Alliance Partners
HR Advice Online: Commission only arrangements
Trusted partner, HR Advice Online, tells us that its clients often seek guidance on commission-only arrangements.
Despite the changes to the Real Estate Industry Award being in effect for several years, many employers still face challenges understanding and implementing the current commission-only model. There are specific conditions that need to be met to employ a person on a commission-only basis. Employees cannot be engaged part-time or casual when entering a commission-only arrangement.
When entering commission-only employment, the MITA is only achieved if the employee can establish that in any consecutive 12-month period in the 3 years immediately preceding entering into the commission-only agreement, the employee received annual remuneration (including any commission or bonus payments) at least equal to 125% of the employee’s classification rate as specified by the Award minimum rates.
For example: if the employee would be classified as a Real Estate Employee Level 2 then the rate must be at least equal to 125% of the Real Estate Employee Level 2 rates of pay, calculated as an annual amount, excluding statutory superannuation.
The type of documents that an employer may rely upon to establish that the MITA is satisfied, includes (but are not limited to) individual payment summaries, pay slips and/or commission statement records or other sales records.
You (as the employer) must be satisfied on reasonable grounds that the employee has established that they have achieved the MITA within the prescribed period.
The minimum commission-only rate is calculated as 31.5% of the employer’s gross commission. Employers gross commission means the commission received by the employer from a client for a sales or leasing transaction less GST and conjunctional agent fees.
Importantly, the employee's gross income must be reviewed annually to establish gross income. The review must occur no later than 12 months from the date those arrangements were entered.
Where the review establishes that the gross income of a commission-only employee for the year under review is less than the MITA as provided by the Award, the commission-only arrangement must cease.
This means that you can no longer pay an employee by a commission-only arrangement. The employee must instead be paid as a salaried employee at least the minimum hourly rate for their classification under the Real Estate Industry Award. Ceasing the commission-only arrangement does not give an employer a right to terminate the employment. If the employee has been unable to satisfy the MITA requirements or meet the MITA earnings, then the employee may be underperforming. In this instance, the employee’s performance can be addressed and managed in line with the company policy on performance management.
Have questions about how to pay your sales agents of other employees of your business? Want to know how best to manage an employee who is not performing? Please contact us at advice@hradviceonline.com.au or phone 1300 720 004 for a confidential discussion.
Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, it may not be up to date at the time of reading. It is not legal advice and should not be treated as such.
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