Meeting the Minimum Income Threshold Amount – What Employers Need to Know Before 2 April 2019

By Erin Verzandvoort,
Employee Relations Adviser

Following a broad review of modern awards by the Fair Work Commission (FWC), employers in the real estate industry should start preparing for an important upcoming deadline, ending 2 April 2019. Currently, the Real Estate Industry Award 2010 (the award) prevents employers from allowing employees to remain on commission only arrangements if they do not meet the minimum income threshold amount (MITA) after an annual review period.

Employees who were engaged as commission only employees prior to 2 April 2018, need to have their gross income reviewed to establish if they achieved the MITA in the previous twelve-month period commencing 2 April 2018. For employees engaged after 2 April 2018, the review must not occur later than 12 months from the anniversary of their commencement on a commission only arrangement. The MITA is equal to 125% of the minimum wage for the employee’s applicable classification under the award. This amount is calculated as an annual gross amount, excluding statutory superannuation. Acceptable evidence of the employee having met the MITA may include; individual payment summaries, pay slips and/or commission statement records or other sales records.

It is important for employers to consider their options if it appears an employee will not meet the MITA by 2 April 2019. While the award simply states the commission only arrangement must cease, it does not provide any practical pathways for employers to choose in this event. The following options are available for consideration.

Termination

One option available to employers is to terminate the employee’s employment. This may be an appropriate solution where the contract of employment contains a provision to terminate employment if the MITA is not met. Even so, employers who terminate an employee may be at risk of an unfair dismissal  claim as well as possible claims for breaching the contract of employment. To carry out a fair and lawful termination, in accordance with the Fair Work Act 2009, employers should ensure there is a valid reason to terminate employment and a procedurally fair process is followed. Leading up to 2 April 2019, employers should monitor and manage the performance of commission only employees. Where appropriate and where it can be demonstrated that key KPIs have not been met, warning letters may need to be issued.

Change of contract

Changing the employment arrangement is an alternative option to termination of employment. If an employee fails to meet the MITA, they can no longer be employed on a commission only arrangement. However, they may still be eligible to be employed on other arrangements, such as a retainer/commission arrangement. This approach allows employers to retain employees who can no longer remain on a commission only arrangement by changing their employment conditions. An employer should not change the contract of employment without the express agreement from the employee and ideally any variation should be recorded in writing. Failure to do so could result in the employer breaching the employment contract and attract pecuniary penalties in the FWC or Federal Court.

Employers who continue to employ employees on a commission only arrangement who do not meet the MITA may be considered in breach of the award and could be liable penalties of up to $63,000 for the body corporate and $12,600 for individuals per breach. For serious breaches, under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, employers who deliberately and systematically breach an obligation, could be liable for penalties up to $630,000 for the body corporate and up to $126,000 for individuals for serious contraventions. 

Accordingly, it is important for employers who engaged employees on commission only arrangement prior to 2 April 2018 to consider the likelihood of their commission only employees not meeting the MITA by 2 April 2019 and what options are the most appropriate for the business.

If you are considering any of the options discussed we recommend you contact the CCIWA Employee Relations Advice Centre on (08) 9365 7660 or email advice@cciwa.com

Award Update

Following the publication of the draft recommendations, the Commission called for comments, relating to the implementation of its preliminary decision to increase minimum wages for all classifications.

As there was not full agreement between all parties, the Commission facilitated a conciliation conference on the 3rd of November, which REEFWA attended.

The Fair Work Commission will publish its final decision in the next 2 weeks.

At the conference, the REEFs’ proposition to introduce broad banding classifications was met positively. Broad banding means, that regardless of whether the employee works in property management or sales, equivalent positions are classified in the same level.

As a part of the broad banding concept, the relativities between each of the levels were also agreed.

REEFWA still has concerns with increasing the Minimum Income Threshold for qualification for sales representatives to be employed as commission only from 110% to 125%. Action regarding this will be reviewed following the decision being published.

REEFWA were also successful in having the implementation of the wage increases delayed until 2nd April 2018.

As previously mentioned, once the final award is released REEFWA will be holding a number of training courses for members about how to implement the new award into your business.

