An enterprise agreement sets terms and conditions for a particular workplace or business, arrived at through bargaining rather than imposed by an award. Once approved it applies instead of the modern award that would otherwise cover the work.
The better off overall test
The Fair Work Commission will only approve an agreement if each employee would be better off overall than under the relevant award. This is assessed across the whole agreement rather than clause by clause, so a lower rate in one area can be offset by better conditions elsewhere, but the overall position must improve. The National Employment Standards continue to apply underneath regardless.
- Bargaining carries good faith obligations on both sides
- Employees vote on the agreement before it is submitted for approval
- Agreements have a nominal expiry date but continue until replaced or terminated
Why it matters when hiring internationally
Enterprise agreements are more common in some sectors than others, and where one applies it, rather than the award, governs pay and conditions. When acquiring or absorbing an Australian team, establishing whether an agreement covers them is a threshold question, because it determines the entire employment cost structure.