As an employer, you should be aware of the different awards that set out the minimum requirements for employees in your industry. Likewise, you must be across specific penalty rates, loadings, and other entitlements. Indeed, calculating these amounts for each employee, week in and week out, can be frustrating and administratively burdensome. Further, getting these calculations wrong can put your business at risk of an underpayment claim or a breach of the Fair Work Act 2009. Considering the complexities of interpreting and using modern awards in Australia, you can implement an enterprise agreement in your business. This article will discuss enterprise agreements and how to implement one within your business correctly.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Modern Awards vs. Enterprise Agreements
If you employ staff in Australia, you may have come across a modern award. Except for high-level executives and senior managers, modern awards cover most jobs in Australia. Generally, a modern award sets out the minimum entitlements and conditions businesses must provide to their employees in that role or industry. These entitlements might include:
- minimum wage;
- penalty rates;
- overtime rates;
- annual leave;
- sick leave; and
- methods of dispute resolution.
Each modern award will handle these entitlements differently. You must know which award applies to your employees and how your singular employees are classified under the relevant award. Pay rates and other entitlements (like allowances, overtime and penalty rates) can vary depending on your employee’s role and level of skill, competence or seniority. An employment lawyer can assist you in assessing your modern award coverage and your employees’ classifications.
On the other hand, enterprise agreements vary the terms of modern awards to benefit you and your employee. These agreements replace modern awards. However, the base pay rate you pay your employees under an enterprise agreement cannot be lower than the applicable modern award.
Enterprise agreements are negotiated between employers and a group of employees through a collective bargaining process. This generally involves bargaining representatives and will require each party to bargain in good faith. However, recent changes to the law mean that the Fair Work Commission may also intervene and make workplace determinations in limited cases where parties are in dispute and bargaining is at a standstill.
Why Would an Employee Accept an Enterprise Agreement?
On its face, anything that seeks to reduce an employee’s entitlements could cause alarm. But, you can only implement an enterprise agreement if your employees will be better off overall than if they were under the relevant modern award. Moreover, employees have bargaining powers within these agreements and are assured certainties regarding their conditions. This means they are probably more inclined to favour enterprise agreements.
Importantly, just because the employee receives a higher base wage does not mean that they will always be better overall. As a result of legislative changes under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, from 6 June 2023, this must be a “global assessment” to ensure each employee (and reasonably foreseeable employees) are left better off concerning their hours and patterns of work.
Continue reading this article below the formWhy Would an Employer Enter Into an Enterprise Agreement?
Many employers seek to implement an enterprise agreement as it is often simpler and more efficient in the long term. Modern awards can be complex. Notably, analysing their application to each employee can take time and effort. Costs associated with accounting and payroll can increase when employers need to calculate:
- meal allowances;
- penalty rates; and
- the overtime applicable to individual employees.
With an enterprise agreement, employers can take their attention away from calculating wages and spend more time focussing on the running of the business. Indeed, they allow for greater flexibility allowing for a mutually beneficial agreement with the potential for greater employment benefits and progression opportunities.
Furthermore, employees will not take industrial action and strike if they work under an enterprise agreement. Therefore, an enterprise agreement may benefit employees concerned that the requirements under the modern award may cause employees to take industrial action.
Implementing an Agreement
The Fair Work Commission (FWC) must review all enterprise agreements before you can implement them. The FWC will not approve enterprise agreements which:
- include unlawful content;
- make the employees worse off; or
- undercut rights provided under the National Employment Standards.
Additionally, enterprise agreements cannot include several terms, including those that;
- discriminate;
- go against the general protections provisions of the Fair Work Act;
- take away an employee’s right to unfair dismissal claims; and
- adjust who is entitled to employee rights under the Fair Work Act.
Key Takeaways
An enterprise agreement is a helpful tool that allows employers and employees to reach an agreement that will benefit both parties. Employers will save time and hassle worrying about applying different awards to different employees, and employees benefit by receiving a better wage overall.
If you have questions or want assistance with an enterprise agreement, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The question here is whether it is better for your business. Enterprise agreements allow for negotiations and consistency across all employees. It also simplifies the multiple modern awards that can cover multiple employees and allows you to tailor your business’ pay rate and employee benefits. However, enterprise agreements can be a disadvantage due to their minimal flexibility. Likewise, they take time to plan and negotiate, which could be costly.
Yes. These agreements give them a say in negotiations, bargaining and ensuring their employment terms and conditions. These agreements aim to benefit the employee more overall than the modern award would.
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