Fair Conditions for Fair Work Enterprise Agreement Tips for Employers

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Enterprise agreements can be a useful tool for both employers and employees to establish pay and working conditions. It is not mandatory for employers to have an enterprise agreement with their employees, but the benefits that can be gained can be wide-ranging. Employers are required to submit enterprise agreements to the Fair Work Commission for approval before they become valid. Once approved by Fair Work, enterprise agreements can only be changed if both parties agree to the amendment or if the agreement term expires. This provides clarity and certainty for everyone involved.

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What is an enterprise agreement?

An enterprise agreement is a binding document that outlines the compensation and benefits above the legal minimum that employers provide to their workers. It is not an individual employment contract but a mutual agreement between employers and employees. It aims to provide fair conditions for fair work – that is, to compensate employees fairly for their time and effort. Therefore, the interests and needs of both employees and employers need to be met in the agreement.

Employers are already required to adhere to the National Employment Standards or conditions outlined in the relevant Modern Award when employing staff. If an enterprise agreement is in place, it typically includes these minimum conditions. In certain cases, the minimum conditions will be adjusted to meet the need of either party, but the employee cannot be judged to be worse off. Enterprise agreements often provide additional allowances and better conditions, based on what is valued by employees as well as employers.

The terms included in the agreement are negotiated between employees and employers. Some conditions might be readily agreed upon by both parties, while others may require compromises from both sides.

Note that the Fair Work Act outlines that an enterprise agreement cannot be made at a business where the employer has only one employee. In these cases, the relevant industry award may best apply. Employees are often represented by a union, who they appoint to act on their behalf, when negotiating the agreement with their employer.

Employers who do not wish to make an agreement with their employees may not be forced to. However, if the employer does not agree, employees may apply to the Fair Work Commission to order the employer to start the process.

The types of enterprise agreements

There are three main types of enterprise agreements: single enterprise, multi-enterprise and greenfields agreements.

Single enterprise agreements

One or more related employers and two or more employees can create a single enterprise agreement. An example of employers considered to be related is when employees work for two different franchisees of the same franchise. However, single enterprise agreements involving one employer and two or more employees are the most common.

Multi-enterprise agreements

Where two or more employers and two or more employees make an agreement, it is called a multi-enterprise agreement. For example, this occurs when a worker is employed by two different companies in the same industry to do the same role.

Greenfields agreements

New enterprises that do not yet have employees can make a greenfields agreement. These agreements are most commonly negotiated between the employer and a relevant union in their industry ahead of hiring staff.

The process of making an agreement

There are several steps to follow when creating an enterprise agreement with employees. It’s important to adhere to the timeline for planning and negotiating an agreement, otherwise the process may need to restart.

Plan to make an enterprise agreement

Communicate with employees that you plan to make an enterprise agreement with them. This may either respond to their request for an agreement or raise the prospect of having one with them. Keep in mind that when employers apply for approval for their agreement, they are required to provide Fair Work with copies of any information that is supplied to employees during the bargaining process. So, keep a record of all communication from this point of the process.

Start the bargaining process

The bargaining process is when the employer and the employees negotiate various aspects of the enterprise agreement. Sometimes, there may be disputes between the two parties on one or more matters in the enterprise agreement. If these cannot be resolved, the Fair Work Commission can be called on to resolve the issue.

Develop the agreement

Once both parties have agreed to the terms and conditions, the enterprise agreement is drafted. There are specific clauses and terms as well as fairness measures, called ‘Better Off Overall’ calculations, that need to be included. Ensure the document includes all required information before proceeding.

Prepare employees to vote

After developing the agreement, call on employees to vote on it. Employees, rather than their representatives, are required to vote on whether they agree to the enterprise agreement. Only those eligible, such as those who the agreement will cover, can vote. Employees have seven days to review the agreement before the voting period ends.

Apply for approval

If 51% or more of employees vote in favour of the agreement, the employer is required to apply to the Fair Work Commission for approval. A Commission Member will assess the enterprise agreement against factors. These factors include meeting the needs of a particular kind of employees and being signed and dated in the correct way.

How an enterprise agreement can be beneficial

Having pay and working conditions clearly outlined in a binding document can help employers easily communicate benefits to their employees. It also keeps employers accountable to ensure they provide what they promised, without inadvertently overlooking promises or delaying their implementation. However, there are other benefits that employers can gain.

An engaged and satisfied workforce

An enterprise agreement sets conditions that are either tailored to the industry and employer or are better than what is outlined under other employment arrangements.

For example, enterprise agreements can outline allowances that are unique to the business. It may be a food allowance for employees who may work through more than one meal break during their shift. Or, it may be a clothing allowance for those who are required to purchase specific uniforms or safety workwear. Providing these allowances can help employees financially, so can keep them engaged in working for the business.

Enterprise agreements can also outline leave entitlements that go above and beyond what is required under the National Employment Standards. For example, some employers provide birthday leave, which gives the employee an extra day of annual leave to take on or around their birthday. The extra time off can help employees feel valued and satisfied in their job.

Employees can feel valued when their employer is not only keen to offer benefits above the legal minimum, but to write them into a legally binding document. This also helps them to more engaged in their role at the organisation.

As employees agree to the terms and conditions and have the opportunity to offer suggestions, an enterprise agreement can increase the likelihood they are content with their working conditions.

Become an employer of choice

Once approved by Fair Work, enterprise agreements are published publicly on its website. This allows potential employees to access the document before they are employed and decide if it is an organisation they want to work for. You can stand out among other employers just by having an enterprise agreement with employees, rather than relying on Award conditions.

Conduct business planning and forecasting

Enterprise agreements often detail pay rises in advance, which gives employers certainty around future workforce costs. For example, an enterprise agreement may outline a 3% pay rise next financial year, 2.5% the year after that and 2% the following year. You may be better able to plan your business’ future financial outlay when costs such as pay rises have already been negotiated and determined.

By outlining fair conditions for fair work, enterprise agreements can be positive for both employers and their employees. Enterprise agreements can lead to benefits that make it well worth the time and effort that you put into negotiating one with your employees.

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