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.
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 email@example.com