An enterprise bargaining agreement is an agreement between national system employers and their employees. These types of agreements are negotiated, in good faith, between the employers and employees through collective bargaining.
Enterprise bargaining agreement v Industry Award
As you may be aware, many different types of jobs in Australia are covered by an associated Industry Award. An Industry Award will state the minimum requirements that an employee in that industry must be provided with. For example things such as minimum wage, annual leave, sick leave, and methods of dispute resolution.
Generally an enterprise bargaining agreement will be similar to the Industry Award but for example there may be significant differences, for example, lower or no weekend penalty rates or meal allowances.
Why would an employee accept an enterprise bargaining agreement?
There is a simple reason why an employee will accept this. For any enterprise bargaining agreement to be allowed it has to pass what’s known as the “Better-off Overall” test. This test conducted by the Fair Work Commissioner assesses whether the enterprise bargaining agreement is on the whole better than the relevant Industry Award. For example, this means that even though the enterprise bargaining agreement may not have any meal or equipment allowances or lower weekend penalty rates it will still pay likely actually have a higher overall pay.
For example, under a relevant award, a waiter in a restaurant may be entitled to a minimum wage of $17.35 per hour and a 25% penalty rate for working on Saturday. This means that their wage per hour on a Saturday would be $21.69.
However, an enterprise bargaining agreement, may not have a penalty rate for its staff when they work on Saturdays but the base wage starts from $22.50 per hour.
It’s quite obvious from this example that even though there is no penalty rate the waiter is actually better off. This is an example of why an employee would accept an enterprise bargaining agreement even though it may seem to be taking things away from the base Industry Award.
The requirement however is “Better-off OVERALL” so just because the base rate is higher does not mean that it will satisfy this requirement. The enterprise bargaining agreement must be, on the whole, not any less beneficial than the National Employment Standards and the relevant award.
Why would an employer seek to enter into an enterprise bargaining agreement?
One of the most common reasons is because it can make life a lot simpler for the employer. Our contract lawyers know that Industry Awards can become quite complex. Deciphering awards can be difficult, and calculating different items for each employee, such as allowances, penalty rates and overtime, are time-consuming and inefficient for the employer. Employers are generally more concerned with running the business, maintaining its operations and generating revenue. An enterprise bargaining agreement can make things simpler for the employer by getting rid of allowances, penalty rates, etc. by increasing the base wage significantly.
However, employers should note that not all things can be removed. There are 4 important things which must be kept in an enterprise bargaining agreement. They are as follows:
- an expiry date for the enterprise bargaining agreement;
- a dispute settlement procedure for disputes between the employer and employee;
- a flexibility term; and
- a consultation term.
An enterprise bargaining agreement can be great for both the employee and employer and there are many reasons why each party may want to enter into one. If you are thinking of entering into an enterprise bargaining agreement contact us and we’ll be able to get one of our best contract lawyers to help you.