What is an Enterprise Agreement in Australia- An Ultimate Guide

by Ilyas Omari

May 3, 2023
Blog, Startup

Written by

Ilyas Omari

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If you’re a business owner considering taking on multiple employees, you may want to consider an Enterprise Agreement. An Enterprise Agreement will create consistency among your employees and ensure that the terms and conditions of employment are suitable for both of you.

An Enterprise Agreement is an agreement between you, the employer, and your employees.

These can be negotiated by the employees themselves or by a worker’s union acting on your employees’ behalf.
Understanding Enterprise Agreements and how they work in Australia can be a bit daunting. In this ultimate guide, we have broken down everything you need to know about Enterprise Agreements, how they work, and covered some frequently asked questions.

Read along

What is an Enterprise Agreement?

Put simply, an enterprise agreement is a jointly constructed agreement between employees and an employer. It guarantees minimum entitlements for all employees such as pay, conditions and break entitlements. Generally, an enterprise agreement will be the first point of reference for any workplace-related disputes or issues. This is because it governs a group of employees’ fundamental entitlements and responsibilities. The Fair Work Act 2009 (Cth) regulates such agreements in Australia.

For example, company A (a supermarket) might enter into an enterprise agreement with its employees. According to a provision in the agreement, all employees in the company will be paid above $22 per hour. Additionally, it states that employees working a 6-hour shift are entitled to a paid 15-minute break.

What are the types of Enterprise Agreements?

Entering into an employment contract is a process which establishes the terms of an employment relationship. Consequently, it is a very important process for both employer and employee. In this article, we’ll discuss the enterprise agreement and specifically the single-enterprise agreement.

Single-Enterprise Agreements

A Single-Enterprise Agreement is an agreement between employees and a single employer or two or more single-interest employers. Essentially, single-interest employers are businesses which are related (this can mean many things; common examples are joint ventures and related companies). The difference here is that the agreement is between the employees and one employer rather than multiple employers. This distinction is relevant as the Fair Work Act 2009 (Cth) has provisions which behave differently in respect of different enterprise agreements. For instance, ‘multi-enterprise agreements’ and ‘greenfields agreements’ are other kinds of enterprise agreements.

For example, company A (a supermarket) and its subsidiary liquor division enter an enterprise agreement with their employees. The agreement covers the basic entitlements of all employees working for both businesses. This agreement is a single enterprise agreement.

In summary, a single-enterprise agreement is a kind of enterprise agreement. Its distinguishing feature is that it can only be between a single employer or multiple single-interest employers and employees. Should you need to negotiate an employment agreement it may be best to seek professional legal assistance.

Multi-Enterprise Agreements

Multi-Enterprise Agreements cover a group of employers and their employees who work in the same industry or occupation. These agreements set out the terms and conditions of employment that will apply to all employees covered by the agreement, regardless of which employer they work for.

Multi-Enterprise Agreements must also be approved by the Fair Work Commission and must meet the minimum standards set out in the Fair Work Act 2009.

For example, nurses and teachers are often parties to these types of agreements. Nurses from different hospitals or teachers across various schools in NSW would share a mutual multi-enterprise agreement with the employers in their industry.

Greenfields agreements

Greenfields agreements are made between an employer and one or more employee associations (such as unions) for a new enterprise that has not yet been established. These agreements are typically made for large construction projects, new mines, or other major developments.

Greenfields agreements can be either a single-enterprise agreement or a multi-enterprise agreement.

What should be included in an Enterprise Agreement?

Enterprise Agreements must not exclude the National Employment Standards (NES). Further, they include certain terms as required by the Fair Work Act 2009 (Cth) and associated regulations. The Fair Work Commission provides some model terms regarding dispute settlement, flexibility and consultation terms.

Additionally, an Enterprise Agreement should include the following:

Scope and coverage: The scope of the agreement, including which employees and job classifications are covered and any exclusions.
Duration: The period of time that the agreement will be in effect. EAs cannot be for longer than four years.
Wages and conditions: The wages, allowances, and other conditions of employment that will apply under the agreement, including any penalty rates, overtime rates, and public holiday pay.
Hours of work: The standard hours of work for employees, including any flexible working arrangements or part-time work options.
Leave entitlements: The types of leave available to employees, including annual leave, sick leave, and parental leave.
Training and development: The opportunities for training and development provided by the employer to support employees’ career development.
Redundancy and termination: The procedures for managing redundancies and terminating employment, including severance pay or notice periods.

The content of an Enterprise Agreement will depend on the specific needs and circumstances of the employer and employees involved, and may vary from industry to industry. It is also recommended to seek legal advice when drafting or negotiating an Enterprise Agreement.

What are the benefits of having an Enterprise Agreement?

Here are some benefits of having an EA, compared to having individual employment agreements, for employers in Australia:

Simplified pay structures: Enterprise agreements can help businesses to streamline their pay structures, making it easier for both employees and employers to understand the pay rates and entitlements.
Consistency and enhanced employee relations: By having a single point of reference, enterprise agreements can facilitate better communication and relations between employers and employees, leading to increased job satisfaction and a more cohesive work environment.
Streamlined hiring and negotiation: Having a strong EA can minimise the need to negotiate individual employment agreements with each employee, which can be very time-consuming.
Improved Employee Relations: An EA can help to foster positive employee relations by providing a clear and transparent framework for employment conditions and creating a sense of trust and collaboration between employers and employees.
Certainty: Having fixed agreements can help businesses predict and manage their labour costs.

What are the detriments of having an Enterprise Agreement?

Here are some detriments of having an EA, compared to having individual employment agreements, for employers in Australia:

Time-consuming initial negotiation process: Using an EA frontloads the time and cost required to bring all of the employees under an employment agreement. This can take away from important aspects of establishing a business.
Rigidity: Once an enterprise agreement is in place, it can be challenging and time-consuming to make changes or updates. This can hinder an SME’s ability to respond quickly to changes in the business environment or workforce composition.
Complexity: Enterprise agreements can be complex documents that may be difficult for employees to understand. This can lead to confusion and potential disputes over the terms and conditions of employment.
Industrial action: During the negotiation process, as employees have the right to involve the union, there is a possibility of industrial action if an agreement cannot be reached, which can disrupt business operations. However, when a business successfully reaches an agreement with a union, this can reduce the risk of industrial action in future.
Uncertainty: An EA may be rejected by the Fair Work Commission.

FAQs

Does an Enterprise Agreement replace an award?

No, an Enterprise Agreement (EA) does not replace an award.

An award is a legally binding document that sets out the minimum terms and conditions of employment for employees in a particular industry or occupation. It covers matters such as wages, hours of work, leave entitlements and other conditions of employment.

An Enterprise Agreement, on the other hand, is a negotiated agreement between an employer and a group of employees (or their bargaining representative) that sets out the terms and conditions of employment for that particular workplace.

An EA can provide terms and conditions that are different to the award, but compared to the award, it must pass the better-off overall test (BOOT) in order to be accepted by the Fair Work Co, mission.

Subject to the above, an EA can override the terms of an award, but the award will apply if it covers matters where the EA is silent.

Is an Enterprise Agreement mandatory for businesses?

No, an Enterprise Agreement (EA) is not mandatory for businesses.

Are Enterprise Agreements legally enforceable?

An Enterprise Agreement is not enforceable until Fair Work Australia approves it. When you lodge one, it will normally take 14 days for approval to be granted. Further, you will have to wait an additional 7 days for your approval to take effect. If you have any questions about these types of employment arrangements, you should contact an employment lawyer.