine percent! Retain the nine percent!
Zoe Belisle-Springer: So this brings us on I suppose to our second part of the show which is the webinars, announcements and all of what you’re used to for the end of our episodes and the trade show season in the EU has now come to an end, at least for us, however, you can catch us next in L.A., November 4th to the 6th. We’ll be attending Modern Salon’s Digital Summit as we’re Platinum Sponsors of the event and it’s shaping up to be a really exciting few days. It promises hands on training, social media, any other digital platforms as well… everything to take your beauty career and business to the next level. In fact we’re gonna have a few sessions, Advanced Education sessions… and Chris Brennan – who you’d know from the Phorest Academy webinars and all of the #30Days2Grow & #SalonRetailWeek videos – he’s gonna be hosting a talk on The Four Keys To Controlling Your Digital Reputation on the main stage, on Sunday November 4th.
Then myself, I’ll actually be hosting a panel discussion about Instagram and your brand, how it’s not just business, but it’s also personal and on this panel we’ll have Christina Kreitel, Cosmoprof Beauty Artistic Team Member. We’ll also have Natalie Boos, of The Business Of Balayage and Christopher Aaron is also going to join us as a L’Anza Healing artist and also Modern Salon artist.
Also at this event, you can catch Ronan Perceval, our CEO and Paddy Monaghan, our Product Director on a free event to take your Instagram to the next level. It is a session on tools that we have developed in Phorest to help stylists and salons build their following, boost their presence and improve their engagement rate on Instagram. So if you are attending the Salon Digital Summit, make sure you register for our free session. We’ll have the link in the episode’s notes. Otherwise, you can still catch us in January, in Dublin for our very own Salon Owners Summit and that will be on Monday, January 7th. We have loads of announced speakers already, loads of workshops announced. You can all catch that info on the Phorest Blog.
For anyone interested in knowing more about this whole developing story about the VAT increase in Ireland, we’ll definitely keep you posted on what’s coming up next. If you have any feedback, feel free to leave us a review on iTunes or on Stitcher. We’re always looking for suggestions on how to improve the show. Otherwise, have a wonderful week and we’ll catch you next Monday.
Killian Vigna: All the best!
Thanks for reading! #LetsGrow