The ultimate guide to enterprise agreements: understanding the difference between an enterprise agreement and an award

Businesses use enterprise agreements to set clear workplace conditions with employees. A well-structured agreement helps businesses attract skilled workers and improve retention. Understanding how to create, negotiate and manage agreements is key to building a fair and productive workplace.[ez-toc]

A quick guide to enterprise agreements

Enterprise agreements set workplace conditions between employers and employees. They provide wages, leave entitlements and other benefits beyond the minimum award. Businesses can customise terms to suit their needs while ensuring fair pay and conditions. The Fair Work Commission reviews agreements to ensure compliance. Strong agreements help attract talent, improve retention and create better workplaces.

Types and key elements of enterprise agreements

Enterprise agreements set workplace conditions for employees. They offer tailored terms beyond the minimum standards in modern awards.

Types of enterprise agreements

Enterprise agreements come in three main types. Each serves a different purpose based on the workplace and industry.1. Single-enterprise agreements

• Apply to one employer or a group of related employers.
• Cover employees working for the same business.
• Allow businesses to tailor pay, conditions, and flexibility.

2. Multi-enterprise agreements

• Involve multiple employers that are not related.
• Apply when businesses share common conditions, like in an industry.
• Require unions or employee representatives for negotiations.

3. Greenfields agreements

• Apply to new businesses before hiring employees.
• Employers and unions negotiate terms before employees start.
• Help set conditions for new workplaces in advance.

Key elements of enterprise agreements

Enterprise agreements must include conditions that improve on the minimum award entitlements. The Fair Work Commission assesses agreements before they are registered.1. Pay and conditions

• Employees must receive wages and conditions above the minimum award.
• Agreements must meet or exceed the National Employment Standards (NES).

2. Working hours and leave

• Employers must set clear rules on standard and flexible work hours.
• Agreements should outline leave entitlements, including annual, sick, and parental leave.

3. Dispute resolution

• Agreements must include a process to resolve workplace disputes.
• Dispute resolution typically involves discussions, mediation, or legal steps if needed.

4. BOOT (Better Off Overall Test)

• The BOOT test ensures employees are better off under the agreement than the modern award.
• The Fair Work Commission applies this test before approval.

Enterprise agreements vs. modern awards

Enterprise agreements and modern awards both set workplace conditions, but they have key differences.FeatureEnterprise agreementModern awardCoverageSpecific to a business or group of businessesCovers an entire industry or occupationFlexibilityCustomised for the workplaceStandard conditions for all employeesApproval processRequires Fair Work Commission approvalSet by the Fair Work CommissionPay and conditionsMust be better than the modern awardSets the minimum legal requirementsBargaining processNegotiated by employers, employees and unionsNo negotiation requiredEnterprise agreements provide flexibility while ensuring fair conditions for employees. Employers should review their industry needs before choosing an agreement.Utilise Business Kitz to streamline your employee and contract management processes.

Who can negotiate and apply for an enterprise agreement?

Enterprise agreements set workplace conditions and must follow legal requirements. Only certain parties can negotiate and apply for them.

Eligible parties

The following parties can negotiate an enterprise agreement:

• Employers – A single employer, a group of related employers or multiple unrelated employers.
• Employees – Workers who will be covered by the agreement.
• Unions – If employees choose, a union can represent them.
• Employee representatives – Employees can appoint a bargaining representative if they do not want a union involved.

Each party must follow fair bargaining rules set by the Fair Work Commission.

The bargaining process

Enterprise bargaining ensures fair agreements that meet legal standards. Employers and employees must follow these steps:

1. Initiate bargaining – An employer, employees or a union starts the process.
2. Appoint representatives – Employees can choose a union or another representative.
3. Negotiate terms – All parties discuss pay, conditions and workplace rights.
4. Meet Fair Work standards – Agreements must comply with the National Employment Standards and pass the BOOT test.
5. Vote on the agreement – Employees vote to approve or reject the final terms.
6. Fair Work Commission approval – If employees approve, the agreement is sent to the Fair Work Commission for review.

