G.M. Filisko is a Chicago area freelance and former editor for REALTOR® Magazine.
Pull them in with benefits.
December 1, 2006
Not that many years ago, you’d have been hard-pressed to find brokers offering employee-style benefits to independent contractors. Associates simply received their commission and were left to work out their own plan for managing their savings and health insurance.
Today, however, brokers are increasingly providing benefits such as health insurance and retirement savings plans while still preserving their associates’ independent contractor status.
The competitive pressure of attracting and retaining associates is propelling the trend. “Our medical benefits and overall compensation were part of the driving force” in many associates joining the company, says Mike Golden, cofounder of @properties in Chicago.
Here’s a snapshot of benefits packages offered by brokers—large and small, independent and franchised—throughout the country.
Subsidized health insurance
By pooling associates’ premiums, @properties is able to help associates obtain insurance for less than they would as individuals. The company pays associates’ insurance premiums, and associates “pay us back for most of the premium,” says Golden, cofounder of the 410-associate brokerage. The insurance company likes the arrangement, because it doesn’t have to deal administratively with 150 separate checks from the sales associates; instead, it just deals with one check from the brokerage.
Though Golden couldn’t provide exact figures, he says that an individual @properties associate can get a “good, basic medical plan” for about $210 per month and a “very good plan” for about $300 per month. An associate with a family of four would pay around $600, he says.
“It took us a couple of years to put the program together, so I know it isn’t easy to create,” says Golden. Compensation factors into the culture of benefits, too, Golden says. New associates joining @properties keep 55 percent to 85 percent of commissions, with the rate based on productivity, he says.
“In a lot of firms, if you have a bad quarter, your split falls back to a prior level,” says Golden. “But once our associates attain a split, we never roll it back. If associates’ business falls off because of a life change or they don’t want to work as hard, we’ll have them share a desk or work from home, because space is more valuable to us than the split.”
The company has just introduced a 401(k) retirement account; Golden says the brokerage covers costs but doesn’t match contributions.
Keller Williams Realty International Inc., Austin, Texas
Keller Williams’ franchisees throughout the country can offer whatever associate compensation plan they choose. However, the franchiser’s training model recommends a four-part compensation plan for the company’s more than 71,000 associates that “helps Keller Williams grow and creates for associates an ownership opportunity without risk,” says Dave Jenks, vice president of research and development.
Keller Williams doesn’t provide health insurance or retirement programs. “We’ve tried to get health insurance for our associates, but we haven’t been able to find a way to do it that beats what they can get locally,” says Jenks. “And although we have training on how to set up retirement programs, we don’t handle the money for associates.”
Part of the problem, he says, has to do with the company’s national scope. Since insurance rules differ in each state, the company is unable to apply a single insurance program on a nationwide basis.
Under the company’s four-pronged associate compensation plan,
- all associates receive a baseline 70 percent commission, which can increase to 90 percent or more for those with the highest production.
- The amount associates pay to their broker is capped annually, typically between $18,000 and $30,000. Once that’s met, associates move to a 100 percent split for the rest of the year.
- The franchise fee is also capped at $3,000 annually.
- Finally, says Jenks, Keller Williams provides a monthly profit-sharing program that’s based on the number of salespeople an associate brings into the company. Under the plan, if one associate sponsors another, the sponsoring associate earns profit from the production generated by that associate’s commission each year. The amount of profit is based on a graduated rate, which declines the further away the generation of recruits gets.
“In 1997 I brought three people from my former company,” says Jenks. “Today, I get paid for the people I brought in, the people they brought in, and so on to a maximum of seven levels; 770 people have come in from those original three.”
Jenks says his monthly profit-sharing check has allowed him to guarantee to his children that he’ll pay for his nine grandchildren’s college education.
Lyon Real Estate, Sacramento, Calif.
This 975-associate company builds in incentives for associates to become high achievers. Lyon’s splits range from 50 percent to 85 percent. Associates whose production exceeds the level of their split receive a bonus that contributes to their following year’s split earnings.
Associates can also opt into the company’s health and 401(k) plans. Jim Waters, senior vice president, says the company has negotiated low group rates for associates under the health plan, and then associates pay the premiums. Exact coverage costs for plans are proprietary, says the company.
The 401(k) plan is similar. The company offers no company match, but associates can contribute their own funds to their individual plans. “We also have a financial adviser who’ll help them set up an investment portfolio,” says Waters. Both the 401(k) plan and the service provided by the financial adviser are provided at no cost to associates.
Full benefits package
Prudential Carolinas Realty, Winston-Salem, N.C.
Prudential Carolinas began offering an associate benefits plan to its 900 associates in 2005, says Tobin Henry, ABR®, GRI, senior vice president of development. The plan offers a wide range of benefits, including health, dental, prescription, life, and disability insurance, along with retirement-savings plans.
For instance, the health insurance plan offers associates coverage at rates lower than what they would get on their own. Henry declined to provide exact coverage costs for particular benefit levels, but he says he knows of associates who cut their premiums in half by choosing the company’s program. Premiums for the other insurance programs, such as dental and prescription, are separate.
Under the retirement plan, associates can invest in company-administered simplified employee pension (SEP) IRA and 401(k) plans, though there’s no company match. They can also opt into the commission-deduction program, under which the company will deduct—as it does for the IRA and 401(k) plans—from each commission check an amount the associate chooses and deposit it into a savings account to pay taxes or other expenses.
The company’s commissions range from 50 percent to 100 percent. To achieve the 100 percent level, associates must have generated more than $200,000 in agent earnings in the prior 12 months, says Henry, who, because the program is new, doesn’t yet have figures on whether anyone has reached the $200,000 level.
“The plan’s been a great recruiting tool for us,” Henry says.
United Country Premier Brokers of Colorado, Salida, Colo.
“Ownership in the company breeds teamwork, ensures everyone is working toward the same goal, and makes for a wonderful working atmosphere, because everybody helps each other,” says Cinda Riley, GRI, broker of a 35-associate company that allows associates to take an ownership stake.
Under United Country’s compensation program, all associates take home 60 percent of their earned commissions. But after associates have worked at the company for a year, they’re eligible to buy a company equity stake. The cost per share of the buy-in is based on a formula factoring in the company profits for the preceding three years. Riley’s the largest owner of the company (with 21 percent); she’s sold 79 percent of the shares to her associates.
“At the end of the year, associates who’ve bought into the company get a bonus check based on how well the company has done,” says Riley. The amount they receive is based on a formula that considers the company’s profitability and how much stock the associate owns. Disbursements have reached into the five-digit range.
The company just opened its third office, in South Fork, Colo., and Riley says the company’s growth helps associates build their financial future.
Riley says she’s looking into offering a group health plan that would allow associates discounted coverage. She hopes to know by Jan. 1, 2007, whether the company can offer such a plan to associates.
Five companies, five different plans
The variety of plans these companies offer differ considerably. But the fact that a wide range of small, medium, and large companies are offering some form of benefits package suggests such packages are increasingly key to brokers’ ability to recruit and retain top salespeople.