After a long battle, the Fair Work Commission has now finalised the four-year award review and the new Real Estate Industry Award will commence on 2 April 2018. Here’s what you need to know before the changes kick in.
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 Fair Work Act 2009 requires the Fair Work Commission to undertake a review of all modern awards as soon as possible after the four-year anniversary of commencing operation (which was 1 January 2010). The purpose of the review is to make sure each modern award continues to be a fair and relevant set of terms and conditions for employment.
REEF went into the review process with two main strategic objectives:
REEF also held a strong belief that real estate employers should continue to have the opportunity to employ high-performing salespeople on a commission-only basis. It shouldn’t be forgotten that employees, as well as employers, want this option.
Fighting the good fight for you
REEF is a not-for-profit organisation and we’re here to help you. We represent the interests of real estate employers on all workplace relations issues. While others sit on the sidelines, we roll up our sleeves and fight on your behalf to ensure any changes to the workplace relations framework best serve your interests. Just imagine how much worse the outcome of the award review would have been if REEF didn’t take on the battle and fight to secure better outcomes for you.
Interestingly, some ‘for profit’ organisations were conspicuous by their absence throughout the review process. These non-industry specific service providers are happy to charge exorbitant service fees, but were suddenly invisible when the time came to undertake work on behalf of the wider industry.
While we’re disappointed with some of the relativities endorsed by the Fair Work Commission, the comparators used to set the new minimum rates of pay were fair and relevant. It was always going to be a difficult task to maintain the existing rates of pay because, unlike almost every other industry, they have never been work value assessed against other occupations.
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.
Help is on hand
With the introduction of the new Real Estate Industry Award there’s a lot of new information for real estate employers to take in, a lot to understand and a lot to implement by 2 April 2018.
At REEF, we understand the daunting task you’re faced with over the coming months. That’s why we’re committed to providing you with the best and most comprehensive information and advice to ensure you’re ready and compliant by the time the new award commences.
A series of informational videos is now in production and will be available to you in the coming weeks. These videos will help you understand the changes. You’ll receive an alert when they’re ready for viewing.
Thank you for your support, encouragement and understanding as we fought this battle head on to protect the interests of all real estate employers.
Greg Paterson
REEF Membership Services Director
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 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:
The new Real Estate Industry Award contains a new set of classification descriptors. Employers will need to refer to these descriptors when determining the appropriate level at which to classify employees.
Here are some examples of the new broad-band classification structure in action:
The type of broad-band classification structure set out in the new Real Estate Industry Award is common across other industries.
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 particular level, rather than by their job title.
Classifying by job title can be awkward when mixed job functions are involved, particularly because different rates of pay can apply to different titles. This problem is solved with the introduction of the new broad-band classification structure.
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.
What are the new minimum rates of pay?
Employers must determine the new classification level for each operational employee (excluding clerical and administrative employees) and 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 from 2 April 2018.
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.
How do you determine the new minimum rate of pay for an existing employee?
Determining the correct level for an employee under the new broad-band classification structure is a relatively simple task.
COMMISSION-ONLY EMPLOYMENT
The rules relating to commission-only arrangements have undergone a great deal of change as a result of the award review process. 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, new qualification criteria must be satisfied.
The new Minimum Income Threshold Amount (MITA) replaces the complex and clumsy test that has operated for the last 11 years.
The MITA is simple and applies only to employees who are employed after 2 April 2018. Employees who currently qualify under the Real Estate Industry Award 2010 can continue to be employed on a commission-only basis after 2 April 2018.
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.
EXAMPLE: If an employee’s classification is Level 2, the MITA is calculated as 125 per cent of $809.10 per week (i.e. $52,733 per annum).
The MITA will increase as the minimum rates of pay change. The new REEF Rates of Pay booklet will include the MITA.
Annual assessment test
The new Real Estate Industry Award introduces an obligation for an employer to 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. To continue employment with the agency following a failed assessment, 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 Fair Work Commission decided that it was appropriate to change the way the minimum commission-only rate of pay is prescribed in the award.
It 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
Despite REEF’s efforts, the Fair Work Commission has now 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. Please contact REEF if assistance is required in applying this model.
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 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.