Enterprise Agreements Part 1: What Are They?

Enterprise Agreements. What Are They? | IRSimplified.com.auThis is part 1 in a series on enterprise agreements.

You can find the first post in the series here.

With regards to the Fair Work Act 2009, an enterprise agreement is an agreement on certain employment conditions between an employer and their employee(s).

Enterprise Agreements can be between:
a) An employer and group of employees;
b) More than one employer and group of employees;
c) One of more employers and one of more unions for a genuine new enterprise (Greenfields Agreement)

Modern Awards v Enterprise Agreements

A Modern Award covers specific employees within a particular industry.

An Enterprise Agreement covers employees of a particular employer(s).

Enterprise Agreements can bundle a number of different Modern Awards that apply to a workplace into the one document. Once the Enterprise Agreement has been approved, the Modern Award(s) no longer apply.

However, the wages and conditions cannot make an employee ‘worse off’ when compared to the relevant Modern Award.


For an Enterprise Agreement to be approved by the Fair Work Commission, it must pass the Better Off Overall Test (BOOT).

Let’s say you want to avoid the confusion of when to pay penalty rates, you could roll those rates into the standard hourly or annualised salary.

For example, your staff have a standard rate of $27.00 per hour for a 38 hr week Monday to Friday, working an additional Saturday a month for 6 hrs.

Their normal weekly wage would be $1026.00 rising to $1323.00 when working the additional Saturday.

The new agreed wage could be $27.86 per hour flat rate, which would bring their weekly wage up to $1100.50.

To pass BOOT, the employee would need to get a wage over the 4 week period which is equal to or better than $4401.00 ($1026.00 x 3 + $1323). Over a 4 week period on the new rate, the employee would earn $4402.00.

This means that they are better off, and the rolled up rate would be acceptable.

Unlawful Content

An Enterprise Agreement cannot include unlawful content.

Some examples are:

  • A discriminatory term
  • An objectionable term
  • A term that would enable an employee or employer to ‘opt out’ of coverage of the agreement
  • A term that confers an entitlement or remedy in relation to unfair dismissal before the employee has completed the minimum employment period
  • A term that excludes, or modifies, the application of unfair dismissal provisions in a way that is detrimental to, or in relation to, a person
  • A term that is inconsistent with the industrial action provisions
  • A term that provides for an entitlement to right of entry that is not in accordance with Part 3-4 of theFair Work Act 2009, or,
  • A term that provides for the exercise of a State or Territory OHS right other than in accordance with Part 3-4 (which deals with right of entry).

From 01 January 2014, an enterprise agreement cannot include a term that requires superannuation contributions for default fund employees to be made to a superannuation fund, unless that fund:

  • Offers a MySuper product
  • Is an exempt public sector scheme, or
  • Is a fund of which a relevant employee is a defined benefit member.


While the Fair Work Act says that an enterprise agreement cannot have a nominal expiry date of more than 4 years from the day it was approved by the Fair Work Commission. The enterprise agreement will remain in force until it is superseded by a new enterprise agreement, or an application for it’s termination has been approved.


For an Enterprise Agreement to be approved the FWC must be satisfied that:

  • the agreement has been made with the genuine agreement of those involved
  • the agreement passes the better off overall test and does not include any unlawful terms or designated outworker terms
  • the group of employees covered by the agreement was fairly chosen
  • the agreement specifies a date as its nominal expiry date (not more than four years after the date of Commission approval)
  • the agreement provides a dispute settlement procedure
  • the agreement includes a flexibility clause and a consultation clause.


The Fair Work Commission may approve an Enterprise Agreement that does not meet the requirements of the Fair Work Act 2009, if the employer agrees to enter into certain undertakings that will alleviate the concerns.

The views of each bargaining representative will be sought, and once the FWC is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee and result in substantial changes to the agreement, it may be approved.

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