A critical lesson in calculating commission

A recent member enquiry highlights how easy it is to make mistakes when it comes calculating the commission to be paid to a commission-only employee.

The employee alleged that she was underpaid commission on several sales. She based her allegation on the terms of her commission agreement, as well as provisions of the Real Estate Industry Award.

The employee’s Employment Agreement included REEF’s template commission table:

Base commission	31.5%
Base commission superannuation	2.9925%
Commission margin credit	15.5075%
TOTAL	50%

The commission agreement also set out various amounts that formed debits against the amount credited under the Commission Margin Credit column. These debits included things like annual leave paid to the employee, the costs of the employee’s personal assistant and non-recoverable vendor paid advertising.

So far, so good.

But it all started to go wrong when the employer forgot that the Base Commission and Base Commission Superannuation amounts are untouchable and it’s unlawful to debit any amounts against them.

In this case, the authorised debits were simply taken from the total amount of commission credited to the salesperson (that is, from the 50% total), rather than being debited only from the Commission Margin Credit amount of 15.5075%.

This mistake resulted in the employee receiving less than the minimum commission percentage prescribed by the award (31.5%) for two of her sales transactions.

In simple term, the employee was underpaid.

The takeaway

A commission-only employee must receive a minimum of 34.4925% of the employer’s gross commission (including superannuation) from each component of a property sale for which they are responsible.

This minimum amount is untouchable.

Any agreed debits can only be made from the commission margin above this minimum percentage.

Updated template agreements

REEF has updated the two template Employment Agreements relating to commission-only employees to more clearly show how the base commission calculation (and superannuation) is protected and untouchable. This has been done, in part, by combining the first two columns into a single column called ‘Guaranteed Base Commission (inclusive of superannuation)’.

To access these updated templates, login to the People Management System.