Modern Award coverage article - Real estate industry

On 1 January 2010, the Australian National Employment Standards (NES) commenced operation and created a safety net of minimum conditions which apply to every Australian employee. In addition to the NES, on 1 January 2010 the Real Estate Industry Award 2010 (Real Estate Award) and the Clerks - Private Sector Award 2010 (Clerks Award) commenced operation. These awards contain the minimum terms and conditions applicable to real estate employees.

In several states and territories, including Victoria, real estate sales and property management personnel will be covered by an award for the first time, meaning many employees are now entitled to additional payments for overtime hours worked and penalty rates for their hours worked on weekends. Previously such employees would have simply been paid their ordinary rate of pay.

In addition to the above, one of the biggest changes under the Real Estate Award is the regulation of commission arrangements within the industry. An employer and employee may agree that, in addition to the minimum weekly wage specified in the Real Estate Award, a sales/property management employee will be entitled to a portion of the commission paid to the employer. Any method or formula used to calculate the amount of commission payable must be evidenced in a written agreement between the parties. Similarly, details of bonus or incentive payments payable to an employee must be evidenced in a written agreement.

Sales and property management personnel who are engaged on a 'commission-only' or a 'retainer' basis are now subject to a number of strict requirements. Importantly, a real estate employee may only be engaged on a commission-only basis if all of the following conditions are satisfied:

• it has been agreed in writing and the written agreement sets out the basis upon which the entitlement to commission will be calculated;
• the employee has been issued with a real estate agent's licence or is registered or permitted to perform the duties of a real estate salesperson;
• the employee has been engaged as a real estate salesperson (with any licensed real estate agent) or was an active licensed real estate agent, for an aggregate period of at least 12 months in the five years immediately prior to entering into the commission-only agreement;
• the employee is at least 21 years of age;
• the employee is not engaged as a casual, a junior, a property sales associate or a trainee; and
• the employee can demonstrate that they had achieved the minimum income threshold (as defined by the Real Estate Award) - unless the employee has operated their own real estate business within the last five years.

Subject to the provisions of the Real Estate Award, a commission-only employee is always entitled to at least the minimum commission-only rate for each sales or commercial leasing transaction for which he or she was responsible. Currently, the minimum commission-only rate is calculated as 35% of the employer's net commission. They are not entitled to minimum weekly wages, allowances or overtime rates. Accordingly their ability to earn a living will be based solely on their own performance.

The Real Estate Award does not apply to administrative / clerical staff. Instead, the Clerks Award will apply to those employees 'engaged wholly or principally in clerical work, including administrative duties of a clerical nature'.

This article does not attempt to review all the changes included in the modern awards. Real Estate Industry employers need to understand the impact modern awards will have on their organisation and manage compliance in order to escape the penalties associated with failing to meet the awards' terms. For a comprehensive review of your business practices, please contact our Employment & Industrial Relations team.