Court Rules Brokers Are Not Entitled to Leave or Base Pay

Australia's Federal Court has decided that stockbrokers and wealth advisers who are paid through commissions are not entitled to minimum wages or paid leave under current finance awards. This ruling could save investment firms millions in possible back-pay claims and may influence future employment arrangements in the sector.

The decision reverses an earlier ruling that found a client adviser had been underpaid by $231,000 because he did not receive a base salary or leave entitlements. The adviser, who worked at a major wealth management firm, was paid exclusively through commission for four years. The case raised questions about whether commission-only pay structures meet national employment standards, but the appeal court found they do.

A key factor in the ruling was the classification of the adviser as a "pieceworker" – someone paid for output rather than hours worked, in the same category as fruit pickers or garment workers. The judge determined that the adviser’s role, which involved giving investment advice to clients, did not qualify for standard award protections. Since the adviser's commission earnings exceeded the minimum wage, there was no obligation to provide a base salary or leave entitlements.

The ruling is expected to have a broad effect across the finance industry. Fears that the case could spark widespread claims of underpayment are now easing. The court's firm position confirms that the structure of commission-based roles and the nature of advisory work places them outside typical employment award protections.

Source: Australian Financial Review, KPMG, Baker McKenzie, ASIC