After three long years of negotiations, submissions and representations, the Fair Work Commission is about to hand down its final decision following the review of the Real Estate Industry Award.
The new Real Estate Industry Award will commence operation on 2 April 2018. With D Day fast approaching, every real estate employer needs to be aware of the changes and understand what they need to do before the new award kicks in.
The changes are, in some respects, disappointing from an employer’s perspective – with the increases to the minimum rates of pay being the most notable example.
But, when considered as a whole, REEF is pleased with the outcome from this protracted review process. It could have been much worse. This is especially the case when viewed against the backdrop of the horrendous claims lodged by the unions at the beginning of the process. REEF succeeded in protecting the industry against the proposed abolition of commission-only arrangements and the serious threat that the debit-credit commission system would be undermined. We were also successful in insulating the industry against the introduction of penalty rates for weekend work.
The new Real Estate Industry Award will introduce a number of important changes. Here’s a quick summary of the main things to note.
New broad-band classification structure
The introduction of a new broad-band classification structure is a significant change that will make classifying employees much easier for real estate employers.
Gone are the old job titles. There will now be a four-tiered classification based on skills, duties and responsibilities:
- Real Estate Employee Level 1 (Associate Level)
Employees engaged as a Property Sales Associate, Property Management Associate or a Strata Management Associate will all fall into Level 1 and have the same minimum rate of pay. Two wage rates apply at this level. The first rate applies to employees during their first 12 months of employment and the second rate applies thereafter.
- Real Estate Employee Level 2 (Representative Level)
Salespeople, property managers and strata managers will all fall into Level 2 and have the same minimum rate of pay.
- Real Estate Employee Level 3 (Supervisory Level)
Sales, property management and strata management supervisors will all fall into Level 3 and have the same minimum rate of pay.
- Real Estate Employee Level 4 (In-Charge Level)
Employees who are responsible for the overall operations of an agency will fall into Level 4.
New minimum rates of pay
The new Real Estate Industry Award will introduce increases to most minimum rates of pay under the various classifications. For example, the increase for a Real Estate Salesperson (now classified as a Real Estate Employee Level 2) is $72.40 per week.
Employers need to ensure they adjust the minimum rates of pay for all operational employees on 2 April 2018 to ensure they’re not breaching the new award. This is particularly critical for salespeople engaged on a debit/credit commission arrangement.
New commission-only arrangements
The rules relating to commission-only arrangements have undergone a great deal of change as a result of the award review process.
For an employee to be engaged on a commission-only basis from 2 April 2018, they must:
- Be 21 years of age or older
- Have a Real Estate Licence of Certificate of Registration
- Be employed as a salesperson
- Agree in writing to be employed on a commission-only basis
- Have worked in the industry as a salesperson for at least 12 months in the last three years
- Satisfy the new Minimum Income Threshold Amount (MITA) qualification test.
The MITA is satisfied if the employee can show that in a consecutive 12-month period in the three years immediately prior to entering into the commission-only agreement they received a salary (including commission or bonus payments, but excluding allowances and superannuation) at least equal to 125 per cent of the employee’s classification rate under the new Real Estate Industry Award, calculated as an annual amount.
On 2 April 2018, the MITA will be $52,733 and will increase as minimum rates of pay change each July.
There will also be an obligation for an employer to assess existing commission-only employee’s remuneration at the end of every 12-month period. If the assessment reveals that the employee received commission less than the MITA over the previous 12 months, the employee can no longer continue to be employed on a commission-only basis.
Under the new Real Estate Industry Award, the minimum commission-only rate has also been revised. Commencing on 2 April 2018, the minimum rate payable to a commission-only employee is 31.5 per cent of the employer’s gross commission (excluding GST and conjunction commission).
Finally, and most importantly, the application by the unions for an underpinning safety net for commission-only employees was rejected. This means that, subject to complying with the qualifying and annual re-qualifying rules, employers can continue to use commission-only employment as a way of engaging and incentivising sales employees.
Other review outcomes
There are also a number of other notable changes under the new Real Estate Industry Award that employers should be aware of, including a new mobile phone allowance, a new motor cycle allowance and a significant extension to post-employment commission entitlements.
The good news for employers is that the debit-credit commission system will remain intact and under the new Real Estate Industry Award there will be no penalty rates for working unsocial hours (e.g. weekends).
Be prepared
The start date for the new Real Estate Industry Award is fast approaching, so it’s essential for employers to ensure they fully understand all the changes and make the necessary changes to their employment practices from 2 April 2018.
Remember, failure by employers to comply with the new award could result in heavy penalties. For example, if you don’t adjust the minimum rate of pay under a debit/credit arrangement or fail to carry out an annual review of a commission-only employee’s performance, you could be prosecuted for breaching the award and/or the Fair Work Act.
If you’re an employer and need clarification about any of the changes under the new Real Estate Industry Award, The Real Estate Employers’ Federation (REEF) is your best source for information and advice.
The Real Estate Employers’ Federation (REEF) is the real estate industry’s leading not-for-profit employer and workplace relations advisory association, with more than 1,500 members and subscribers across Australia. Each year, REEF receives more than 15,000 calls from real estate employers needing help and guidance on matters affecting the employment relationship.