Common misconceptions

Many believe only unions can negotiate enterprise agreements. This is not true. Employees can represent themselves or choose another bargaining representative.Some think modern awards do not apply once an enterprise agreement is in place. This is also incorrect. An agreement must provide better conditions than the relevant award.Employers and employees should learn their rights before starting negotiations. Understanding the process helps make sure that agreements are made fairly.

Step-by-step guide: how to make an enterprise agreement

Creating an enterprise agreement involves several key steps. Employers and employees must follow legal requirements to ensure fair terms.

Step 1: preparation

Before starting negotiations, employers should:

• Review existing wages and conditions.
• Check compliance with the Fair Work Act and National Employment Standards.
• Identify workplace needs and areas for improvement.
• Notify employees of their right to representation in bargaining.

Proper preparation helps avoid delays and legal issues later.

Step 2: negotiation

Enterprise bargaining allows employers, employees and unions to discuss workplace conditions. All parties must negotiate in good faith, meaning they must:

• Meet and respond to proposals promptly.
• Provide relevant information when requested.
• Consider all views and avoid unfair conduct.

Negotiations should focus on fair wages, work conditions and industry standards.

Step 3: drafting and employee access

Once the terms are agreed upon, the employer must:

• Draft the enterprise agreement in clear, legal terms.
• Provide employees with a copy at least seven days before the vote.
• Ensure employees understand the agreement by offering explanations if needed.

This step ensures employees make an informed decision before voting.

Step 4: approval voting

Employees must vote on the final agreement. The voting process must be:

• Fair, with all eligible employees given a chance to vote.
• Free from pressure or misleading information.
• Based on majority approval.

If the majority approves, the agreement moves to the next stage.

Step 5: submission and Fair Work Commission review

The employer must submit the agreement to the Fair Work Commission. The commission checks that:

• The agreement passes the Better Off Overall Test (BOOT).
• The terms are lawful and meet minimum employment standards.
• The agreement does not disadvantage employees compared to the relevant award.

If approved, the agreement is legally binding and replaces the award.

Common pitfalls to avoid

Many agreements fail because they:

• Do not meet minimum award entitlements.
• Contain unclear terms or legal errors.
• Do not give employees enough time to review before voting.
• Fail the BOOT, making employees worse off than under the award.

Employers should review their agreement carefully before submission. Getting legal advice can help avoid costly mistakes.

Tools and resources for enterprise agreement management

Managing an enterprise agreement requires the right tools and resources. Employers must ensure compliance, streamline processes and meet legal standards.

Government tools and resources

The Australian government provides several resources to help businesses create and manage enterprise agreements. These include:

• Fair Work Commission templates – Standard templates help businesses draft agreements correctly.
• Guidelines and checklists – The Fair Work Commission website offers step-by-step guides.
• National Employment Standards (NES) – Employers must ensure agreements meet the minimum employment standards.
• Fair Work Ombudsman resources – Employers and employees can access information about workplace rights and compliance.

Using these resources helps businesses avoid errors and meet legal requirements.

Business solutions for compliance

Many businesses use digital tools to manage enterprise agreements efficiently. These solutions improve compliance and document security.1. Contract management softwareSecure digital platforms help businesses create, sign and store agreements. Business Kitz offers a simple solution for:

• Drafting agreements using legal templates from our Document library of over 100 templates in conjunction with our AI-support Document creator tool.
• Digital signing for faster approvals with our Document signing tool.
• Secure storage via our Document vault to keep agreements accessible and protected.

2. HR and legal advisory servicesProfessional HR and legal experts help businesses:

• Ensure agreements follow workplace laws.
• Provide advice on enterprise bargaining and compliance.
• Assist in negotiations with employees and unions.

Using the right tools and resources helps businesses create strong, legally sound agreements. Employers should review available options to find the best fit for their needs.

