What is a enterprise agreement?

An enterprise agreement is a collective workplace agreement between an employer and a group of employees that sets pay, hours, and conditions for a workplace or business. It is negotiated between the parties, voted on by employees, and approved by the Fair Work Commission before it takes legal effect. Once approved, it replaces the relevant modern award as the source of pay and conditions, although the National Employment Standards continue to apply.

There are three main types under the Fair Work Act 2009. A single-enterprise agreement covers one employer and its employees, the most common form. A multi-enterprise agreement covers two or more employers, used in small-business sectors like early childhood education and aged care. A greenfields agreement covers a new business or project before any employees have been hired and is negotiated between the employer and one or more registered unions.

The Fair Work Commission must apply the Better Off Overall Test (BOOT) before approving an agreement, which compares the agreement against the relevant modern award and confirms that every employee covered is better off overall under the agreement. Employees must also have voted in favour of the agreement after a period for considering the proposed terms. Unions registered as bargaining representatives can negotiate on behalf of their members during the bargaining process.

Enterprise agreements typically have a nominal expiry date of up to four years from approval, after which they continue in force until replaced or terminated. Bargaining for a replacement agreement can begin up to three months before the expiry date. The Secure Jobs, Better Pay Act 2022 introduced reforms making it easier for small businesses to join multi-employer bargaining and strengthening the BOOT, with about 11,500 active enterprise agreements covering around 2.4 million Australian employees as of 2024.