Most employers will have heard of an ‘enterprise agreement’ or ‘enterprise bargaining agreement’.  But do you know what they are or if they could be of use to you? 


What is an enterprise agreement?


An enterprise agreement or enterprise bargaining agreement, is a collective agreement between an employer and their employees. The agreement covers the terms and conditions of the employment relationship and takes the place of awards.  Conditions and benefits such as rates of pay, leave, working hours, overtime, allowances and dispute resolution procedures can all be included.


Why have an enterprise agreement?


Given that an agreement generally covers items found within awards and the National Employment Standards (NES), why would you need one? 

Awards are designed to cover an entire industry group or occupation.  Agreements can be tailored to suit the circumstances of a single employer. 

For example, some industries are covered by awards containing countless allowances and penalty rates.  An agreement could remove allowances and instead provide an ‘all inclusive’ rate of pay, saving administrative time and reducing the risk of errors.


Why would an employee agree to an enterprise agreement?


Terms and conditions of employment are covered by awards, NES and the Fair Work Act (FWA).  So why would an employee agree to enter into an enterprise agreement?

All agreements must be approved by and registered with the Fair Work Commission.  To receive approval, amongst other requirements, an agreement must pass the “Better Off Overall” test.  That is to say that an agreement must provide employees with terms and conditions that see them “better off” than they would otherwise be by remaining under their relevant award, NES and FWA.  For example, an employee may lose their tool or phone allowance, but receive a higher hourly rate leaving them “better off overall”.


Pros vs. Cons


As with everything, there are both positive and negative aspects to enterprise agreements.  The ‘pros’ for employers are:

  • the ability to simplify processes and payments,
  • reducing the possibility of misinterpreting relevant awards. 


The ‘cons’ associated with having an enterprise agreement include:

  • providing remuneration and/or benefits in excess of that required by relevant awards,
  • being ‘locked into’ paying or providing benefits ‘above award’ for the duration of the agreement,
  • the time and cost of developing and bargaining the agreement.


Many employers find agreements unnecessary, preferring to stick with their relevant award, whereas others love the benefits they can provide.  Enterprise agreements aren’t for everyone, but having an understanding of them allows you to make an informed decision as to whether or not they could be right for you. 


If you would like further information about developing an enterprise agreement for your organisation, please contact us –



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Disclaimer:  Blogs posted by MMO HR Solutions are for information purposes only and do not constitute professional advice.  The reading/use of any blog posts does not form a consultant-client relationship.  The reading/use of any blog post should not be used as a substitute for professional advice.