Last week, the Fair Work Commission (FWC) handed down a ruling banning the employment of sales representatives on a commission-only basis until November. Related to COVID-19 interruption to normal market conditions, the FWC figured employees who’d met the minimum requirement to move to commission-only shouldn’t be given that choice.
This is off the back of major changes affecting employment in the real estate industry. From 2nd April last year, sales reps remunerated by commission-only are no longer able to remain on such agreements unless they earn a minimum of 125 per cent of the minimum Award rate each year, currently $56,062 plus superannuation. The FWC has also just ruled that the months from May to October this year be excluded when calculating an employee’s eligibility to remain commission-only.
Called the MITA test, this is a significant departure from previous commission-only arrangements where a sales rep who earned 110 per cent of the minimum Award rate in any given year qualified to be remunerated in that manner from then on. It made no difference if they “had an off year”; they remained on the commission-only system and kept their job.
The method as determined by the FWC means agents must annually review their sales teams and those not earning $56,062 will have to move to a retainer-plus-commission model or be terminated. Sadly, given that the average income earned in WA by real estate sales reps is about $48,000, most that don’t make the threshold will be sacked.
Latest figures from our regulator shows about a third of licensed reps have left the industry over the past five years due to the market slow-down. With part-time sales reps ineligible for employment on commission-only arrangements, there will be even more reps leaving the industry in future years.
Agents will not take the risk with a moderately performing sales rep by paying a retainer without the reasonable prospect of them making enough sales to cover their wage. And reps are usually happy with commission-only arrangements because it gives them greater flexibility to work their own hours.
The criteria to qualify for commission-only is badly designed. For example, a rep who makes the MITA in year 1 and qualifies to remain on commission-only, then fails to make it in year 2, can no longer remain remunerated by commission-only with that agency. However, because the rules state that a rep has to have qualified within the last three years to be employed by commission-only, they could move to another agency and remain on the commission-only arrangement. This is utterly ridiculous. And what about a rep who takes maternity leave? An employer is obliged to re-employ them on the same conditions upon their return yet what are their chances of reaching the MITA after six months off?
Quality, long-serving sales reps with select clients selling a handful of properties a year as they slow towards retirement have already gone under the new arrangements bringing to a premature close their celebrated careers.
The FWC’s decisions continue to present new challenges to those keen on a real estate sales career.
