What Makes for a Good Enterprise Agreement? And What is the Importance of Getting it Right?

What is an enterprise agreement?

An enterprise agreement is a legally binding industrial instrument made between an employer and its employees. It outlines the specific terms and conditions of employment such as wages, hours, and leave entitlements, that apply within a particular business.

While most businesses operate within an underpinning Modern Award, enterprise agreements provide the flexibility to move beyond the award’s minimum standards and tailor working conditions to better meet operational needs and employee expectations.

What does a Good Enterprise Agreement look like?

A high-quality enterprise agreement is built on two pillars: a strong bargaining process and a well-drafted final document. An organisation might execute a thorough negotiation process, yet still produce an agreement that fails to adequately address unique organisational needs or provide meaningful improvements compared to the relevant award.

Effective enterprise bargaining should result in an agreement that not only complies with legal standards but also improves on them. It needs to offer practical benefits for both employees and the organisation. This starts with a well-structured negotiation framework that encourages transparency, participation, and long-term thinking.

When thoughtfully developed, enterprise agreements can deliver significant benefits. Here are a few examples:

1. A powerful recruitment tool

Enterprise agreements allow employees to influence their working conditions, making an organisation more attractive to top talent seeking new opportunities.

2. Improved retention

Enterprise agreements ensure employees receive fair compensation and address industry or organisation-specific challenges that Modern Awards may not cover.

3. Simpler than Modern Awards

Awards are often complex, whereas enterprise agreements, though requiring careful drafting, can be structured clearly.

4. Alignment with business strategy

Enterprise agreements allow organisations to offer generous benefits where viable, while adjusting terms in areas less suited to their operational structure. This allows for a balanced approach, creating an inclusive environment where all stakeholders can contribute to defining employment terms.

The Impact of Well-Designed Enterprise Agreements

Recently, our experts have observed growing hesitation among employers when it comes to enterprise agreements.

The reason?

These agreements require significant preparation and behind-the-scenes work before a final version is reached. This includes comprehensive scenario modelling for wages and benefits, engaging with employees to address concerns, and ensuring the agreement offers outcomes that are genuinely better than the minimum entitlements under the relevant award.

While the process can be time-consuming and resource-intensive, preparation certainly pays off. Our experts recommend adopting a democratic approach when designing an enterprise agreement. When proper procedures are followed:

• Both employers and employees benefit significantly
• The agreement serves as a strong representation of organisational values
• Employment terms and conditions reflect fair standards.

The true value of enterprise bargaining lies in establishing a solid foundation from the start and having good intentions throughout the process to deliver optimal outcomes. The enterprise bargaining process, therefore, represents a significant investment.

Why Expert Oversight is Pivotal

Enterprise agreements can serve as a competitive tool, which is why experienced industrial relations experts must be involved in both drafting and negotiation phases. These specialists act as essential bridges in what is otherwise a cumbersome and complex process.

As emphasised earlier, adhering to legal requirements during enterprise agreement negotiations is crucial, as inadequate drafting can cost employers millions of dollars.

Even a single ‘comma’ or ‘word’ can significantly alter the meaning of terms and conditions, leading to multiple interpretations. Our specialists have seen firsthand how poorly drafted agreements, written without expert input, have resulted in prolonged legal and financial battles in the form of underpayments and talent loss.

A well-structured enterprise agreement does not require frequent amendments—only renewal at each nominal expiry date and occasional updates to reflect current industry standards. That’s why it’s critical to approach the process strategically, with the support of knowledgeable advisors and committed internal champions who can help ensure a smooth and successful outcome.

Where to next?

Enterprise agreements, when developed with care and strategy, can deliver long-term value for both employers and employees. With the right support, organisations can turn enterprise bargaining into an opportunity to build a more stable and high-performing workplace.

Need expert guidance?

Partner with our workplace relations specialists to navigate the enterprise bargaining process with confidence and clarity.