Reviewing remuneration

One of the questions more frequently asked of us by our existing clients relates to how they get their caretaking remuneration reviewed (and hopefully) increased.  One thing about the Australian economy remains relatively certain – labour costs always rise!

There are three bases for a review of caretaking remuneration:

  • Obtaining the support of owners by ordinary resolution at general meeting (preferably with the support of the committee); or
  • Review to market under a market review clause in the caretaking / management agreement (which is usually upon the exercise of an option but can be 5 yearly or so under an agreement with a straight fixed term); or
  • A statutory review under the BCCM Act, which can occur only very limited circumstances, and in very general terms, only for complexes that are between 3 and 4 years old.

Reviewing remuneration under a caretaking / management agreement is not as simple as just asking for a pay rise. Resident managers are contractors – not employees, and once the remuneration is set, it can only be varied if both parties to the contract (i.e. you and the body corporate) agree to that.

If you do not have the statutory or contractual right to force your body corporate to review the caretaking remuneration, the only option is to negotiate with your committee and obtain a variation at a general meeting. Naturally, this process should be very carefully managed to make sure that your message gets through in the way you want it to.

Remuneration review reports (also called time and motion studies) are now relatively settled, with the reasoning of some experts having been tested, and approved, by relevant judicial authorities.

You need to remain cognisant that asking for a remuneration increase is asking for owners to increase the amount of levies they pay.

Commercially, we believe that the owners or the committee always find it more palatable and capable of support if they are not asked for the full increase. For example, say you were currently paid $60,000, and your report says that the market remuneration should be $80,000. Rather than standing your ground and demanding the full amount, it is sometimes easier for people to accept when a discount is applied – to say $70,000. This allows everyone to feel that they have had a bit of a win – which is very important in any commercial relationship.

If there is a discount suggested, it is also worth considering the nature and extent of the duties – sometimes these can be negotiated as well as part of the overall review.

There is not a formula you can simply apply to matters like this.  Each one is a matter of feel for how to best go about achieving what you want.

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