You are the owner of a newly established business, you are looking at taking on 10 employees but you want to create consistent entitlement and salary structures.You may want to consider an enterprise agreement.

What is an enterprise agreement?

An enterprise agreement is an agreement negotiated between the employer and their employees setting out the terms and conditions of employment. It is different from an employment contract that is an agreement between the employer and an individual employee. An enterprise agreement needs approval by the Fair Work Commission to ensure that it satisfies the Fair Work Act and that it passes the BOOT or the ‘better off overall test’.

Types of enterprise agreement?

  • A single-enterprise agreement

Made between one employer (two or more single employers) and employees.
An example of two or more single employers is where for example Start-up’s company X and company Y decide to have a joint venture where they will enter into a mutual enterprise agreement with both company X’s and company Y’s employees.

  • A multi-enterprise agreement

Made between two or more employers (that are not single employers) and a group of employees. For example, nurses and teachers are often parties to these types of agreements.
Nurses from different hospitals or teachers across different schools in NSW would share a mutual multi-enterprise agreement with the employers in their industry.

Note: Single-enterprise agreement and multi-enterprise agreements usually take place prior to employing any of your employees

  • A Greenfield agreement

This can be either a single-enterprise agreement or multi-enterprise agreement. A Greenfield agreement is made by one or more unions or employee associations (eg. trade unions) with employers.

What terms do I have to include in my enterprise agreement?

Under Fair Work Australia an enterprise agreement must contain:

  • the parties to the agreement
  • deduction of wages for any purpose agreed to by the employees
    operations of the agreement
  • the expiry date of the agreement that cannot exceed four years from the date of Fair Work Australia’s approval dispute settlement procedure for any disputes that may arise
  • flexible terms and conditions surrounding the cancellation of the agreement
  • a consultation term to ensure that employers let their employees know any changes that may affect them

Note: Enterprise agreements must not exclude the 10 minimum National Employment Standards (NES) .

Why should I have an enterprise agreement with my employees?

These agreements can have a huge advantage to both the employer and their employees in their business operations. Some of the common advantages include:

  • flexibility around working hours
  • carer’s leave or maternity leave
  • redundancy payments
  • conversions of casuals to permanent employment

The conditions will have to be fair and legal and can really accommodate those who are about to have children, or already have children and have parental duties. There could also be conditions that incentivise and encourage work-life balance. For example, some business’ have a ‘TGIF-condition’, where employees can opt to take off their Friday afternoon off for an agreed amount of times per year!

Lodge an enterprise agreement and enforceability

An enterprise agreement is not enforceable until Fair Work Australia approves it. It takes up to 14 days for the agreement to be approved and 7 days to take effect from the day of approval.

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Ann Chen

Ann is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a keen interest in media and IP law, her research focuses on the evolving role of the law to navigate new and emerging information platforms.