On 2 April 2018 significant changes to the Real Estate Industry Award 2010 (Real Estate Award) made by the Fair Work Commission (FWC) came into effect.
Modern awards set the minimum terms and conditions employees are entitled to based on their specific industry or occupation. Failure by employers to meet the minimum terms and conditions of a modern award may result in them facing proceedings by employees or the Fair Work Ombudsman seeking compensation (including up to 6 years’ backpay) plus penalties (of up to $63,000 per breach or $630,000 per breach for serious contraventions)1.
Employees in the real estate industry engaged in property sales, property management and leasing are covered by the Real Estate Award. The FWC conducts routine reviews of all modern awards on a 4 yearly basis to assess the operation of modern awards and adjust them if it considers it necessary. As a result of the FWC’s latest review of the Real Estate Award, the FWC has:
- created a new streamlined classification system for employees covered by the Real Estate Award
- created a number of more stringent requirements for employees who are engaged on a commission-only basis
- introduced an amended entitlement to a mobile telephone allowance
- introduced an entitlement to a motor cycle allowance
- extended the entitlement to be paid commission after termination of employment
What is the impact for real estate agencies?
The impact of the key changes to the Real Estate Award is as follows.
New Real Estate Award classification struct
The effect of the new classification system is to significantly increase the minimum guaranteed base salary for employees.
|For example before the changes on 1 April 2018 the base weekly rate payable to a Property Sales Representative was $736.70 per week but has since increased to $809.10 per week.
Note: the base minimum weekly wages will increase further from 1 July 2018 in accordance with the Annual Wage Review Decision for the 2018/2019 financial year.
The following table sets out the new classifications, the old classifications and the current weekly minimum rates of pay due under the Real Estate Award for full-time employees:
|Old classification||New classification||Weekly minimum wage under new classification for full time employees|
||Real Estate Employee Level 1 (Associate)||
||Real Estate Employee Level 2 (Representative Level)||$809.10|
||Real Estate Employee Level 3 (Supervisory Level)||$890.00|
|The “In-Charge” classification did not apply under the old classification structure and applies to individuals in charge of offices rather than just teams.||Real Estate Employee Level 4 (In-Charge Level)||$930.50|
Commission-only employees under the Real Estate Award
Sales and leasing employees can now only be engaged on a commission-only arrangement under the Real Estate Award if the employee can establish (with their present or any past employer) that they have earned, including any commission and bonuses, 125% of the rate of base rate of pay they would have been entitled to under the Real Estate Award in any 12 month period over the preceding 3 years.
|For example a full-time Property Sales Representative is entitled to a base yearly salary of $42,073.20 as a Real Estate Employee Level 2 (Representative Level). Therefore to be able to lawfully enter a commission-only arrangement the full-time Property Sales Representative must have earned $52,591.50, including commissions and bonuses, in any 12 month period over the preceding 3 years.|
If an employee is on a commission-only arrangement it must be reviewed by the employer annually to establish their gross income. If the gross income earned by the employee in the preceding 12 months is less than 125% of the base rate of pay the employee would have been entitled to under the Real Estate Award then the commission-only arrangement must cease immediately and revert to the base salary payable under the Real Estate Award.
|For example if a full-time Property Sales Representative enters a commission-only arrangement but fails to earn $52,591.50 in the next 12 months, the commission-only arrangement must cease.|
The Real Estate Award now also prohibits commission-only arrangements which provide for pre-payment of leave.
Motor cycle allowance
Motor vehicle allowances for employees that an employer requires to use their own motor vehicle in the course of their employment continue to be part of the Real Estate Award. The motor vehicle allowance has been supplemented by a motor cycle allowance.
From 2 April 2018 if an employer requires an employee to use their own motor cycle in the course of their employment the employer is required to pay them an allowance of $0.26 per kilometre for up to 400 kilometres per week.
Mobile telephone allowance
The mobile telephone allowance payable under the Real Estate Award to employees that use their own mobile phone in the course of employment has been adjusted to require an employer to reimburse not less than 50 per cent of an employee’s monthly mobile phone plan for monthly phone plans up to $100 per month.
Key actions for real estate agencies
- Identify the new classification for each of your employees covered by the Real Estate Award.
- Review the remuneration paid to employees to assess if they meet the new minimum base salaries and allowances under the Real Estate Award.
- Review employment contracts to ensure they include a clause that enables remuneration paid to employees above the Real Estate Award minimum base salaries and allowances to be offset against the new Real Estate Award entitlements.
- Review commission structures or policies to ensure they remain commercially viable as a result of the increased minimum base salaries and other changes to the Real Estate Award.
- Assess if the arrangements of any commission-only employees will need to be adjusted to a guaranteed salary arrangement.
- Ensure adequate records are kept of the remuneration paid to all employees covered by the Real Estate Award, but in particular for any commission-only employees.
1. In addition, individuals including directors, business owners and managers, may be personally liable for penalties of up to $12,600 or $126,000 per breach under accessorial liability provisions.