Teams and Groups Commission Processing
Teams and groups are an important part of the growth of Keller Williams Realty. In working with teams and groups in your Market Center, consider the following:
- What are the legal requirements for processing commissions in your area?
- How will you track Team/Group Royalty caps and what is your Market Center’s policy for Team/Group Company Dollar caps?
- What effect does this have on Profit Share?
Legal Requirements
When determining how to record the production of teams and groups, the number one factor is your area’s legal requirements. Some real estate regulatory agencies require the broker to pay commissions directly and only to each of the associates who participated in the real estate transaction.
The commission check(s) and the tax forms will be sent to each of these participants.
No Legal Requirements
If your area’s real estate regulatory agency does not require the broker to pay commissions directly to each of the associates who participated in the real estate transaction, you have two options for processing commissions:
- Record commissions directly to the associate.
- Record commissions to the Team/Group (entity) or Lead Associate(s).
Recording to the Individual
When part of a team/group, the DA may be processed to the producing team member(s). When a portion is paid to the producing team member and a portion is paid to the Lead Associate(s), each will be listed on the Disbursement Authorization. Each associate will receive production credit and pay any applicable Royalty and Company Dollar. When the associate(s) is part of an incorporated team or group and is associated with a company record, the commissions will be paid to the company.
Royalty Caps
When commission is recorded to the individual team member(s), each associate will have the regular Royalty cap determined by Keller Williams Realty International and included in the Franchise Agreement.
When a rainmaker contracts with a team member to contribute towards the team member's royalty cap, royalty must be booked under the team member and reimbursed through complimentary deductions (positive deduction from rainmaker; negative deduction to team member) on the DA. This method will preserve the integrity of the royalty agreements.
Company Dollar Caps
Set the team member(s) Company Dollar caps per your Market Center policy.
When a rainmaker contracts with a team member to contribute towards the team member's company dollar cap, company dollar must be booked under the team member and reimbursed through complimentary deductions (positive deduction from rainmaker; negative deduction to team member) on the DA. This method will preserve the integrity of the profit share system.
Recording to the Lead Associate
When a team/group is incorporated and/or the area’s regulations allow, the teams/groups have the option of recording all DAs to the Lead Associate. In this case, all Company Dollar is credited to the Lead Associate and all Profit Sharing will go to the Lead Associate’s sponsor(s).
Note: When a team/group chooses this option and the DAs are recorded to the Lead Associate, the Lead Associate must conform to all tax and labor laws and take on the compensation responsibility for the team.
When a team/group records the DAs to the Lead Associate or legal entity, the caps are recorded under the Lead Associate’s associate record.
Team Royalty Caps
Royalty caps are attributed to the team based on the number of producing members on the team (Lead Associates, Buyer Agents, and Listing Specialists) using the formula $3000 x # of producing team members; the royalty cap may not be higher or lower than the KWRI fee named in the franchise agreement. The collection of these royalties will be based upon the Lead Associate’s anniversary year and is collected at 6 percent of GCI until all Royalty caps are paid.
If a producing member leaves the team during the anniversary year, the Lead Associate may replace them with another producing member without incurring additional charges for that anniversary year.
If additional producing positions are added during the anniversary year, the Lead Associate is responsible for an additional Royalty cap for each additional position, which is collected at 6 percent of GCI.
In this case, when the team/group has exceeded the GCI for the number of current Royalty caps and now owes additional Royalty cap(s), the MCA will calculate the Royalty and add it to the Disbursement Authorization.
Team Company Dollar Caps
Set the team member(s) Company Dollar caps per your Market Center policy.
Things to Consider
When you record the DAs to the Lead Associate or legal entity, consider the following:
- What are the requirements for assigning commission to a business entity in your area? Will the business entity need to be listed on the Real Estate license? Will the Lead Associate be required to have a broker’s license?
- How will the Lead Associate handle the compensation and tax liability for the team members?
- How do you track the transactions for individual production recognition?
- When an associate leaves a team/group, how do you reconcile what was paid by that associate?
- Do you automatically add a full Company Dollar cap when an associate joins, or do you prorate the cap, based on their Anniversary Date?
- What process will you use to collect Royalty when an associate joins a team after the team has already capped?
The Market Center leadership will need to determine the Market Center policy for handling these questions.
Note: Refer to the Awards policy for specific KWRI awards policies.
Impact on Profit Share
Profit Share is calculated on the amount of Company Dollar paid by an associate to a profitable, Profit Sharing Market Center. Profit Share is paid to that associate’s sponsors.
Commission Recorded to the Individual Team Member(s)
When the commission is recorded to the individual team member(s), it is their sponsors who receive Profit Share.
Commission Recorded to the Lead Associate/Legal Entity
When the commission is recorded to the Lead Associate or legal entity, it is only the Lead Associate’s sponsors who receive Profit Share.