6/24/2011

In-house agents must be treated as employees not contractors

QUESTION: Sir John, is a marketing company selling exclusively projects of a developer in the business of brokerage?

ANSWER: Yes it is a Real Estate Broker operation.

QUESTION: Are brokers and salespersons under a marketing company the same as agents, therefore not employees? What do you call their relationship? Are they in-house brokers?


ANSWER:Real Estate Agents is a general term for brokers and salespersons. In-house agents of a RE Marketing Company are classified as employees (contractual or regular) of the company only if the company pays them salaries, wages, and benefits. If they are not given the benefits due to legitimate employees, then they are Independent Contractors.

QUESTION: What contract must be executed between the marketing company and the broker and salespersons?

ANSWER: It depends. Either (1) Regular Employee Agreement, or (2) Contractual Employee Agreement, or (3) Independent Contractor Agreement or Sub-Agency Agreement.

QUESTION: Is the compensation paid by the marketing company to his brokers and salespersons the same as commissions, therefore subject to Expanded Withholding Tax (EWT)?

ANSWER: Definitely YES. EWT applies to Regular Employees, Contractual Employees, and Independent Contractors

QUESTION: If a marketing company accredits independent brokers, what is the relationship called?

ANSWER: Independent Contractor Agreement


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In your case, you are a RE Marketing Company who is an Independent Contractor who exclusively sells only projects of ONE DEVELOPER. However, it is not clear to me, as you failed to state, that you are the Exclusive Agent of the Developer.

Your RE COmpany's in-house Broker and Salespersons are classified as your EMPLOYEES (contractual employees or regular employees) only if you pay them what is legally due to employees such as SALARIES, WAGES, FRINGE BENEFITS, LEAVES.

If you don't pay your in-house Brokers and Salespersons SALARIES, then they are classified as Independent Contractors. Independent Contractors must have their own RE Company and own Official Receipt.

If you want to retain your relationship with contractual employees for more than six months, then you must regularize their employment status; otherwise then they need to be moved to from contractual employee status to independent contractor status.

INHOUSE - meaning, Regular Employee or Contractual Employee. Their principal place of business is your office, you spend for their overhead, they work only for your firm EXCLUSIVELY selling your listing, you pay wages for their working time. The in-house can't sell any property that is not in your listing. Two kinds of in-house: (1) Regular Employees, and (2) Contractual Employee. Under the Labor Code, pag 6 months na ang Contractual Employees mo obligado ka na i-hire yan as Regular Employee.

EXTERNAL - meaning Independent Contractor. Their principal place of business is different from your office, you don't spend for their overhead, they are not your exclusive agents, they can sell any other properties not listed in your firm. All External Brokers ay Independent Contractor mo, hindi sila employee, wala silang salary galing sayo, pero entitled sila sa commission pag maka-benta sila ng listing mo. All Independent Contractor must have their own Official Receipt and their own principal place of business.

Pero pag RE Marketing Company ka, bihira na maka-kuha ka ng Independent Contractor kasi pwede naman directa sila sa Developer. Unless of course pag Exclusive Agent ng Developer yang RE marketing company mo, in this case lahat na Independent Contractors ay dapat merong Sub-Agency Agreement or Independent Contractor Agreement with you. Ang commission ng Inhouse ay dapat mas maliit compara sa External kasi gumagastos ka ng overhead sa Inhouse.

5 comments:

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realestatedeals said...

Thanks John, the above information is very clear. Yes, we are an exclusive marketing arm of a developer. Now that these in-house licensed RE brokers and salespersons must be our employees, aside from the usual salaries and benefits due them, are they entitled to get commissions from each sale that they make?

Based on the usual practice, in-house sales people are paid only commissions, some receive allowances. But how come in this new law they must be employees?

JOHN ODONNELL R. PETALCORIN said...

Ang meaning ng "In-house" ay EMPLOYEES. So, kung ayaw ng RE Firm na gawing employees ang agent ehhh pwede naman, huwag nyang tawaging "inhouse", tawagin nyang "external agent" or "independent contractor".

Nagsimula kasi ang confusion nyan nung etong mga Developer sinasabi nila na "employees" nila ang mga "inhouse" kaya dapat exempted sila sa RA 9646. Ehhh nung kinilatis kung talaga bang employees nila eh lumalabas na hindi naman pala.

So please avoid using "in-house" pag hindi nyo employee ang tao.

Pag employees, merong minimum wage. Bahala na kayo mag add ng commissions. So, pag employees ninyo pwede nyo bigyan ng combo package, merong wage + commission + other government mandated benefits.

Sa independent contractors naman, purely commission lang talaga yang mga yan,

Unknown said...

Sir, pag in-house yung brokers and salespeople, pwede bang magbayad ang Developer ng commissions directly to the salespersons or dapat si broker lang babayaran nya and yung salespople ni broker si broker ang magssplit ng nakuha nyang commission?

JOHN ODONNELL R. PETALCORIN said...

Dear unknown,

Please subscribe to this blog so you won't appear "unknown". If the Broker AND Salesperson are both IN-HOUSE, it means they are both EMPLOYEES of the Developer -- then, they can be compensated SEPARATELY and DIRECTLY by the Developer.