Jobs and pay under threat from proposed union changes to real estate commission system: Industry body

An application to ban commission-only payments to real estate agents and prohibit the deduction of things like superannuation and advertising costs from commission payments could have a crippling effect on the industry, the Real Estate Employers’ Federation of NSW (REEF) has warned.

A copy of the latest REEF employer guide obtained by Property Observer warns that the real estate industry is “under threat from union activity” and says it is “preparing itself for perhaps the biggest industrial challenge of recent times”.

REEF highlights an application by the Real Estate Salesperson’s Association of South Australia (RESA), a trade union representing property sales consultants, to change the current system of real estate industry awards – the minimum wages paid to real estate industry employees.

The application was filed by RESA to Fair Work Australia as part of the employee watchdog’s required two-year review of the 2010 modern awards.

RESA is seeking two key changes:

• To have the current debit-credit commission system be dismantled, prohibiting employers from debiting things like advertising and marketing and superannuation payments from an employee’s commissions; and
  
  
• Abolishing commission-only employment by requiring a “wage safety net” for all salespeople.

“As members would be well aware, the debit-credit commission structure is simply a method of calculating a salesperson’s productivity and hence his/her entitlement to commission,” reads the REEF newsletter.

“It is a remuneration arrangement that has existed for 40 years.

“If RESA’s application succeeds, the industry will be forced to reconsider existing incentive arrangements. This might include how much sales commission an employer is prepared to share with individual salespeople.”

On the second proposal to implement a wage safety net, REEF says this would mean that “if a commission-only salesperson does not earn by way of commission over a 12-month period the minimum amounts that have to be paid to a salaried salesperson (around $40,000), the employer would have to make up the shortfall”.

“RESA’s application will completely undermine the fundamental principles of commission-only employment… We see no reason for it being removed from the award as proposed by RESA,” says REEF

Greg Paterson, executive director of REEF, says if the application is successful it will have a major impact on how salespeople are remunerated.

“They will earn less and their commission split will be less,” he tells Property Observer.

“If the application is successful people could lose their jobs because employers won’t be able to afford to keep salespeople on.

“Or they will have to renegotiate lower payments with them,” he says.

The proposed rule changes will affect the vast bulk of those working in the industry – those who are directly employed by an estate agency – but won’t affect contractors.

Paterson says REEF, which has 1,500 members, along with other employer bodies, will strongly oppose the application put forward by RESA.

“We are not sure exactly how the hearing will be undertaken, but people will be required to present evidence.

“RESA will argue in favour of the application and we will strongly oppose the application,” he says.

No hearing date has been set, but Paterson expects an announcement very soon.

Robert Simeon, a director at Richardson & Wrench Mosman and Neutral Bay, says the changes will have the most damaging effect on salespeople.

“Principles will no longer have recourse to recover advertising costs from estate agents’ commission, so will demand they pay the costs upfront.

“In some expensive suburbs advertising can cost between $15,000 and $25,000.

“Many agents will lose their jobs,” he says.

A spokesperson for Fair Work Australia says a timetable for will be released shortly as well as details of how the review process will be handled.

A decision on changes to the awards system is expected this year.

Property Observer contacted RESA for a comment but had not heard back from the union at the time of publication.