As an employer in Australia, few tasks are as crucial as correctly managing payroll.
Employee payroll entitlements include salaries/wages, commissions/bonuses, allowances and other financial entitlements such as superannuation, loadings, overtime or penalty rates and the accrual and taking of leave. Paying employees their correct entitlements is not only essential but also a legal requirement.
In this article, Bryan Wilcox, CEO of the Real Estate Employers’ Federation, explains the rules around managing your payroll obligations.
What’s involved in payroll compliance?
To comply with government regulations around payroll, employers must:
- make accurate payments and deductions;
- provide your employee with a detailed payslip that shows what you’ve done, including separately identifying pay items where required;
- file and pay taxes on time;
- pay superannuation contributions – to the right funds and on time; and
- retain payroll records for at least seven years.
Employers must ensure that their employees are paid entitlements not less than the minimum rates prescribed by the relevant industrial Award. Failing to meet this requirement can expose an employer to legal consequences and claims for underpayment.
In the real estate industry, there are two industrial awards that apply to most employees. These are:
- Real Estate Industry Award 2020 – this award regulates the minimum pay and conditions of real estate operational employees in both property sales and property/strata management; and
- Clerks – Private Sector Award 2020 – this award regulates the minimum pay and conditions of clerical and administrative employees.
The importance of the correct award and pay rates
To meet your payroll obligations, the first critical factor you must determine is which of these two awards applies to your individual employees. In most cases, this will be quite straight-forward.
The Real Estate Industry Award will apply to ‘operational employees’ such as salespeople (including commission-only employees) and leasing and property or strata management employees.
On the other hand, the Clerks Award will apply to your administration employees who do not perform real estate functions, such as the office receptionist or bookkeeper.
There will be occasions however, where the issue of correct award coverage can be confusing or unclear because the employee performs mixed functions. An example might be a receptionist who also assists in property management. In such circumstances, you should seek professional help to guide you through the process of determining which award should be applied given the overall nature of the duties performed by the employee.
The next issue is to determine the employee’s correct classification under the relevant award. Your agency is likely to have a mix of full-time, part-time or casual employees (and, possibly, independent contractors).
Getting the classification wrong – such as incorrectly categorising someone as a contractor rather than as an employee or as a casual rather than part-time – can cause serious problems for your agency.
Finding the relevant classifications and associated rates of pay
The minimum rates of pay and allowances for award covered employees, is set out in the relevant award. These rates are adjusted annually, usually on 1 July each year following a review by the Fair Work Commission, to ensure that minimum rates remain reflective of current economic and social conditions.
Employees paid more than the award minimum rate of pay
Of course, not all employees receive the minimum rate of pay prescribed under the relevant award for their classification. It’s quite common for certain employees to be paid a rate of pay which exceeds the award minimum (particularly in certain classifications).
In such circumstances where an employee is paid in excess of the minimum award rate an employer is not obliged to pass on any increase to minimum rates of pay awarded in the Fair Work Commission’s annual wage review.
Don’t forget your superannuation obligations!
The Superannuation Guarantee (Administration) Act 1992 is a critical aspect of payroll compliance in Australia.
It mandates that employers contribute a percentage of their employees’ ordinary time earnings into a compliant superannuation fund. Employers must ensure that they calculate and make the correct superannuation contributions on behalf of their eligible employees. They must also meet the deadlines for making these contributions, which are generally monthly or quarterly.
The current minimum contribution rate is 11.5% of an employee’s “ordinary time earnings” but increases to 12% from 1 July 2025. Compliance involves calculating and making the correct contributions on time and ensuring that they are paid into compliant superannuation funds.
For superannuation purposes, “ordinary time earnings” includes:
- Wages and salary; and
- Performance-based commissions, bonuses or incentive payments.
Handling superannuation obligations with respect to wages
Calculating your superannuation obligations would seem easy enough – you simply apply the applicable superannuation rate against the employee’s gross wage and send it to the employee’s superannuation fund by the due date. If either the employee’s wage or the superannuation rate increases, you adjust the superannuation calculation accordingly.
But it may not be that simple in circumstances where the employee and employer have agreed in writing to a salary package that is inclusive of superannuation. Provided the employee’s wage level always remains higher than the minimum award rate for the employee’s classification, it may be possible to adjust the salary/superannuation components (down/up), so the total package remains unchanged.
Handling superannuation obligations in respect of commissions
If you have a written commission agreement with a salesperson that their share of commission on property sales will be, say, 45% (including superannuation), what happens if the superannuation rate increases?
Well, subject to the employment contract containing appropriate provisions, you will be able to adjust the commission paid to the salesperson and superannuation calculated on the salesperson’s behalf, to stay at 45% and NOT increase due to an increase in the superannuation rate.
But a word of warning should be noted!
The adjustment of commission calculations to reflect a change to the superannuation rate (as described above), should ONLY be undertaken where the written commission structure agreed to with the employee allows it to happen. Employers cannot unilaterally change commission arrangements without the employee agreeing to the change.
The cost of getting it wrong – new laws criminalising intentional wage underpayments
In addition to the long-standing civil penalties for wage underpayments, the Federal government has enacted legislation to strengthen workplace laws concerning the deliberate underpayment of an employee’s wages. From 1 January 2025, it is a criminal offence to intentionally underpay an employee their correct wage entitlement.
Employers will commit an offence if they’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) and they intentionally engage in conduct that results in the failure to pay those amounts to or for the employee on or before the day they’re due to be paid.
In the most severe cases the penalties can be significant. For a company, the penalty can be the greater of 3 times the amount of the underpayment or $7.825 million.
For an individual director, the penalties can be a maximum of 10 years in prison and the greater of 3 times the amount of the underpayment or $1.565 million.
The final word
Ensuring your employees receive their correct payments, while adhering to the ever-evolving web of employment laws, can be a daunting challenge. Even the most seasoned employer can find it difficult.
Employers should therefore seek professional guidance with respect to payroll compliance. This could be the difference between experiencing a smooth or bumpy employment ride.
