Enterprise Agreement vs Employment Agreement (2019 Update)
An employment agreement is negotiated between you and your employee, whereas an enterprise agreement is negotiated by a Union on behalf of multiple workers.
When it comes to hiring employees for your business, it can be hard to know exactly what documents you need. Beyond complying with the National Employment Standards (NES), you should also hire your workers under an employment contract. However, in some instances, an enterprise agreement may be more suitable.
In this article, we’ll break down the differences between an Enterprise Agreements and Employment Agreements. Further, we’ll describe the circumstances where each type of agreement is suitable.
An Enterprise Agreement is an optional binding instrument you can choose to make between yourself and your employees which sets out their terms and conditions of employment. The Fair Work Commission must be satisfied that the enterprise agreement meets all legislative requirements in the Fair Work Act before approving it.
This includes that it passes the ‘Better Off Overall Test’ (BOOT). This test requires that each of your employees who are covered by the agreement are better off overall than under the relevant modern award.
You can use an Enterprise Agreement to set out the minimum employment conditions that apply to:
- Your business or businesses
- Your employees
Using an Enterprise Agreement means that the award no longer applies. But there are still requirements you must meet such as:
- Your Enterprise Agreement must not pay less than the award
- You must meet National Employment Standards
An Enterprise Agreement is optional, but can make your business an attractive alternative if you set minimum standards that are more desirable for employees than your competitors.
You run a medium-sized construction business and employ carpenters. Your business is in the midst of negotiating an enterprise agreement with the Union. You want the hourly pay to be $24.50. However, the Union will not agree to this and are asking for $27 to be the hourly rate.
In this situation, even if the Union agreed, you would not be able to pay your workers $24.50 per hour. This is because the minimum wage under the Building and Construction General On-site Award states is $25.36. For the enterprise agreement to be legal, the pay needs to match at least what is required in the Award.
Employment agreements aren’t compulsory, but they’re always recommended. Full Time Employment Agreement (Long Form) or Casual Employment Agreement gives you the capacity to layout clear expectations and responsibilities for your new full-time or casual employees. Further, using an employment agreement when you hire employees means that you’ll also be protecting your business.
Employment Agreements often covers legal provisions such as remuneration, bonus, share scheme, expenses, motor vehicle benefits and many more. Your Full Time Employment Agreement must comply with the current Fair Work Act 2009 (Cth) and the National Employment Standards (NES).
Employment Agreements cover:
- Position, duties, and working hours
- Employee obligations
- Term of employment
- Remuneration, bonus, share scheme, superannuation
- Probation period, notice period, leave and termination provisions
- Expenses, motor vehicle benefits
- Policies and procedures
- Confidentiality provision
- Non-compete provisions
- Non-solicit provisions
- Intellectual property provision
- Severability, variation, jurisdiction
Knowing what legal documents you’ll need to employ your workers is important. However, if you remain unsure whether you need an employment agreement or enterprise agreement, it is worth contacting an employment lawyer.
Jackie is the Content Manager at Lawpath and manages the content team. She has a Law/Arts (Politics) degree from Macquarie University and is an admitted solicitor in the Supreme Court of NSW. She's interested in how technology can help shape the future legal landscape.