An Enterprise Agreement is negotiated between employers, employees and bargaining representatives to establish a fair working wage and conditions of employment.
Unlike a Modern Award or the National Employment Standards (NES), an Enterprise Agreement gives employers and employees the freedom to bargain for better wages, greater flexibility, and working conditions to suit their individual needs.
The Fair Work Act 2009 sets out strict rules and guidelines for all parties to follow to ensure the process is fair. This includes guidelines for negotiating, mandatory terms to include, and the requirements needed to comply with the Fair Work Commission’s (FWC) approval standards.
An Enterprise Agreement sets out the minimum terms of employment between one or more employers and their employees or a group of their employees. The agreement may either sit in isolation of any other Award or it may incorporate certain terms from the relevant parent Award.
Enterprise Agreements can benefit employers because they can negotiate for more flexible working conditions. Likewise, employees can bargain for higher wages and extra benefits a standard Modern Award does not offer.
Below are the three types of employment agreements that can be made:
An Enterprise Bargaining Agreement cannot offer overall lesser terms than the Modern Award or national minimum standard.
An Enterprise Agreement covers a range of matters from rates of pay to employment conditions and dispute resolution procedures. Based on the requirements of the FWC, an Enterprise Agreement must contain the following items:
Negotiating can take many weeks or months. It requires a lot of research, meetings and discussions with employers, employees and bargaining representatives. Before starting the process, employers must notify staff of their intent to negotiate and give them enough time to find a suitable bargaining representative.
For employees, their bargaining representative will most likely be a trade union member however this is not mandatory. If an employee is a union member, their union will be their default bargaining representative, unless the employee notifies of an alternative representative. An employer covered by the agreement can represent themselves or seek representation elsewhere.
Bargaining in good faith is a key component of an Enterprise Agreement. The Fair Work Act 2009 outlines good faith bargaining requirements to be followed during the process:
Once negotiations on the Enterprise Agreement have concluded between the representative parties, the agreement must be brought to a vote. All employees covered by the pending agreement have the right to vote on the agreement. If a majority of the employees who cast a valid vote approve the agreement, then the Enterprise Agreement is passed to the FWC for approval.
The FWC will apply a stringent means test called the ‘Better Off Overall Test’ against an Enterprise Agreement to ensure the employee has not been disadvantaged by the agreement.
For advice on how to negotiate an enterprise agreement and other useful information, fill out the online form below to request a free consultation with an Employsure workplace relations specialist.