With the Real Estate industry awards coming into effect 2nd April 2018, we're providing a home for the information we've published on this important topic.
You also have your chance to ask your own questions on what the changes mean to you or your agency. Click the below button to ask your questions (can be anonymous).
Answers to questions:
Q: How are commission-only contractors impacted by the new laws?
A: Contractors are not employees and therefore not covered by Modern Awards. As such the changes to the Real Estate Industry Award do not apply. However, when engaging contractors, you should be careful that you are not sham contracting. This occurs when an employer disguises or misrepresents an employment relationship as an independent contracting arrangement. Misclassification can result in contraventions of the Fair Work Act.
Q: How will the changes affect part-time sales people? Can you pro-rata time to pay 20 per cent of salary for equivalent hours?
A: The changes will impact part-time employees who are engaged on a commission-only basis. In order to be eligible to be engaged (and continue) on a commission-only basis, an employee must satisfy the full Minimum Income Threshold Amount (MITA). There is no provision to pro-rata the MITA to cater for the reduced hours worked by part-time employees.
Part-time sales persons who are not engaged on a commission-only basis will continue to receive the same pay and entitlements as a full-time employee on a proportionate basis.
Q: What are the new rates? How do you pay casual employees? How does it affect allowances and sales commission payments?
A: Real estate employers are encouraged to seek expert advice to assess the impact of the changes on a case-by-case basis. If you require further assistance, please do not hesitate to contact our team on our advice line - 1300 651 415. However, here are some general facts:
1. Classification and structure
When considering the impact of the changes, a useful starting point is the introduction of a new classification structure.
The old classification structure, based on job titles, has been scrapped and replaced by the following structure based on skills, duties and responsibilities:
Real Estate Employee Level 1 (Associate Level)
Real Estate Employee Level 2 (Representative Level)
Real Estate Employee Level 3 (Supervisory Level)
Real Estate Employee Level 4 (In-Charge Level)
The most significant change in this regard involves the inclusion of a new classification (Level 4) to incorporate employees. You will need to evaluate the work performed by existing employees and classify them in accordance with the above structure.
2. Minimum rates of pay go up
From the first full pay period on or after 2 April 2018, the minimum rates of pay for most employees will change as follows:
Real Estate Employee Level 1 (Associate Level) – first 12 months $728.20
Real Estate Employee Level 1 (Associate Level) – after 12 months $768.60
Real Estate Employee Level 2 (Representative Level) $809.10
Real Estate Employee Level 3 (Supervisory Level) $890.00
Real Estate Employee Level 4 (In-Charge Level) $930.50
If you are not paying your existing staff at least the rates outlined above from 2 April 2018, you will run the risk of underpayment claims.
3. Casual employee changes
The minimum rate of pay for a casual will continue to be 1/38th of the relevant weekly rate, plus a casual loading of 25 per cent. The minimum engagement per shift is three hours. As a result of the changes, there is no provision to pay casual employees on a commission-only basis; casuals will be entitled to be paid for a minimum of three hours each time they are required.
Understanding the dynamics of the industry and the need to motivate and reward sales persons, it is common practice to engage casual salespersons on a ‘debit-credit arrangement’. The most significant changes in relation to payment of commissions surrounds entitlements post-termination. As a result of the changes a clear line has been drawn in the sand: an employee will now be entitled to a proportion of any commission in accordance with the terms of a written agreement so long as:
- where terminated for serious misconduct, a legally enforceable contract was in place as at the date the employee was terminated
- in all other cases, in circumstances where there was a legally enforceable contract in place prior to the expiration of the ‘exclusive agency period’
4. Commission-only changes
In addition to the general changes above, there have been significant changes that will solely impact commission-only employees. These changes include:
- to be engaged on a commission-only basis, an employee needs to satisfy the Minimum Income Threshold Amount (MITA). The MITA is 125 per cent of the minimum award rate for the relevant classification. This is greater than the 110 per cent previously required
- existing employees will now be required to show that they have satisfied the MITA on an annual basis. If they are unable to do so, they are no longer eligible to be engaged on a commission-only basis and should revert to more traditional forms of employment available under the Award
no provision to pro-rata the MITA for part-time employees
- the prohibition of the 'all up' commission rate, which involves an employee being paid leave in advance as part of a commission. These arrangements have been deemed unlawful and entitlement should be provided when it is taken
- the minimum commission-only rate will be calculated at 31.5 per cent of the employer’s gross commission (which has changed from 35 per cent of the employer’s net commission)
The changes also impact upon reimbursements for mobile phones and include a new ‘motorcycle allowance’.
Q: I have a commission-only employee who has a separate full-time job in another field. How can this arrangement work now?
A: As a result of the changes, an employer is no longer able to lawfully engage a commission-only employee on a casual basis. You may wish to keep the relationship ongoing by way of a ‘debit-credit arrangement’. Alternatively, subject to expert advice specific to your individual circumstance, you can explore whether it is appropriate to engage the worker as an independent contractor.
Q: Is WA following with these changes?
A: The changes will only impact upon ‘National System’ employees in Western Australia. The ‘National System’ covers businesses that are constitutional corporations (e.g. ‘Pty Ltd’ businesses and/or other incorporated entities that are trading or financial corporations). If you are unsure as to whether you are a ‘National system’ or ‘State system’ employer, please seek advice as there are potentially significant ramifications for getting this wrong.
More Information you may find useful:
Article: Get ready. The employment landscape is about to change - Bryan Wilcox
Bryan Wilcox, CEO at the Real Estate Employers' Federation, summarises the major changes to be introduced in the new Real Estate Industry Award. More here
Podcast: How to Prepare for the Real Estate Industry Award changes on April 2 with Roman Panovski from Employsure
Guest Interview: Samantha McLean discusses the April Real Estate Industry award changes with special guest Roman Panovski, Senior Employment Advisor at Employsure. More here