How enterprise agreements impact employee entitlements

Enterprise agreements set workplace conditions beyond the minimum award. They help employees gain better pay, benefits and work-life balance.

Key areas influenced by agreements

Enterprise agreements must improve conditions compared to the relevant award. They provide flexibility while ensuring employees remain better off overall.1. Wages and pay structures

• Employees must receive wages above the minimum award rates.
• Agreements can include structured pay increases.
• Some industries offer higher penalties, overtime rates and allowances.

2. Leave entitlements and flexibility

• Agreements can extend leave entitlements beyond the National Employment Standards (NES).
• Some include extra annual leave or paid parental leave.
• Flexible work arrangements may allow remote work or adjustable hours.

3. Additional perks and incentives

• Some agreements offer training allowances or professional development funding.
• Bonuses and performance-based incentives can reward high-performing employees.
• Businesses may provide wellness programs or meal allowances.

Example: how a healthcare business improved retention

A private healthcare provider struggled with high staff turnover. Nurses and support staff left for better pay and conditions in other workplaces. The business introduced an enterprise agreement to improve employee entitlements.Key changes included:

• A structured pay increase above the award.
• Additional paid training to support career growth.
• Extra paid leave for long-term employees.

After one year, staff retention improved by 30%. Employees felt valued and engaged, reducing recruitment costs for the business.A well-structured enterprise agreement benefits both employers and employees. Businesses should review industry standards and negotiate fair conditions to attract and retain talent.

Compliance, dispute resolution and agreement enforcement

Enterprise agreements must follow workplace laws. Employers and employees must ensure agreements comply with the Fair Work Act and other legal requirements. If disputes arise, clear processes help resolve them fairly.

Ensuring compliance

Employers must follow all terms in an enterprise agreement. Compliance includes:

• Paying employees at or above the agreed wage rates.
• Providing entitlements like leave and allowances.
• Following dispute resolution procedures outlined in the agreement.

The Fair Work Ombudsman provides resources to help businesses comply. Employers should regularly review agreements to ensure they meet legal standards.

Handling breaches

A breach occurs when an employer or employee does not follow the agreement. Common breaches include:

• Underpayment of wages or entitlements.
• Failure to provide agreed working conditions.
• Unlawful changes to contract terms.

If a breach happens, the affected party should:

1. Raise the issue with the employee, employer or HR team.
2. Seek help if unresolved. Employers may contact a lawyer, commence performance management processes, or provide the employee with a formal warning, depending on the severity of the breach. Likewise, employees can contact their union or a workplace representative if they are the affected party.
3. In serious cases, the employee may Lodge a complaint with the Fair Work Ombudsman, who can investigate serious breaches. If the breach is the fault of the employer, the employer should immediately seek to resolve any breaches prior to a complaint being lodged and rectify any identified issues with the enterprise agreement as necessary.
4. Take legal action – In some cases, disputes may go to the Fair Work Commission or court.

Dispute resolution tools

Enterprise agreements must include a dispute resolution process. The Fair Work Commission provides:

• Conciliation to help parties agree.
• Arbitration if no agreement is reached.
• Legal rulings on agreement enforcement.

Employers and employees should use these tools to resolve issues quickly. A strong dispute resolution process helps maintain a fair and productive workplace.

Frequently asked questions about enterprise agreements

How do enterprise agreements apply to businesses?

Enterprise agreements apply to businesses that want to set workplace conditions beyond the minimum award. They allow employers to tailor pay, leave and flexibility to suit a specific business. The Fair Work Commission ensures agreements meet legal standards before approval.

Where can I find enterprise agreements for my industry?

You can find enterprise agreements on the website of the Fair Work Commission. The site provides agreements and other registered agreements across different industries and sectors. Employers and employees can search for agreements that match their workplace needs.

What is the minimum pay requirement under an enterprise agreement?

An enterprise agreement must ensure employees are better off compared to the relevant award. It must meet or exceed the minimum wages set by Fair Work Australia. The Better Off Overall Test (BOOT) ensures employees receive fair pay and entitlements.

