Estate agents could qualify for minimum wage

Estate agents could qualify for minimum wage

MAIN IMAGE: Jan le Roux, CE of Rebosa.

According to legal opinion obtained by Rebosa there are circumstances where traditional real estate agencies may be required by law to top up or pay the minimum wage to commission-earning estate agents.

When President Cyril Ramaphosa signed the National Minimum Wage Act in November 2018, no-one expected it to affect commission-based estate agents, after all they earn a commission not a fixed salary. Then some government officials came by a few estate agencies and started asking questions which brought the matter to the attention of Jan le Roux, CE of industry body Rebosa (Real Estate Business Owners of South Africa).

“Agents never thought in their wildest dreams that the minimum wage could affect estate agents, but we’ve done our homework,” Le Roux says.

The result of the ‘homework’ indicates that many agencies will have to revisit the contracts they offer intern or new agents. Rebosa obtained a comprehensive legal opinion on the matter which makes two things clear: first, the Act applies to employees and not to independent contractors, and second, estate agents (whose employment agreements define them  as employees) who doesn’t make any sales or earn less than R3 500/month in commission qualify to be paid a minimum wage (R3 500 per month or R20 an hour is the national minimum wage set by the Act).

The first issue to determine is the type of relationship that exist as the Act only applies to employees. Although an estate agent earns a commission only and not a salary, if it is determined that an employment relationship exists between the agency and the agent, then the provisions of the Act applies.

This means that if an estate agent (who is an employee) didn’t make sales over a period of assessment, then the agency will have to pay a minimum wage, or ‘top up’ where the agent’s commission came to less than R3 500 a month.

Of course, in this business it could happen that an estate agent earns good commission one month and then nothing or much less in the following months.

Says Le Roux, according to the legal opinion they received on the matter, in that case it could be argued that the commission be averaged over a 12 month period. Should the monthly amount then exceed the minimum wage then no further payments or top ups will be required from the agency.

The opposite could also then apply, that the agency may claim back remuneration paid out already should an agent make good commission within the measured period that exceeds the monthly minimum wage requirement for 12 months – provided the employment agreement is drafted as such.

‘This is not a welcome development in an industry in which minimum “salaries” never applied and it may well have a detrimental effect on the appointment of candidates.’

Says le Roux: “This is not a welcome development in an industry in which minimum “salaries” never applied and it may well have a detrimental effect on the appointment of candidates. Even if one was convinced of the necessity of a minimum wage, and there are many arguments against, to apply it to a traditionally commission-based industry may well be most unfortunate. Then again it may be argued that the industry needs this to stimulate recruitment as recruits battle in the first year to make ends meet.”

Rebosa sent out an instruction on this to their members – view it here.

Showing 7 comments
  • Charles Haigh
    Reply

    With the majority of agencies having a “hit and miss” approach to taking on interns, this legislation will have a severe impact across the industry namely

    1, current “non performing agents” will be retrenched for non performance
    2. agencies will be reluctant to take on interns
    3 interns can not be independent contractors
    4 franchise models with costs per agent will have to rework their cost model.
    5. the act creates yet another barrier to entry
    6. the act is also counter-productive to the transformation drive
    7. Small businesses simply can not afford an over-head like this.
    8. interns will be subject to vastly different operational requirements from
    employers so gone will be the days of flexible hours for agents.
    9. Interns will be subjected to harsh probationary periods.

    The list could go on but these are the glaringly obvious and indicative of yet again a short-sighted implementation of legislation without role-player consultation.

  • Lee Clarke
    Reply

    I’ve worked with Intern estate agents earning a stipend and to be frank ,alterior motives around the use of said stipend are always evident…the die hard motivated and successful agents in our industry attended the school of hard knocks and with it some enlightening lessons around work ethics determination and drive required to achieve success in this field…this is utter BS and obviously a ingenious way for government to walk away from the stipend centric initiative s they recently incorporated to assist PDI’s penetrate the property market… Our market place without the buy in from their Public works budgets

  • Francois P Theron
    Reply

    What if the Government pays the minimum wage for the first 12 months if the average income is less than the R3 500 minimum wage so as to curb the ever rising unemployment? Perhaps similar to “3000 unemployed youth will be trained by this R250m programme. … With the additional funding of R250 million, CapaCiTi will now be training 3000 candidates with industry-demanded technology and business skills, placing them in permanent jobs in South Africa’s leading companies.” I guess unsustainable and lack of funds…Just asking…

  • Alta Fourie
    Reply

    The EAAB has a “one Learner one Agency” not enforcable policy in which they expect an agency to train an intern at its own cost. Add to this the implications of the Minimum Wage Act, estate agency principals will rethink any training of new estate agents. The average age of estate agents is around 53, white females.

  • Charmaine Vermeulen
    Reply

    Are you kidding me? This will have a devastating effect on the industry. You want the employer to carry all the risk? This is crazy.

  • Charmaine Vermeulen
    Reply

    Agents work their own hours. If an intern agent has to get a salary he will be obliged to be at the office every day from 08h00 to 17h00.

  • ANTON FERERO
    Reply

    This will result in more job losses than ever. How can you pay someone if there is no guaranteed income? I have seen agents sitting in offices making phone calls and never sold a property. In three months times the estate agency will be bankrupt.

    This is by far the most stupid suggestion.

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