Real Estate Industry Award changes effective 2 April 2018

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May 11, 2018 | Posted in Human Resources Services
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On 2nd April 2018, significant changes to the Real Estate Award 2010 'Award' took effect.

For Real Estate business owners, a good knowledge and understanding of the significant changes of the Award is vital to ensure their compliance. Not only to mitigate the risk of a breach of the Award, but importantly to ensure their employees are paid correctly to avoid a future claim(s) for underpayment of wages.

So what are the significant changes to the Award? What impact will they have on a Real Estate business? What other important information does a Real Estate business owner need to know about? What will flow from the changes now in effect to manage their existing employees, a new hire and ultimately their business operations?

This document explains the significant changes and the other important information Real Estate business owners need to know.

There are 3 significant changes:

  1. Award classifications and minimum wage rates.
  2. Commission-only employment arrangements. There are strict requirements that an employee must meet to be engaged on a commission-only basis.
  3. Allowances now include mobile phones and motorcycles / scooters.

Award classifications and minimum wage rates

Award classifications of roles and the corresponding minimum wage rates have changed.

About the change

  • In the past, an employee's classification under the Award aligned with their position title. Now, the classification of an employee's role must also include an employee's skills as well as their duties and responsibilities.
  • A new classification, ‘Real Estate Employee Level 4 (In-Charge Level)' has been added to the Award to cover an employee who is responsible for the management/supervision of the office as opposed to team members.
  • Increase in minimum weekly wage rates.

To comply with the Change

  • Review all roles to include the skills and responsibilities of each existing employee and assign the appropriate new classification and minimum wage rate to ensure compliance. In doing so, it is important to note that an existing employee must not suffer a reduction in wages as a result of the new classification structure.
  • Upon review, ensure any necessary adjustments are made to an employee's rate of pay (if below the corresponding minimum wage rate)

Commission-only employment arrangement

New provisions now apply for commission-only employment for existing employees and new hires.

About the Change

Classification and remuneration

A salesperson may only be engaged in commission-only employment if they have achieved a minimum income threshold amount of 125% or more of the equivalent annualised minimum wage aligned with their employee classification. What does that mean?

By way of example, effective 2 April 2018, for a salesperson to remain in commission-only employment, as a minimum:

  • they would be classified as a ‘Real Estate Employee Level 2 (Representative Level)
  • they must achieve an annualised salary amount equal to or greater than $52,733 (exclusive of superannuation and allowances). This amount is the minimum annual wage applicable for a Level 2 classification.

Unlawful ‘one' commission rate to include all things

The old ‘one' commission rate to include all things, is now deemed unlawful and inconsistent with the National Employment Standards (NES). Consequently, all employees on a commission-only employment arrangement must be paid their leave entitlements at the time leave is taken. Superannuation payments must now be paid in addition and not form part of the commission-only rate of pay.

Decrease in commission-only calculation rate

The minimum commission-only calculation rate is now 31.55% of the employer's gross commission (as opposed to 35% of the employer's net commission before the Award change)

Paid leave entitlements (annual and personal/carer's leave)

A commission-only salesperson is also entitled to paid leave entitlements (annual and personal/carer's leave) in accordance with the NES, as a minimum, at the employee's base rate of pay. A commission-only salesperson must also be paid for annual leave or personal/carer's leave when taken. It is no longer acceptable to pay leave entitlements in advance. Any employees who are currently paid an ‘all up' rate to include payment of leave entitlements must be transitioned across to comply with this new provision.

Part-time employees

There is no provision under the Award to pro-rata the minimum income threshold amount to accommodate part-time employees.

Casual employees

Under no circumstances are casual employees to be engaged on a commission-only basis.

Agreement must be in writing

All agreements must be in writing and state the remuneration the employee will receive on a commission-only basis and must also set out in detail the basis the commission is calculated.

Minimum requirements must be met for an employee to be paid on a commission-only basis.

It is the employer's responsibility to demonstrate that all requirements have been met.

A real estate salesperson must:

  • have a current real estate licence or be registered or be permitted to perform the duties of a real estate salesperson under Real Estate law.
  • Be engaged in property or commercial sales or industrial/retail leasing and classified as a Real Estate Level 2 under the Award, or alternatively, the sales person was an active licensed real estate agent for at least 12 consecutive months in the 3 years immediately before entering into a commission-only arrangement.
  • be 21 years of age and must not be engaged as a casual, junior - classified as a Real Estate Employee Level 1 or a trainee.
  • show that in any consecutive 12 months, in the preceding 3 years, that they received a salary (inclusive of commissions but excluding statutory allowances and superannuation) equal to 125% of the minimum Award rate for their relevant classification (as opposed to 110% that was in place before the Award Change)

To comply with the change - Review all employees

Existing employees

Employers have up until 2 April 2019 to review their existing employees who entered into a commission only arrangement before the Award Changes effective 2 April 2018.

For new hires/employees who move to a commission-only basis, on or post 2 April 2018

Employers must now conduct a Review of an employee's gross annual income every 12 months to ensure the employee meets the minimum income threshold amount of 125% of the applicable minimum wage ($52,733 as at 2 April 2018).

Frequently asked Questions about the change

What if a commission only employee's gross annual income falls below the minimum income threshold?

An Employer must end the commission-only arrangement immediately and make the necessary calculations/arrangements to pay the employee an amount equal to or greater than the minimum weekly rate for their employee classification.

What about existing employees who qualified under the Award before 2 April 2018, who are employed on a commission only basis?

An existing employee's eligibility continues for commission-only employment under the provisions of the Award so long as the employee remains in employment and subject to meeting the minimum income threshold amount of 125% of the applicable minimum wage.

