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Terminology explained: Modern Awards Vs Enterprise Agreements

Published August 16, 2016 (last updated February 9, 2023) - ANZ Head of Legal Services
Employment Modern Awards

Modern Awards and Enterprise Agreements (EA) are terms all employers would hear quite frequently. They are, however, also commonly misunderstood.

Do you know the difference?

Modern Awards

In simple terms, a Modern Award outlines the entitlements of employees including wages and conditions based on industry and occupation. These conditions include the type of employment, overtime, penalty rates, wages, allowances, superannuation and leave entitlements. There are currently 122 Modern Awards covering the majority of employees in Australia.

Modern Awards stem from the National Employment Standards (NES), which outline the ten minimum standards for employment. Modern Awards cover all employees unless they are employed under an EA, employment contract or another registered agreement. Some classes of employees, such as accountants, may not be covered by an Award.

Within any business, the employees may not necessarily be covered by the same Modern Award. Employees are covered by Awards which relate to their occupation, therefore a kitchen hand and a cleaner will not be under the same Award, regardless of whether they work for the same business.

Enterprise Agreements

The Fair Work Act 2009 allows employers and employees to form an agreement rather than adhering to a Modern Award. These agreements set out the terms and conditions of employment and cannot contain anything less than what is offered in the Modern Award. Once an EA is approved by the Fair Work Commission (FWC), it may:

  • replace any applicable Modern Awards to act as the base terms and conditions of employment for those employees who are covered by the agreement
  • incorporate the terms contained in the relevant parent Modern Award

Under the Fair Work Act there are mandatory terms which must be included in an EA such as:

  • flexibility to vary the EA to meet the needs of the employer or employee
  • a coverage term which explains who the agreement covers
  • a consultation term requiring the employer to consult with employees regarding any major changes that are likely to have a significant effect on the employee or group of employees
  • a nominal expiry date no later than four years after the day on which the agreement has been approved by the FWC

An EA cannot include any discriminatory terms or terms that otherwise breach the Fair Work Act.

So what is the main difference between the two?

The main difference between a Modern Award and an EA is that EAs only apply to the employees of one particular organisation. They are tailored to suit that particular business and employees are negotiated internally and then approved by the FWC. Modern Awards are standardised and non-negotiable.

Employsure understands that with ambiguous and complex legislation, accompanied by the vast number of categories attached to Modern Awards and EAs, determining which one applies to your business can be tricky and time-consuming. Employsure is here to help, so contact us today on 1300 651 415.

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