In this article, Bryan Wilcox, CEO of the Real Estate Employers’ Federation, explains how the Minimum Income Threshold Amount (the MITA) must be applied against the performance of a salesperson engaged on a commission-only arrangement, both prior to, and during employment.
The MITA is a performance-based income target that, under the Real Estate Industry Award 2020, must be satisfied to enable an employee to be lawfully employed on a commission-only basis. It is also an Award requirement that an employer review the commission-only salesperson’s income level after each 12 months of employment.
To enable the salesperson to continue working on a commission-only basis, the annual review must show that the salesperson’s income level in the preceding 12-month period satisfied the MITA.
This requirement to conduct an annual MITA review for commission-only employees has thrown up many questions for real estate employers. A common question relates to how to deal with those employees who are in a state of employment transition.
Consider this scenario recently posed by a real estate employer:
“I have a commission-only employee transitioning to retirement, and they won’t meet the Minimum Income Threshold Amount. They make the occasional sale and they’re a huge benefit to my business on a cultural level. I don’t want to lose them, but I can’t afford to start paying them the Award entitlements. What options do I have?”
It’s a situation that arises more often than you might think.
It’s important to understand that a commission-only employee’s failure to meet the MITA does not automatically mean their employment is terminated. However, the employer will have to change the employment relationship and start paying the employee Award entitlements.
This may result in a considerable negative cash flow impact on the business if they remain as a full-time employee. Many employers are simply not in a position to start paying a full-time wage and allowances to such employees, irrespective of their real or intangible value to the business.
While it’s not lawful to keep a salesperson engaged as a commission-only employee who falls short of the MITA, there are other alternatives.
Employees who agree to work reduced hours because they are transitioning to retirement or due to other personal reasons, can remain employed. However, their remuneration will need to be restructured.
Employers can (by mutual agreement):
- Employ the employee on a part-time basis with an added debit-credit commission structure; or
- Where the employee works irregular hours, employ the employee as a casual on a debit-credit commission structure.
Consider the following case studies:
Case Study 1
Henry is 70 years old and is the former Principal of the business. He is employed as a commission-only employee but won’t achieve the MITA.
Henry doesn’t want to work regular rostered days or hours as he enjoys the flexibility of working at times convenient to him.
Henry can be employed as a casual employee with a debit credit commission structure and paid only for the hours he works. These hours will be determined in consultation with the Principal. He will be paid a casual hourly rate of pay which may be offset against sales commissions credited to him.
Case Study 2
Jane is a single mother with two children. She was employed as a commission-only employee and will not achieve the MITA for the current review period.
Jane is a great agent but given her domestic circumstances she is only able to commit to working 20 hours per week.
The agency has decided that rather than losing Jane, it will engage her as a part-time agent and pay her the minimum Award wage and other entitlements for the 20 hours she will work each week.
Under a debit-credit commission arrangement, this payment can be offset against the commission she brings into the agency from her sales.
Provided the arrangement is confirmed in writing, either scenario will allow the employer to recover the costs of Award entitlements (including wages, allowances and annual leave) from the employee through the debit-credit commission structure.
Key Takeaways
The annual MITA review should not necessarily cause low performing commission-only employees to lose their jobs. This may certainly be the result that some employers favour, but it’s not automatically the case.
There are other options that may be considered. However, these options do come at a price. The employee will need to be transitioned by agreement from a commission-only arrangement to a position requiring payment of wages and other entitlements for time worked (on a full-time, part-time or casual basis).
Remember, where such a transition occurs, it must be committed to writing in recognition that both the employer and employee have accepted the changed arrangements.