What if a commission-only employee resigns or their employment is terminated?

Effective 2 April 2018, except if an employee is summarily dismissed due to serious misconduct, employers are required to pay the employee a portion of commission, incentive payments or bonuses, calculated in accordance with the written agreement or the Award if there was a legally enforceable contract in place for the sale or lease of a property, before the expiration date of the exclusive agent.

Allowances

What's new?

Motor Cycle or Scooter

If an employee is required by the Employer to use their own motor cycle/scooter for work purposes from 2 April 2018, then the employee is entitled to receive an allowance calculated on a per kilometre basis - 0.26 per km up to a maximum of 400kms per week.

The employee is required to keep a log of the number of kilometres travelled to be in a position to claim this allowance from their employer.

Mobile phones

An employee is now entitled to claim an allowance from their Employer if they are required to use their own mobile phone for work purposes.

  • Mobile phone on plan – reimbursement of at least 50% of the cost of the employee's monthly phone plan (for a maximum monthly phone plan of $100)
  • Mobile pre-paid plan – reimbursement of a reasonable amount agreed to in writing between the employer and the employee

Stand-by and call-out allowance – strata /community title management or property management classifications only

  • The employer must agree in writing with the employee, a method of payment to compensate for the employee being on stand-by and/or call out.
  • If there is no agreement in writing between the employer and the employee, then the time the employee was on stand-by and/or call out will count towards an accrual of ordinary hours of work.

Other important information Employers need to know about.

Casual Conversion Clause

Employment of casuals to maintain flexibility within a workplace is a good option. However, Employers need to be aware that the Fair Work Commission has ruled that changes to a number of Modern Awards will provide for Casual Conversion in the future.

If a Casual Conversion provision is included in the Real Estate Industry Award, this would allow casual employees who work regular and systematic hours to request permanent employment after 12 months. The employer would only be able to reject a casual employee's request to convert to permanent employment on reasonable business grounds.

Employers can mitigate their risk of engaging casuals by stating in the employment agreement:

  • the employee is engaged on a casual basis
  • the employee is not guaranteed a number of hours each week or ongoing employment
  • the employee has no paid leave entitlements
  • the employee will receive 25% casual loading in lieu of paid leave entitlements

Annualised Salary Arrangement

An annualised salary arrangement allows for an employee to be paid the same amount of wages each week and is agreed between the employer and the employee. An annualised salary arrangement cannot be below what an employee would receive if they were paid strictly in accordance with the minimum wage rates provided by the Award.

When calculating an employee's annualised salary, it is critical that an analysis is performed to compare the employee's proposed annualised salary with the minimum Award. The analysis will identify whether adjustments need to be made to the proposed annualised salary for the employee to ensure the employee is better off over all.

Under the Award, Employers must now conduct a Review of an employee's gross annual income every 12 months to ensure the employee meets the minimum income threshold amount of 125% of the applicable minimum wage ($52,733 as at 2 April 2018).

Employee Performance Reviews

As part of the annual review of an employee's annual gross earnings, Employers will identify employees who are not meeting set financial targets and/or performance expectations.

This is an opportunity for Employers in their review of an employees' salary, to also conduct a performance review with the employee. This pro-active approach provides an opportunity for the employee and the Employer to meet and talk about:

  • the employee's performance over the last 12 months
  • identify and set performance goals for the year ahead
  • take the initial steps to address and document any performance concerns

Consultation, Policies and Procedures

Employers have an obligation to consult with their employees about any changes to their terms and conditions of employment. For example, hours of work, reporting structure, duties and responsibilities.

In line with the Award Changes, it is important that Employers take the time to consult with their employees before making any final decisions in relation to their terms and conditions of employment. It is also now a necessity for workplace policies and procedures to be developed and implemented to ensure compliance with the Award, the NES, the Fair Work Act and Workplace Health and Safety Legislation.

By way of example, under the Award it is now an Employer's responsibility to demonstrate that an employee meets ‘specific requirements' before engaging an employee on a commission-only basis. The development and implementation of a policy and procedure that clearly sets out the commission only requirements and that analysis/calculation proves the minimum income threshold has been met, would assist with the consultation process and documenting whether the requirements have been met or otherwise. This approach ensures the employee understands and is aware of the requirements that must be met (and any outcomes), before any final decisions are made and agreed in writing.

Real Estate Franchises and Compliance

Under the Protecting Vulnerable Workers Act 2017, Franchisors face a much greater burden of ensuring that their franchisees comply with employment laws and do not underpay their employees.

If a Franchisee under pays an employee or breach the Award, the Franchisor may also be liable. As such, Franchisors may now require documentation and supporting evidence to ensure Franchisees have complied with workplace laws.

All Employers must meet their compliance obligations. The Fair Work Commission is of the view that being a small business is no longer an excuse for failure to pay its employees correctly or keep accurate employee records.

By way of example, as soon as a commission becomes available for payment, an Employer must pay the commission to the employee within 14 days and provide a written statement that provides for:

  • the way the commission payment was calculated
  • itemise all costs (debits) – mobile phone calls, kilometres travelled, advertising etc

It is evident that Employers must keep accurate records of all details relating to an employee. Employers have 3 days to provide on-site access or post copies of records upon request to an employee (current and former), or a Fair Work inspector.

Ulton is here to help

At Ulton, we provide both professional advice and practical assistance to Real Estate business owners. Ulton's experienced Human Resources Consultant, Christine Guy is available to discuss you concerns about the changes and ensure your compliance. Chat to Christine Guy on (07) 4154 0400.

ChristineGuy
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