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The management of leave entitlements for commission-only employees is a subject that continues to cause confusion for many real estate employers.
In this article, Bryan Wilcox, CEO of the Real Estate Employers’ Federation (REEF), explains the five most common myths which permeate through the industry on this subject.
Myth 1 - Commission-only employees do not accrue entitlements to annual leave, personal carer’s leave or long service leave
Yes, they do!
Under the National Employment Standards (NES), all employees accrue leave entitlements such as annual leave, personal/carer’s leave, long service leave and so on. Employees engaged on a commission-only basis are no exception to this rule. For example, during each 12 months of employment, a commission-only employee will accrue 20 days annual leave and 10 days personal-carer’s leave.
As part time commission-only employment is unlawful, all leave accrues on a full-time basis and employers cannot pro-rata leave entitlements for commission-only employees.
Leave for commission-only employees is paid at the minimum award rate unless it relates to long service leave which would then involve a calculation using average commission earnings. Leave payments to commission-only employees do not attract leave loading. Each state and territory have different laws relating to the calculation and payment of long service leave.
Myth 2 - I don’t need to keep track of any leave taken by a commission-only employee
Yes, you do!
It is a legal requirement that you maintain a record of any leave taken by your employees, including commission-only employees. Unfortunately, the common observation from real estate principals that “it is impossible to keep such records as I often don’t know when they are not working” doesn’t excuse an employer from failing to keep such records.
It should be your company policy that ALL employees complete a written leave request form when they wish to take any type of leave. This leave request can then be authorised and processed in accordance with your office system.
Employers must keep a record of accrued leave balances for all employees, including for commission-only employees.
Myth 3 - I’m permitted to incorporate payment for any leave entitlements into an “all-up” commission percentage agreed with the commission-only employee
No, this is not true!
It is unlawful to pre-pay a commission-only employee their leave entitlements (including annual leave) as part of the agreed commission percentage. Commonly referred to as an “all-up” commission rate, this arrangement is a breach of the Fair Work Act.
Leave must be paid when the leave is taken – not pre-paid as part of an all-up commission rate. Even those businesses which operate under a registered enterprise agreement containing such arrangements are bound by this payment rule.
If, after having made a leave payment, you then wish to recover or debit the leave payment from future commission payments, the written employment agreement must allow for this.
Employers who are continuing to use an all-up commission rate should immediately transition the commission-only employee to a lawful arrangement.
Myth 4 - When an employee changes from a salaried arrangement to a commission-only arrangement, their leave calculations start anew
No, this is not true!
If, for example, a salesperson agrees to change from a debit-credit commission arrangement to commission-only, their accrued leave entitlements are not affected by the change in their employment status. That is, the leave accrual balances do not reset to zero, rather they carry across and continue to accrue under the commission-only arrangement.
Myth 5 - When the employment of a commission-only employee comes to an end, I do not have to pay out any unused annual leave and long service leave
No, this is not true!
When the employment of any permanent employee comes to an end (including commission-only employees), there is a requirement for the employee to be paid any unused annual leave and, in circumstances where the employee qualifies, accrued long service leave.
