Fair Work Commission hands down Award review decision

The changes detailed in this article are not operative at this point in time. The precise form of the Award variations will not be known under later this year, as the Fair Work Commission is allowing time for interested parties to make final submissions about how the new Award should work. However, it's expected that the Property Sales Representative wage increase will become operative on 1 January 2018.

Following is a brief outline of the key elements of the Fair Work Commission's decision.

There were a number of contested matters on which the employer parties and the unions could not reach agreement. The Fair Work Commission was asked to rule on these contested matters.

 

1.  Increase to minimum award wages

The Fair Work Commission decided the minimum award rate of pay for a Property Sales Representative (i.e. a real estate salesperson) is undervalued. The decision states:

"In our view, the skills required to be exercised and the indicative tasks performed by Property Sales Representatives align more appropriately with those of the Level 2 employee under the [clerical] award."

There will be an increase of $72.40 per week to the Property Sales Representative minimum rate of pay. Taking into account the recent 2017 National Wage Case decision, from 1 January 2018 the minimum weekly rate of pay for a Property Sales Representative will become $809.10.

There will be increases to other classifications under the Real Estate Industry Award. The commencement date of these other wage increases may be different to, but not earlier than, that for the Property Sales Representative. The Fair Work Commission has ordered that the employer and union parties confer further to see if agreement can be reached on these other rates, including an operative date.

 

2.  Matters associated with commission-only arrangements

The subject of "commission-only" employment attracted a number of applications from the unions for several key changes. These were:

     
a. Minimum Income Threshold

The unions wanted the Minimum Income Threshold used to determine if a salesperson qualifies to be engaged on a commission-only basis to be increased.

The Minimum Income Threshold is currently 110% of the minimum wage for the employee’s award classification. The Fair Work Commission has expressed a "provisional view" that the Minimum Income Threshold will increase to 125% of the rate for the employee’s award classification. When the Property Sales Representative moves to $809.10 in January 2018, and assuming the Fair Work Commission's provisional review is affirmed, the Minimum Income Threshold will be satisfied only if the employee has earned at least $52,734 in a 12-month period during the last three years. This qualification rate of $52,734 is lower than REEF expected.
          

b. Wage safety net

The Australian Property Services Association (APSA), the national real estate union, wanted commission-only arrangements to be underpinned by a wage safety net. This would have meant that if the commission-only employee didn’t earn the equivalent of the minimum award wage over a defined period, then the employer would be required to pay the employee the difference between the award wage and the commission earnings.

The Fair Work Commission rejected APSA’s proposal for commission-only arrangements to be underpinned by a wage safety net and REEF is delighted at this outcome.

However, the Fair Work Commission decided to introduce a commission-only 'review and cancellation' provision. This provision will mean employers will need to annually review the gross income of a commission-only employee and where that income falls below the Minimum Income Threshold amount (i.e. $52,734), the employee cannot continue to be employed on a commission-only basis. Importantly, however, there is no top-up payment required at the time the commission-only employment ceases.

     
c. Employer's Gross Commission

The new minimum commission-only rate will be changed to read "31.5% of the Employer’s Gross Commission", rather than the current "35% of the Employer’s Net Commission".

 

3.  Debit–Credit restrictions

The unions wanted to place significant restrictions on the types of items that could be debited under a "debit–credit" commission arrangement. This claim was rejected by the Fair Work Commission. As the Fair Work Commission noted: "it is not appropriate for a modern award to regulate over award payments".

REEF is delighted to have succeeded in preventing the unions from sabotaging this highly popular commission arrangement. It is a wonderful outcome for our industry.

 

4.  "All-up" commission rate for commission-only employees

The current Real Estate Industry Award provides that commission-only employees can be paid their NES entitlements (e.g. annual leave and personal/carers leave) as part of their "all-up" commission rate.

REEF advised members some time ago about a decision in the Canavan Building P/L case, where it was found by a five-member Full Bench of the Fair Work Commission that any form of pre-paying an employee’s annual leave entitlements was a breach of the Fair Work Act (even where such an arrangement is sanctioned by an award). REEF strongly argued during the review that the all-up commission rate was not offensive to the Fair Work Act and should be allowed to continue.

The Fair Work Commission rejected REEF’s submission on this issue. This means where a commission-only employee is currently employed on an all-up arrangement, the employee is entitled to be paid their NES entitlements when the leave is actually taken (rather than in advance as part of the commission payment).

Therefore, it will be necessary to consider moving any commission-only employee currently engaged on an all-up commission-only rate across to REEF’s alternate "debit margin" option. REEF has been promoting this as an alternative for the last few years, so it’s quite possible that you are already using this option. However, if you need guidance in moving an existing employee from the all-up commission rate, please contact REEF for assistance in managing the process.

 

REEF’s initial commentary on the decision

We're currently in the process of reviewing the written judgement of the Full Bench to determine what impact the changes will have on our industry and what we need to do to comply with the further directions from the Fair Work Commission.

REEF went into this review process with a number of key strategic objectives. First, we were determined to insulate our industry against the introduction of penalty rates for weekend work. Second, we considered it essential to protect the integrity of our debit-credit commission arrangement. We're extremely pleased that both of these key objectives have been achieved.

There is no doubt that while we're extremely disappointed by the minimum award wage increases (against which we fought a strong case), it was inevitable that an increase of some proportion was going to be awarded. The increase of around 13% for a Property Sales Representative will certainly impact on an agency’s bottom line, but particularly so where the employee is unable to perform and cover their employment costs via the selected commission arrangement. Employers will now need to show greater resolve and more quickly manage non-performers out of the business. Tolerance may need to be 'sharpened up; for producers who don’t produce.

In the coming months, REEF will be providing more detailed information relating to this important decision. We expect this information will be not only in written form, but also conveyed by way of webinars and video presentations.

It's important to note that, except in relation to the all-up commission-only rate issue, this advice concerns changes that will occur in the future – 1 January 2018 at the earliest. As things become clearer we will keep you informed of developments.