Enterprise Agreements are an untapped resource of the business world, providing value to both employees and employers through a simple arrangement. This Business Kitz article will outline why enterprise agreements are valuable, whilst providing you with some tips to help to decide whether an enterprise agreement would be a worthwhile resource for your company.
What is an Enterprise Agreement?
Enterprise agreements are known as a collaborative employment agreement, which is used to set the minimum terms of employment between an employer, their employees and any union representing those employees. This agreement may replace modern awards already in place, and act as the basic terms and conditions of employment for anyone covered by the enterprise agreement.
Enterprise agreements can be highly beneficial for both employers and employees as they have a higher rate of negotiation and allow greater flexibility and consistency regarding terms and conditions tailored to the business such as hours and rosters. This also gives employees a chance to negotiate higher wages and benefits such as penalty rates and allowances that typical Modern Awards may not offer. It also provides a framework that is specific to the company, as it can be customised to suit the needs of the company.
Why have an Enterprise Agreement?
There is no set obligation to have an enterprise agreement in every workplace, which often leads to many businesses opting to use a generic, modern award agreement. However, enterprise agreements can offer a number of benefits and disadvantages, which employers often overlook.
Benefits of an enterprise agreement:
- Once an enterprise agreement is instated, employers can facilitate a stable work environment as wage structures and workplace conditions stated in the agreement can be accordingly upheld for 4 years.
- Enterprise agreements can streamline terms and conditions for businesses that rely on multiple awards to cover their employees.
- Agreements can provide protection from industry action, whilst reducing the risk of disputes, as the relevant unions can be involved in the drafting process of the agreement.
- Comprehensive agreements can also empower employees.
- They can provide competitive advantage for businesses as it allows them to operate under fixed cost structures.
- Employee organisations or (trade) unions seek improved employee conditions within your business.
Disadvantages of an enterprise agreement:
- If unions are closely involved, the employer may have limited control over voting outcomes.
- There are significant costs and time associated with planning and implementing a distinct enterprise agreement.
- There are strict processes and timeframes that must be adhered to when drafting and implementing an enterprise agreement.
- If you want to change an agreement before its expiry date, you will need to seek agreement from employees and approval from the Fair Work Commission.
What is the difference between a Modern Award and Enterprise Agreement?
The biggest difference between Modern Awards and Enterprise Agreements is that enterprise agreements are tailored according to the organisation, which allows all parties to draft an agreement that suits their needs. Modern Awards are generic and standard within the industry and cannot be negotiated.
What key topics are covered under an Enterprise Agreement?
The Fair Work Act 2009 details the specific terms that an enterprise agreement must contain to ensure it efficiently protects and represents both parties. These terms include:
- A coverage term that explicitly explains who the agreement covers
- Flexibility term allowing the employer and employee to agree to vary specific terms of the agreement with employees
- A term that requires the employer to provide notice and consult affected employees regarding major workplace changes
- A nominal expiry date of the agreement no longer than 4 years from the agreement’s approval date
What are the three main types of Enterprise Agreements?
A single employer or multiple employers who are single interest employers who make an enterprise agreement with employees who are employed at the time.
A single interest employer is defined as multiple employers who are in a joint venture or common enterprise or are related corporations.
Two or more employers who are NOT single interest employers, make an enterprise agreement with employees who are employed at the time.
An enterprise agreement that relates to a genuine new enterprise, which is created at a time when the employer has not yet employed any of the persons who will be working under that agreement.
What happens if an Enterprise Agreement is unregistered?
An enterprise agreement that has not been registered is not considered legally enforceable. An unregistered agreement must be formalised as a deed or be incorporated into an employment contract for it to become legally enforceable.
Recruitment is a long process and can be extremely time consuming! Business Kitz offers an Australian Employee Compliance Package that can operate in tandem with an Enterprise Agreement to ensure all parties are well prepared.
Legal Advice
Once instated properly, enterprise agreements are legally binding. The purpose of these enterprise agreements is to ensure the employees and employers are properly represented and equally satisfied with the contractual terms and conditions of the company. If you have any questions about enterprise agreements or want to inquire about a dispute regarding an enterprise agreement, our sister company, Legal Kitz can assist you. To arrange a FREE consultation with one of their highly experienced solicitors, click here today, or contact us at info@legalkitz.com.au or 1300 988 954.