Enterprise agreements – what are they and do I need one?
26 Mar 2019
- Employment Law
When working conditions are already set out in the relevant industry awards, why negotiate an enterprise agreement? In this article Emily Shoemark outlines what’s involved in enterprise agreements and when they should be used.
What is an enterprise agreement?
An enterprise agreement is an agreement between an employer and its employees, or a group of its employees, that sets out the terms and conditions of employment. The agreement must be approved by the Fair Work Commission (FWC); it is then registered with the FWC and will be publicly available on its website.
Agreements can be multi-enterprise agreements. However, in the ACT it’s more common to have single enterprise agreements between a single employer and its employees.
An enterprise agreement is another layer of detail in the employment terms and conditions. The employer will still need to comply with the National Employment Standards, and the result of the agreement must be that the employees are better off overall under the agreement than if they were employed under the relevant award. This test, commonly referred to as the BOOT test, is what the FWC will consider in the agreement approval process.
Do I need an enterprise agreement?
Enterprise agreements can assist employers who want to tailor employment conditions to their workplace and type of work. Because awards are industry specific, it can be that sometimes a workplace does not quite fit with the award. It can sometimes be time-consuming and complicated to calculate the individual allowances for each employee, especially in industries where there are many allowances that could apply. In those circumstances, the employer may negotiate with the employees to pay a higher hourly rate rather than allowances, as long as the employees are better off under that arrangements.
Enterprise agreements also allow the employer and employee to agree on more specific conditions of employment than set out in the award. These conditions might relate to when work is performed, ‘time off in lieu’ instead of overtime, and performance management and disciplinary matters.
Top tips for a smooth process
- Make sure you have the essentials. Enterprise agreements must all include certain terms prescribed by the Fair Work Act 2009, including about dispute resolution, consultation and flexibility. The FWC provides model terms on its website; including these model terms can assist with the approval process.
- Make sure the agreement is lawful. Agreements cannot be inconsistent with the Act, including the rights available to workers under the Act. Unlawful agreement terms include those that alter an employee’s right to bring an unfair dismissal claim or alter the remedies available for such a claim. The agreement also cannot be inconsistent with the industrial action provisions of the Act or alter rights of entry.
- Follow the correct process. The Act sets out a framework to assist employers, employees and unions to negotiate in good faith. The framework includes the timeframes for steps to take place. These timeframes give all parties the opportunity to be involved without slowing down the process.
- Try to get employee – and if relevant, union – participation early on in the process. Having engagement throughout the process helps to get the views of all who want to be involved from the outset. This is also helps to avoid employees requesting last-minute changes or submitting an objection.
- Make sure you get the voting process right. The Act prescribes certain timeframes and consultation to take place in the voting process. It’s important to get these right to make sure the vote is valid. If approved, you must submit the agreement to the FWC within 14 days of the vote, with the required forms. These forms are listed on the FWC website.
Approved enterprise agreements come into effect seven days after FWC approval, and so make sure that your payroll systems and policies are ready to make sure you are compliant with the agreement from the date it commences.
How can we help?
If you are considering entering into an enterprise agreement, or have started the process and are having difficulties, our Employment Law team would be happy to assist you with the process. You can call 02 6285 8000 or email us to make an appointment.