Commission-Only Arrangements

Rosy Sullivan

The Fair Work Ombudsman went on an Australia wide auditing blitz in 2012 to ensure that real estate salespeople being paid on a commission-only basis were getting a fair deal. Maybe you were one of the 350 agencies in NSW alone that were checked? The investigation was sparked by a growing number of complaints about unfair and unlawful commission-only arrangements across Australia. Particularly concerning was a number of cases involving inexperienced or junior staff being significantly underpaid under illegal commission-only arrangements.

For example, earlier this year a Melbourne real estate agency was forced by the Fair Work Ombudsman to pay one of their employees more than $10,000 after he was underpaid as part of an unlawful employment arrangement.  The salesman at a Dandenong agency was initially unlawfully required to perform four weeks of unpaid work under a purported ‘training program’. Over the next four months, he entered into what was effectively a commission-only arrangement before his employment was terminated.

The underpaid salesman in this instance was a recent Sri Lankan immigrant in his 50s. Whether the agency’s directors were trying to take advantage of the man’s possible unfamiliarity with his rights as an employee, or were simply ignorant of their responsibilities, we do not know for sure. Nonetheless, we have a strong suspicion that this is not an isolated occurrence. This newsletter serves as a timely reminder to all agencies of their obligations to their employees with respect to fair working conditions.

The Real Estate Industry Award 2010 sets out the minimum wage requirements for the real estate industry across Australia. It also sets out strict rules for commission-only employment arrangements. If you currently employ staff on a commission-only basis, or plan to in the future, you need to be thoroughly acquainted with these rules.

In short, commission-only arrangements are only allowed when it can be demonstrated that an employee has earned more than the minimum wage payable under the Award selling real estate in any 12-month period over the preceding five years.

Additionally, junior employees (under 21 years of age, casuals, property sales associates and trainees) cannot be employed on a commission only basis.  A licensee or Certificate of Registration holder can only enter into a written ‘commission-only agreement’ if they can prove they meet these requirements.

The Fair Work Ombudsman came down hard on the directors of the Dandenong agency, forcing them to back-pay the man $10,300. Also, as an alternative to litigation, the directors entered into an Enforceable Undertaking with the Fair Work Ombudsman, in which they agreed to the following conditions among others:

  • Donate $1000 to the Peninsula Community Legal Centre

  • Make a formal written apology to the underpaid employee

  • Develop processes for ensuring future compliance with workplace laws for all real estate agencies they are involved in - and provide evidence of the measures to the Fair Work Ombudsman

  • Undertake a professional audit of all real estate agencies they are involved in and rectify any underpayments identified

  • Provide professional workplace relations training for all managerial, human resources, recruitment and payroll staff at real estate agencies they are involved in for the next three years,

  • Publish a public notice detailing the contraventions of workplace laws on the agency’s website and in The Dandenong Leader and Melbourne Weekly newspapers.

The Fair Work Ombudsman is increasingly using Enforceable Undertakings as a means of ensuring compliance.  Clearly the impacts of such an undertaking on a business can be extremely harmful. So, if you are a director or principal licensee, it may be time to re-visit the Real Estate Industry Award 2010 and familiarise yourself with your responsibilities under it. If you are an employee who thinks they might be employed under an unfair or unlawful employment agreement, the Dandenong salesman’s story is a great example of how employees can enforce their rights to fair pay.

The Fair Work Ombudsman’s website - - has a number of tools and resources, including PayCheck Plus and an Award Finder, to assist business-owners calculate the correct pay for their employees. You should consult these before entering into any commission-only agreement, or to ensure any current agreements are compliant.