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Enterprise Agreements Advantages And Disadvantages

Published July 06, 2021 (last updated July 8, 2021) Author: Employsure
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You think an enterprise agreement would be easy to administer and beneficial to your business, but is that really the case? Below are the positive and negative facts of having an enterprise agreement.

Advantages And Disadvantages Enterprise Agreements

Like awards, enterprises agreements set out minimum entitlements and employment conditions for your business. An enterprise agreement is negotiated within one or more specific businesses, rather than determined by the Fair Work Commission for an entire industry or occupation. But it still needs Fair Work Commission approval before it can come into effect. Generally, when you have an enterprise agreement the award doesn’t apply, though some agreements do defer to the award or incorporate award provisions.

Enterprise agreements can be tailored to meet the needs of a business or group of businesses and include some mandatory terms as well as provisions regarding various matters, such as rates of pay, employment conditions and dispute resolution processes. The agreement cannot include anything unlawful, for example anything discriminatory. The minimum pay in the agreement still can’t be less than the base rate of pay for the classification under the award, and the National Employment Standards (NES) enshrined in the Fair Work Act will also continue to apply. The employees also need to be “better off overall” than they would have been under the award for the Fair Work Commission to approve the agreement. BrightHR allows you to store employee profiles and key documents such as enterprise agreements, contracts and handbooks securely in the cloud and determine employee access. You can upload updated documents for review, as well as policies and handbooks, set reminders and notifications of key dates, and get read receipts once your employees have accessed the latest version.

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What Are The Advantages Of A Enterprise Agreement?

Enterprise agreements can be useful for a business as they may provide benefits for both employers and employees.

Advantages for Employers

Benefits for Employers may include:

  • Flexibility or consistency regarding employment terms and conditions tailored to the business, e.g. rostering, hours of work,
  • Certainty as to remuneration incorporating penalty rates and allowances, i.e. ‘loaded’ rates
  • Certainty on future wages growth, e.g. pre-determined increases for length of the agreement
  • Reduced pressure to have an enterprise agreement for businesses tendering project work
  • Consolidation and simplification of terms and conditions for businesses who may have multiple awards covering their employees.
  • Protection from industrial action and reduced risk of disputes particularly if unions have been involved in the bargaining process.
  • Competitive advantage for businesses tendering for work as they can fix their costs.

Advantages for Employees

Employees are empowered by the bargaining process, enjoy certainty as to their employment terms and conditions, and are assured that they are better off than they would have been under the applicable award, all of which may result in increased productivity and morale of employees. An enterprise agreement can also be a means for employee organisations or (trade) unions to seek improved employee conditions within your business.

What Are The Disadvantages Of An Enterprise Agreement

Disadvantages for Employers

Some of the negative aspects of an enterprise agreement for Employers are as follows:

  • Minimal flexibility in terms of pay as an enterprise agreement cannot reduce monetary obligations under the NES or the applicable award.
  • An agreement takes time to plan, create and negotiate and can be costly
  • An agreement requires a strict process and timeframes that must be met, or the agreement may be rejected
  • Employees must be notified of employer intentions and can negotiate the terms of the agreement
  • Employees have the right to involve a union
  • The employer has limited control over the voting outcome and the involvement of unions
  • The agreement will continue to exist after the expiry date until terminated
  • Termination usually requires the agreement of the employees
  • If you want to vary an agreement before the nominal expiry date, you will usually need to seek agreement from employees and approval of the Fair Work Commission .If you wish to replace or terminate the agreement you will need to renegotiate.

Often there are other alternatives which may be used to achieve the business objectives without having to undertake a full enterprise agreement bargaining process.

Disadvantages for Employees

There generally aren’t any disadvantages for an employee. We can help you understand enterprise agreements. Call us for free initial advice.

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About Employsure

Employsure is one of Australia’s largest workplace relations advisers to small- and medium-businesses, with over 25,000 clients. We take the complexity out of workplace legislation to help small business employers protect their business and their people.

Frequently Asked Questions

  • What Is An Enterprise Agreement?

    An Enterprise Agreement (EA) is an agreement between one or more employers and a group of employees that provides terms and conditions of employment and that is made in accordance with the requirements of the Fair Work Act 2009.

  • Who Uses Enterprise Agreements?

    Employers or groups of employers, their employees and employee organisations such as unions.

  • What Are The Benefits Of An Enterprise Agreement?

    • Flexibility or consistency regarding employment terms and conditions tailored to the business, e.g. rostering, hours of work,
    • Certainty as to remuneration incorporating penalty rates and allowances, i.e. ‘loaded’ rates
    • Certainty on future wages growth, e.g. pre-determined increases for length of the agreement
    • Reduced pressure to have an enterprise agreement for businesses tendering project work
    • Consolidation and simplification of terms and conditions for businesses who may have multiple awards covering their employees.
    • Protection from industrial action and reduced risk of disputes particularly if unions have been involved in the bargaining process.
    • Competitive advantage for businesses tendering for work as they can fix their costs.
    • May increase employee productivity and morale.
  • How Long Does An Enterprise Agreement Last?

    An Enterprise Agreement can have a nominal expiry date of up to four years. It will continue to apply beyond the expiry date though unless it is replaced or terminated.

  • Is An Enterprise Agreement Legally Binding?

    Yes. An Enterprise Agreement acts similarly to a Modern Award, however it is negotiated within one or more businesses, rather than set for an industry or occupation. It sets terms and conditions of employment that are enforceable in the same way as the terms of a Modern Award.

  • How Do I Terminate An Enterprise Agreement?

    An enterprise agreement can be terminated in two ways, either by agreement between the employers and employees and with the approval of the Commission, or on application to the Commission after its nominal expiry date.

    Call us for free initial advice to better understand terminating an enterprise agreement.

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