Dawn of a new industrial day

By Byran Wilcox - CEO of the Real Estate Employers' Federation

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.

 Questions?
If you’re a REEF member and have questions about any aspect of the new Real Estate Industry Award, please don’t hesitate to give REEF a call on 1300 616 170

 

     
 
Broad-band classification structure

Gone are the old job titles such as Property Sales Associate, Property Sales Representative, Property Sales Supervisor and the corresponding titles for property management and strata management.

There will now be a four-tiered classification based on skills, duties and responsibilities, and every operational employee must be placed into one of these levels:


• Real Estate Employee Level 1 (Associate Level)
If an employee is engaged to assist either a salesperson, property manager or strata manager, they’ll be classified at the Associate Level. For example, someone who is employed as a property sales associate.

• Real Estate Employee Level 2 (Representative Level)
If an employee is engaged to perform the duties of a real estate salesperson, property manager or strata manager, they’ll be classified at the Representative Level.

• Real Estate Employee Level 3 (Supervisory Level)
If an employee is engaged to supervise Level 2 employees, they’ll be classified at the Supervisory Level. An example of an employee at this level is someone employed as a sales manager.

• Real Estate Employee Level 4 (In-Charge Level)
If the employee is responsible for ensuring the business complies with its obligations under real estate law, they’ll be classified at the In-Charge Level. For example, someone employed as a Licensee-in-charge.

This new broad-band classification structure will make classifying employees much easier, as it will no longer matter if an employee performs a mix of duties across sales, property management and strata management. Employees will simply be classified at a level, rather than by their job title.
 
     
 
Minimum rates of pay

The first full pay period commencing on or after 2 April 2018 will see changes to the minimum rates of pay for most employees.

After working out the new classification level for each operational employee, employers must determine whether their current rate of pay is at least equal to the rates set out in the following table.

Broad-band classification

New weekly minimum wage from 2 April 2018

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 an employee’s current rate of pay is not at least equal to the rates set out in the table above, employers must adjust the employee’s rate of pay to the new minimum rate relevant to their classification.

If an employee’s current rate of pay is equal to or above the new minimum rate relevant to their classification, no adjustment is necessary.
 
     
 
Commission-only employment

The rules relating to commission-only arrangements have undergone a great deal of change. Employers who engage salespeople on a commission-only basis, or intend to do so in the future, need to understand the new rules as errors could have disastrous financial consequences.

New qualification test

For an employee to be engaged on a commission-only basis from 2 April 2018, the new Minimum Income Threshold Amount (MITA) qualification criteria must be satisfied.

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. The MITA will increase as the minimum rates of pay change.

The MITA applies only to employees who are employed after 2 April 2018. Employees who currently qualify can continue to be employed on a commission-only basis after 2 April 2018.

Annual assessment test

The employer must assess a commission-only employee’s remuneration (i.e. commission received) at the end of each 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. The employee must revert to a salaried position, either with or without an associated commission arrangement. Termination may also be an option, provided appropriate performance management processes have been observed.

The annual assessment is an integral part of the revised commission-only employment system from 2 April 2018. For employees employed prior to 2 April 2018, the first annual assessment will need to occur by 1 April 2019. For employees employed after 2 April 2018, the first annual assessment will take place 12 months after the commencement of employment.

Revised minimum commission-only rate

The minimum commission-only rate of pay prescribed in the award is now 31.5 per cent of the employer’s gross commission (rather than 35% of employer’s net commission).

This is a structural change only and should not affect the monetary entitlement of a commission-only employee.

‘All-up’ rate no longer applies

The Fair Work Commission has confirmed that commission-only arrangements that provide for pre-payment of annual and personal/carer’s leave are unlawful and inconsistent with the Fair Work Act.

Employers who have commission-only employees who are paid an ‘all-up’ commission rate must immediately transition them to an arrangement that is lawful under the Fair Work Act. REEF has developed a commission-only arrangement – the commission margin model – that overcomes the problem.
 
     
 
Mobile phone allowance

The new Real Estate Industry Award prescribes a formula for reimbursing an employee for the use of their own mobile phone in the course of their employment: 50 per cent of the employee’s mobile phone plan up to a maximum plan of $100 per month.

This means the maximum employers will be required to pay an employee is $50 per month. If an employee’s plan is $80 per month, the payment will be $40 (i.e. 50 per cent of the $80 plan).
 
     
 
Motor cycle allowance

The new Real Estate Industry Award introduces a new allowance to reimburse an employee who uses a motor cycle in the course of their employment (e.g. to complete letter box drops).

Without this change, employers would have been required to pay the employee the full car allowance rate.
 
     
 
Post-employment commission entitlement

Currently, following the termination of the employee’s employment, an entitlement remains for the employee to be credited with commission or bonus payments from a property transaction in accordance with their employment agreement, provided a legally enforceable contract is in place either before the cessation of employment or during the notice period. This is commonly referred to as the ‘line in the sand’ for a commission or bonus entitlement.

This line moves slightly under the new Real Estate Industry Award. The entitlement to be credited with commission or bonus payments after the termination of employment will now remain alive for the duration of the fixed term of the exclusive agency agreement.