Navigating commission payment structures in the real estate industry in Australia

Australia with its well-developed workplace relations system has placed significant focus on ensuring minimum payment levels for industries which in turn has placed limitations on commission-only payment structures for most types of employments. One of the few exceptions in this case is the residential real estate sales industry wherein most jurisdictions will allow established real estate agents to be employed in a commission-only payment structure without a base retainer or salary. But how does this work, what are the requirements and how can you ensure you’re complying with the relevant State and Federal laws regarding employment of real estate agents in Australia?

Why are commission-only type of employment payment structures highly regulated in Australia?

Since Federation Australia has had a strong arbitration system with robust protections for workers, with the most fundamental basis being minimum earning requirements based on ‘award rates’ per industry and Federal minimum wage requirements. Due to the nature of commission only employment, it is possible for some employees to work significant hours with minimal if any payment unless they successful complete a sale, which has caught the attention of the employment regulators. Due to this, commission only payment structures for the most part have limited existence in Australia as they generally will still be required to provide a minimum wage amount based on the industry award regardless of conversion of sales.

But what about the real estate industry?

One of the noteable exceptions in most States and Territories in Australia is the real estate industry. Due to the very specific nature of real estate sales being the effective sole value of a real estate agent coupled with significant commissions which can be earned per sale, the real estate industry has been seen to be an industry which can support a commission only payment structure whilst providing consistent income to employees operating as real estate agents. Due to an influx of relatively new real estate agents in the industry due to these above average payment rates, the supply/demand availability of houses for sale verses agents did lead to a significant number of agents being unable to earn adequate pay levels leading to government intervention. Greg Murphy, a real estate agent who runs his own real estate agency noted that during this time in the 2000’s, it was possible for some agents to work 40+ hours a week without earning a single dollar.

What we saw was an influx of relatively fresh real estate agents with no experience or network to find leads and agencies which believed they could cash in on increasing the number of agents under their brand without any effective costs to them. If the agents secured a sale it was a benefit to the agency and if they failed it was of little consequence to them.

In response to this imbalance, regulations were put in place which required agencies to provide a base level of pay for a minimum period of time (generally 1-2 years) whilst the agent was trained and networks formed so they could get a realistic opportunity to earn a living.

If you’re looking to employ someone in the real estate industry, or are currently employed in the industry and unsure of the regulatory requirements – check with your State or Territories employment regulator who will be able to guide you to the specific information to ensure you maintain compliant with employment and wage conditions.

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