The first one is planned for Wednesday 13 December 2017 – Details to come next week!

Should you have any questions regarding the above please feel free to contact

Peter Kuhne – REEFWA President – 08 9375 8822
Michael McGowan – REEFWA Executive Officer – 08 9365 7525

Award Update

REEFWA would like to provide you with an update on the review of the Real Estate Industry Award 2010, following from the preliminary decision of the Fair Work Commission in July this year.

As stated in our previous member updates, REEFWA was disappointed in the preliminary decision of the Fair Work Commission to amend the Award by:

  • Increasing the minimum wage for Sales representatives
  • Increasing the Minimum Income Threshold for qualification for sales representatives to be employed as commission only from 110% to 125%

Following publication of the draft recommendations, the Commission has called for comments relating to the implementation of its preliminary decision to increase minimum wages for all classifications. As full agreement between all parties could not be reached, the Commission will be facilitating a conciliation conference on November 3rd to hopefully arrive at an agreed outcome.

REEFWA will make all members aware of the outcomes of these meetings.

Regardless of the outcomes there will be changes to the Real Estate award and REEFWA will provide numerous briefings for members to further understand the implications and how to implement them in your business.

Should you have any questions regarding the above please feel free to contact

Peter Kuhne – REEFWA President – 08 9375 8822
Michael McGowan – REEFWA Executive Officer – 08 9365 7525

Hot Topic | Unfair Dismissal

RECENT UNFAIR DISMISSAL DECISION HIGHLIGHTS THE PERILS OF ATTEMPTING TO USE REDUNDANCY AS A WAY TO DISMISS DIFFICULT EMPLOYEES

A common strategy used by employers in the real estate industry, particularly those who have less than fifteen employees because this means they are not required to pay redundancy pay, is to manufacture a redundancy situation and dismiss difficult or under-performing employees for that reason, rather than properly addressing issues of misconduct or under-performance.

A recent Fair Work Commission decision highlights the dangers of using such a strategy.

Background

The employee was employed by the employer in a position that in Western Australia, would be the equivalent of a Licensee in late 2015.

In March of this year, the employer had a discussion with the employee, where the employee was advised that his position was no longer required to be done by anyone because the employer had decided to take over the duties of licensee itself.  However, rather than end the employment relationship, the employer offered the employee a position as a property sales associate or alternatively, the employee could choose to be engaged on a contract for service (contractor) relationship.

Whilst this was not part of the unfair dismissal application decision, please note that neither of the above alternatives are appropriate here in Western Australia and should not be considered by REEFWA members.  A property sales associate position would be too junior for an employee who is currently engaged as a licensee and the property sales person position would be more appropriate.

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Increase in minimum wages under the Real Estate Industry Award

Recently the Fair Work Commission handed down increases to the minimum award rates of pay which will affect Real Estate Agents in the National system.

The award rates of pay for National System employers will increase by 3.3% effective from the first pay period commencing on or after 1 July 2017.

This increase will affect employees covered by the Real Estate Industry Award and the Clerks – Private Sector Award.

The following table shows the new rates of pay applicable to employees covered by the Real Estate Industry Award.

REAL ESTATE INDUSTRY AWARD
MODERN AWARD CLASSIFICATION AWARD RATES
Weekly (effective from the first pay period commencing on or after 1 July 2017)
Property Sales Associate – first 6 months $694.90
Property Sales Associate – after 6 months $719.20
Property Sales Representative $736.70
Property Sales Supervisor $847.40
Property Management Associate $742.90
Property Management Representative $785.00
Property Management Supervisor $901.40
Strata/Community Title Management Associate $742.90
Strata/Community Title Management Representative $785.00
Strata/Community Title Management Supervisor $901.40
CLERKS – PRIVATE SECTOR AWARD
MODERN AWARD CLASSIFICATION AWARD RATES
  Weekly

(effective from the first pay period commencing on or after 1 July 2017)

Level 1 – Year 1 $738.80
Level 1 – Year 2 $775.40
Level 1 – Year 3 $799.65
Level 2 – Year 1 $809.15
Level 2 – Year 2 $824.10
Level 3 $854.60
Level 4 $897.40
Level 5 $933.80