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What does the new minimum wage mean for the Real Estate Industry?

What does the new minimum wage mean for the Real Estate Industry?

29 August 2019

Ours has long been a commission-based industry and people who are attracted to the prospect of a career in real estate have traditionally traded off various pros and cons when making their choices.

On the up-side, real estate agents enjoy the benefits of flexible working and the possibility of earnings potential way above what they might achieve in another 9-to-5 type job. On the down-side, they may experience tough times when they first enter the industry as commissions are only paid out on transfer; there is a long lead-time to the first payday. Also, earnings can be unpredictable as the volume and value of deals fluctuate. 

With principals and managers who carefully mentor and manage their agents, and who allocate leads intentionally, we are able to generate a steady flow of opportunities for our agents to earn much more than the minimum wage. Our franchisees work hard to help our new agents in their early days in the industry. For example, "buddy" systems work well where new agents shadow and support more experienced agents and they share earnings. We have experimented with small salaries but that inevitably lowers motivation and diminishes the action that comes from being "hungry" to make a sale. 

The National Minimum Wage Act seeks to give South Africans a fair chance at making ends meet and it should be supported. This is a shared objective between government and our business leaders. How minimum wages are protected remains to be seen in our industry. However, if we set our sights on the baseline, on agents earning the minimum wage, we will forever be limited. Our focus right now is on ensuring that our employment contracts remain firmly grounded in the law, on revisiting our business models (including commission structures) and on improving our business pipelines so that our agents can achieve their financial goals.

We are confident that the overhead cost of paying fixed salaries will not have a negative impact on the transformation of the real estate industry. In fact, we expect just the opposite. If principals are required to invest in people by paying fixed minimum salaries, they will choose those people more carefully, they will mentor them more carefully and they will performance manage them more closely. All of these behaviours will have a positive impact on the experiences of our customers and that is something that excites me. We may have fewer agents but they will be better agents. (Paul Stevens - in response to recent reactions to the new National Minimum Wage Act)

 

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