How does an award differ from an enterprise agreement?

An award sets minimum pay and conditions for a whole industry. Enterprise agreements and other registered agreements allow businesses to establish tailored terms beyond the award. While an award will apply automatically, an agreement must be negotiated and approved.

What is the role of the Fair Work Commission in agreements?

The commission supports agreement-making by reviewing and approving agreements. It ensures agreements follow workplace laws and do not disadvantage employees. Employers and their representatives must submit agreements to the commission for assessment.

How can businesses deal with enterprise agreement disputes?

If a dispute arises, employees and their representatives should follow the agreement’s resolution process. If no resolution is reached, the Fair Work Commission can mediate. Employers must also follow rules set by the Fair Work Act.

Can agreements vary across different businesses?

Yes, agreements vary based on business needs. Fair Work offers a collaborative approaches program that helps businesses negotiate fair terms with employees. Employers should ensure agreements reflect the conditions of their employment while meeting legal standards.

What is the process that employers follow to create an enterprise agreement?

Employers must notify employees, negotiate terms and conditions, and draft the agreement. Employees then vote on the final terms. If approved, the agreement is sent to the Fair Work Commission for review.

How does enterprise bargaining affect employees better than an award?

Enterprise bargaining allows employees to negotiate better wages and flexibility than a traditional award. It ensures employees benefit through higher pay, improved leave entitlements and workplace culture changes.

How can I learn more about enterprise agreements?

To learn more about enterprise agreements and other registered agreements, visit the website at Fair Work Commission. The site offers guidance, checklists and templates for agreement-making. If you need help, please contact a workplace relations professional for advice.

How does the collaborative approaches program help with agreements?

The collaborative approaches program supports fair negotiations between employers and employees. It helps businesses establish strong agreements that meet industry standards. The program also rules on fair conditions of employment.

What happens if an employer does not meet the conditions of employment?

If an employer does not meet the entitlements or obligations in an agreement, employees may raise concerns. Employees and their representatives may report breaches to the Fair Work Ombudsman or Fair Work Commission.

How do enterprise agreements support workplace culture?

Enterprise agreements help create a positive workplace culture. They encourage fair pay, flexible work and professional development.

How does the Fair Work Commission help employees and businesses find support?

The Fair Work Commission provides a centre for agreement-making resources. Businesses can access checklists, guidelines and case studies to help establish fair agreements. The commission also offers a page for related information on compliance.

How can businesses establish a new enterprise agreement?

To establish an enterprise agreement, a business must follow legal steps. These include employee consultation, fair negotiation and submission to the Fair Work Commission. A variation to an existing agreement may also be submitted for approval.

Where can I get more related information on enterprise agreements?

For related information on enterprise agreements and compliance, visit the Fair Work Commission website. Employers can also contact legal advisors or HR professionals for guidance.

Why enterprise agreements are a strategic advantage

Enterprise agreements give businesses and employees more control over workplace conditions. They offer flexibility, improve job satisfaction and help businesses stay competitive.

Key benefits

• Customised conditions – Businesses can tailor wages, hours and benefits to suit their needs.
• Stronger workplace relationships – Fair agreements build trust between employers and employees.
• Hiring and retention advantage – Better pay and conditions attract skilled workers and reduce turnover.

Managing agreements can be complex, but the right tools make the process easier. Business Kitz provides digital solutions for creating, signing and storing agreements securely.Explore Business Kitz today and sign up for a free account to simplify enterprise agreement management and support compliance.Disclaimer: This content is intended to be used for educational and informational purposes only. Business Kitz does not offer legal advice and cannot guarantee the accuracy, reliability, or suitability of its website content for a particular purpose. We encourage you to seek professional advice from a licensed professional and verify statements before relying on them. We are not responsible for any legal actions or decisions made based on the information provided on our website.Unless expressly stated otherwise, all content, materials, text, images, videos and other media on this website and its contents are the property of their respective copyright owners.