The manner in which real estate agents pay their sales representatives has changed.
The manner in which real estate agents pay their sales representatives has changed.
From 2nd April this year, sales reps remunerated by commission-only will no longer be able to remain on such agreements unless they earn a minimum of 125 per cent of the minimum Award rate each year, currently $56,062 plus 9.5 per cent superannuation.
This is a significant departure from previous commission-only arrangements whereby sales reps needed to earn 110 per cent of the minimum Award rate once, qualified to be remunerated in that manner thereafter and that was it.
It made no difference if they “had an off year”; they remained commission-only.
The new method as determined by the Fair Work Commission (FWC) means agents must annually review their sales teams and those not reaching the $56,062 income level will have to move to a retainer-plus-commission model or face termination.
Remarkably, based on my estimation, of the near 3000 reps employed in WA, about 1800 (60 per cent) of them are not selling enough real estate to meet the commission-only test.
Of the 34,000 transactions in the past twelve months, these 1800 reps sold only 9,390 properties between them, about a third of all sales.
Assuming agents fully comply with the new rules, these numbers suggest around 1500 people could become unemployed within the next two years.
The changes impact all real estate businesses that are corporate entities (sole traders and partnership arrangements are not captured by the legislation) across Australia representing about 95 percent of all real estate agencies.
Most agents and reps I speak to are unhappy with the changes.
Agents will simply not take the risk with a moderately performing sales rep by paying a retainer without the reasonable prospect of them making enough sales to cover that new expense.
And reps are usually happy with commission-only arrangements because it gives them flexibility to work their own hours and provides the incentive to work harder for their clients.
Commission means they get rewarded for the efforts.
This was what was wrong with the Purple Bricks “no commission” model and why it ultimately failed after spending millions on advertising; their agents weren’t adequately incentivised to work for the result.
It will now be very difficult for rookies to enter the industry too, with agents having to take an even greater risk with quality people being able to make enough sales in a very tough market.
The stats show us that only 10 per cent of new reps survive beyond the first year and that’s under the previous rules.
Quality, long-serving sales reps with select clients selling a handful of properties a year as they slow towards retirement will be the first to go under the new arrangements bringing to a premature close their celebrated careers.
The FWC has also recently ruled that reps remunerated by commission-only must be employed full-time.
Accordingly, part-timers must be given a salary, something agency principals simply cannot afford.