Don't be left in the dark: New industry award starts on 2 April 2018

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.

The review of the Real Estate Industry Award was due to begin at the start of 2014. It took a while, but it eventually kicked o  in 2015.

REEF went into the review process with two main strategic objectives:

1. We were determined to insulate our industry against the introduction of penalty rates for weekend work.
2. We considered it essential to protect the integrity of our debit-credit commission arrangements.

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.

 

Review decision

Earlier this year we advised you about the Fair Work Commission’s decision regarding a number of disputed matters between the unions and employer bodies
(see the Employers’ Guide, August 2017 edition).

That decision confirmed the following:

1. Increase to minimum award wages

The Fair Work Commission set the Property Sales Representative rate of pay at the level applying to a “tradesperson” – $809.10 per week. The Commission ordered that stakeholders were to confer and see if agreement could be reached on the minimum rates for all other classifications. If agreement could not be reached, the Commission would determine the new relativities for other classifications.

2. Commission-only arrangements

a. Minimum Income Threshold Amount
Arrangements will continue which allow certain real estate salespeople to be engaged on a commission-only basis, but with some important modifications. These modifications include a new qualification test called the Minimum Income Threshold Amount (MITA), which must be satisfied before an employee can be engaged on a commission-only basis. If an employee qualifies, the arrangement must be reviewed at the end of each 12-month period. If the review shows that the employee did not earn the MITA over the 12-month period, then the commission-only arrangement must cease. Importantly, there is no requirement to top up the employee’s income level should the employee fail to achieve the MITA.

b. No casual commission-only employees
There’s no place for the engagement of a commission-only employee on a casual basis. Where the commission-only employee is engaged on a part-time basis, the full MITA must be achieved to both qualify for commission-only employment and, if the commission-only arrangement is to continue, at the annual review. You are not permitted to pro-rata the MITA because the employee is working on a part-time basis.

3. Debit-credit commission arrangements

The debit-credit commission system continues unchanged.

4. No “all up“ commission rate for commission-only employees

The “all-up” commission rate in commission-only arrangements must cease immediately. This means that commission-only employees must be paid their National Employment Standards (NES) entitlements at the time the entitlement is taken and not in advance (this includes entitlements such as annual leave and personal/carer’s leave).

In addition to these disputed matters, there were a number of agreed changes that will also be included in the new award. These relate to:

• the introduction of a new mobile phone allowance provision
• an alteration to the entitlement to commission or bonuses after termination of employment
• the introduction of a new motor cycle allowance.

 

Broad-band classification structure

In accordance with the Fair Work Commission’s directions in its July 2017 decision, REEF attempted to reach agreement with the unions on the appropriate relativities (or wage rates) for the various classifications under the award.

In particular, REEF developed and proposed a new classification structure based on “broad-bands”, rather than the current one which is based on job classifications.

REEF proposed that the old job titles, such as Property Sales Associate and Property Management Associate, be removed and replaced with the broad-band model. Simply put, this means employees are classified at a level according to skills and responsibilities rather than by job title.

The following simple broad-band structure was proposed:

• Real Estate Employee Level 1 (Associate Level)
• Real Estate Employee Level 2 (Representative Level)
• Real Estate Employee Level 3 (Supervisory Level)
• Real Estate Employee Level 4 (In-charge Level)

Under this structure, existing job classifications fall under one of the broad-bands.

This type of classification structure is common in modern industry awards and given the unions' successful work value claim, REEF considered it appropriate to move to a broad-band classification structure. Under the structure, employees are not pigeon-holed into a particular job classification and can perform duties within their level of skill and competence.

By way of example, it's not uncommon for an employee in a small to medium sized real estate agency to be required to perform work in both the sales and property management streams (particularly at the Associate level). Under the current structure, classifying such an employee can be problematic as the employee isn’t working solely in one classification. To complicate matters, different rates of pay apply to the Property Sales Associate and Property Management Associate classifications. Under the broad- band structure, this uncertainty is removed and makes it very simple to classify an employee and establish their minimum rate of pay.

The unions rejected REEF’s broad-band classification structure and the proposed relativities.

 

Conference to settle outstanding matters

The Fair Work Commission arranged a conference in Brisbane on 2 November 2017 to assist industry stakeholders to resolve the matters that remained in dispute and reach a compromise position.

REEF pressed its broad-band classification structure, which the Fair Work Commission acknowledged was highly appropriate in the circumstances. The Commission’s acceptance of REEF’s structure is a great win for real estate employers.

However, there was vigorous debate about the appropriate wage rates to be applied to each of the broad-band levels. The Fair Work Commission provided strong advice to both the unions and employer parties about their respective positions on the appropriate wage relativities attached to each broad-band level.

Given that the Fair Work Commission had already decided where the bar should sit for Property Sales Representatives (i.e. 100 per cent of the trade rate of pay: $809.10 per week), they ultimately agreed on the appropriate relativities under a new broad- band structure (see table below).

New broad-band level	As a % of trade rate	New weekly minimum wage*
Real Estate Employee Level 1 (Associate Level) – first 12 months	90%	$728.20
Real Estate Employee Level 1 (Associate Level) – after 12 months	95%	$768.70
Real Estate Employee Level 2 (Representative Level)	100%	$809.10
Real Estate Employee Level 3 (Supervisory Level)	110%	$890.00
Real Estate Employee Level 4 (In-charge Level)	115%	$930.50

 

New broad-band classification structure confirmed

Subject to some minor tinkering, from 2 April 2018, the new minimum rates of pay (see table above) will apply to the real estate industry.

Clearly there are going to be significant wage increases for most of the existing classifications.

The highest increase relates to the classification of Property Sales Representative of $72.40 per week.

This employee will now be classified as a Real Estate Employee Level 2.

Hopefully the impact of the increase will be o set against the employee’s commission entitlement. However, unfortunately not all salespeople earn regular amounts of commission.

Property managers and strata managers will also be classified as a Real Estate Employee Level 2, with the same corresponding minimum rate of pay.

If you are paying an employee in excess of the minimum award rate of pay (as per the table), you will not be required to increase the employee’s rate of pay.

There will also be reductions in the minimum rates of pay for two current classifications:

• Property/Strata Management Associate – Year 1 only
• Property/Strata Management Supervisor.

Existing employees in these classifications will have their rate of pay protected by a savings clause.

 

Impact of the decision

While we are 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 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. Thank you for your support, encouragement and understanding as we fought this battle head on to protect the interests of all real estate employers.

 

We’ll show you the way – More information coming in 2018

The new Real Estate Industry Award will see the introduction of a myriad of important changes to existing employment arrangements, particularly with regard to minimum wage rates and commission-only employment.

The first three months of 2018 will be devoted to ensuring all REEF members are fully informed about the new award obligations and understand what internal business adjustments are necessary to maintain legislative compliance.