Under changes to the Real Estate Industry Award which came into effect in April of last year, the Minimum Income Threshold Amount (MITA) will only be satisfied if a tentative commission-only employee has earned at least 125 per cent of the employee’s minimum classification rate in any consecutive 12-month period, in the three years prior to the commencement of the commission-only agreement.
For example, a full-time Property Sales Representative is entitled to a base yearly salary of $44,850 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 $56,062.50, including commissions and bonuses, in any 12 month period over the preceding 3 years.
Employees wishing to remain at an agency on a commission-only basis must also satisfy a range of other requirements, which are, at a minimum:
- the employer and employee must have entered into a written agreement which meets the requirements of clause 17-1 of the Award;
- the employee is licensed or registered to perform the duties of a real estate salesperson;
- the employee is classified as level 2 or higher, or was an active licensed real estate agent for at least 12 consecutive months in the three years prior;
- the employee is at least 21 years old, and is not a casual, junior or trainee.
Guy Gibbons, solicitor and CEO of Bennett Carroll Solicitors says employers face difficult territory once existing staff members fail to meet the MITA. Under the Award, if an employee fails to meet the minimum standards to be employed on a commission-only basis, the employee must then be placed onto a salary.
For smaller agencies, particularly those in regional areas, putting an underperforming sales agent on a full time salary can be financially detrimental to their business.
However, it’s not as simple as terminating an employee because they aren’t meeting the MITA to save your agency a few dollars – employers must go through a series of requirements that are set out in the Award for changing the terms of an existing employee’s employment to make it a requirement they meet the MITA.
“If the commission-only employee doesn’t meet those requirements, the problem for the employer is whether or not they have specifically made it a performance criterion that they meet.. because it’s not an automatic [process] where the employer can come in to an employee and say, ‘you haven’t met your MITA and I’m not prepared to pay you a salary, so clean out your desk’”, he says.
To negate this, Mr Gibbons recommends Principals and business owners to seek legal advice to redraft employment contracts, performance review criteria and HR policies. Mr Gibbons says agencies not wanting to place employees that fail to meet the MITA on a salary could engage them as contractors instead, but they must take several steps to ensure the contract is not a sham.
“You need documentation that complies with the ATO’s requirements and with the laws surrounding external contractors,” says Mr Gibbons.
“You can buy those documents, that’s not difficult, but much more important than having a signed document sitting in their third draw is systems and processes designed to actually walk the talk, because what the ATO is doing is, they’re contacting businesses and asking people questions. If the answers don’t use the right wording, they investigate.”
Navigating the changes in the Real Estate Award can be complex and, if the changes aren’t adhered to properly, harsh penalties can apply. Before altering the terms and conditions of an existing employee’s employment, seek professional human resources and legal advice to help you better understand your rights and responsibilities.
Guy Gibbons is a solicitor and the CEO of Bennett Carroll Solicitors, and boasts over 30 years of experience in litigation, estates, commercial law and conveyancing. He will be presenting a power session on navigating the Real Estate Award minefield at the next round of Zone Events. For more information and tickets, visit REIQ.com/Zone3.