What Is an Enterprise Agreement? (2019 Update)
Read this guide to learn about how enterprise agreements work and how they can benefit both your business and your employees.
An enterprise agreements 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.
If you’re a business owner who’s considering taking on multiple employees, you may want to consider an enterprise agreement. An enterprise agreement will create consistency amongst your employees and ensure that the terms and conditions of employment are suitable for both of you. Further, these agreements can account for terms that national awards do not. An enterprise agreement cannot contain anything illegal, for example the exclusion of unfair dismissal or discrimination.
What is an enterprise agreement?
An enterprise agreement is negotiated between you and your employees. This agreement sets out the terms and conditions of employment. These agreements can be between a singular employer and their employees, or multiple employers and their employees. They are usually negotiated prior to your employees commencing employment.
This type of agreement is different from an employment contract. This is because employment contracts are between the employer and an individual employee. Further, this agreement needs approval by the Fair Work Commission to ensure that it satisfies the Fair Work Act. For an enterprise agreement to be approved, it needs to be shown that the agreement benefits the employer more overall, rather than the conditions of the standard industry award.
Types of enterprise agreement
Enterprise agreements come in three types as follows:
Single enterprise agreements
A single enterprise agreement can be made just between yourself and your employees or multiple single-interest employers and their employees. A single-interest employer is one that is sufficiently related to the other employer i.e. they are part of a joint venture or common enterprise.
Company X wishes to hire 20 employees. Company Y cooperates with Company X as part of a joint venture arrangement. Similar to Company X, Company Y wants to hire 12 employees in similar roles. Companies X and Y join to negotiate an enterprise agreement with all 32 employees.
Multi enterprise agreements
Multi enterprise agreements are 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.
Greenfield agreements can be either a single-enterprise agreement or multi-enterprise agreement. If you are considering using a Greenfield agreement, it means your negotiations will be worker’s unions rather than employees. In these types of agreements, the Unions negotiate on behalf of the employees for fair and safe employment conditions.
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 i.e. employer and employees
- 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
Enterprise agreements must not exclude the 10 minimum National Employment Standards (NES) . Further, they must adhere to all the national conditions contained in national legislation.
Why should I have one?
These agreements can be of 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!
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 on these types of employment arrangements, you should contact an employment lawyer.
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.