As an employee in a real estate agency, the conditions under which you work, and your entitlements, are governed by the Real Estate Industry Award 2015. The award commenced in April 2018 and the issue of part-time employment was recently reviewed by Fair Work.
With some interesting clarifications regarding part-time, commission-only agents stemming from the review, Greg Jemmeson of JemmesonFisher joined the EAC to help explain the Award and how you can ensure you comply with it.
Like most industries, the Real Estate Industry Award is regularly reviewed in order to ensure it meets the requirements of the industry and those who work within it. The Award covers everything from the amount of leave you are entitled to each year, how many days each week you are permitted to work without a break, and how much you should be compensated for your work.
One of the most confusing areas within the Real Estate Award pertains to commission-only agents and what income they need to achieve within a 12 month period.
What is a commission-only agent?
Real estate agents can be employed in a number of ways, for example on a standard weekly wage like most people in other professions with commission targets (Debit-Credit), or on a commission-only basis.
A commission-only agent is not paid a base wage, or any regular compensation, but instead, agrees to be paid only a percentage of the commission they make from each sale. That portion is agreed between the agent and the Licensee if the agent is working with an agency.
Given a regular wage isn’t paid, commission-only employees are not subject to the standard minimum wage, but the Fair Work Commission has laid out provisions to ensure they do meet a minimum income threshold.
Only agents who meet certain criteria can be paid on a commission-only basis. Some of these conditions relate to the licence or registration of the employee must hold, their level of experience, and their age.
What does the Award say about commission-only and minimum income?
On 1 May 2019, the Fair Work Commission handed down a review of the Award, including conditions for commission-only agents, and in doing so, clarified a number of issues that have previously led to some confusion and the possibility of non-compliance by employers.
Of most note, was some uncertainty about how commission-only arrangements can be applied to real estate agents who would like to work part-time.
“The review confirmed that any agent in the industry must reach what is known as the ‘minimum income threshold test’ each year”, says Greg Jemmeson. “In clearer terms, what this means, is that, in a 12 month period, agents must earn 125% of the Real Estate Award, which equates to $52,733.00.”
“With no shortage of agents looking for the flexibility of part-time arrangements — and we see this a lot in rural areas, in people who are semi-retired, and also in agents who just want to hold onto their licence so they can sell for family and friends — this of course raised the question, ‘can I be a part-time, commission-only agent, or will this not comply with the Act?”
The outcome of the review indicates it is indeed compliant for an agent who works part-time to be paid on a commission-only basis, but rules apply to govern the arrangement and to ensure the agent still achieves a minimum income.
“Fair Work clarified part-time agents are fine to be commission-only, but you can’t pro-rata the minimum income threshold test,” Greg says. “As an example, you can’t choose to work two days each week and in doing so, make only two-fifths of the $52,733.00 minimum income threshold. If you work two days, you still need to make the entire amount, not part of it.”
“A useful way to think of it is that you can work as many days as you want to per annum, but you still must reach that 125% income threshold test. So, you could work the first three months of the year and make $60,000, meeting the test, and then decide to take the rest of the year off. You don’t have to be employed full-time.”
How can you ensure you are compliant?
Like many things in real estate, being compliant largely means having a clear understanding of the Award as it applies to you (and any employees) and reviewing your practices to ensure you are meeting its requirements.
“It’s important employers do regular reviews — each year, you need to take a closer look at what’s happening in your workplace to make sure your people comply,” Greg advises.
“The Award commenced in April of 2018, so you may have someone on an employment agreement that was agreed prior to that date, who now needs to have the annual income threshold test applied.”
Is the Award grandfathered?
The term ‘grandfathered’ is used a lot when it comes to the law. Essentially, it means if a new law or an amendment is passed, those in the relevant situation prior to the ruling can continue to operate under the old laws.
In the case of the Real Estate Industry Award, the ruling regarding part-time agents, commission-only arrangements and the threshold test is not being grandfathered. This means the rules apply equally to new employees, as they do to existing employees who have been working with you prior to April 2018.
“There’s no grandfathering of those provisions,” Greg confirms. “Moving forward, as you employ new sales people, on their anniversary date each year, you must review that test. If they’ve reached the threshold– which you’d like to think they would — then they comply. If they don’t meet the threshold, they revert back to being a debit-credit, and being paid a weekly wage.”
This article does not constitute legal advice and is general in nature. If you would like more information or individual advice, reach out to JemmesonFisher — members receive free access to legal advice each month.