Enterprise Agreements…Why are they of benefit to small business?

The enterprise agreement is not often used by small business but can provide some unique benefits by simplifying the relationship between the employee and employer.

With the introduction of the modern awards most employees in Australia, with a few acceptations, will fall under an award of some sort. Even if you are paying your employees above the award rates (which mostly everyone does) your employees will still be entitled to all the conditions stipulated in that award. For example under the professional services award 2010, which covers IT workers and Engineers who work for vendors; an employee is entitled to 17.5% loading on holiday pay.  Further most companies are covered by multiple awards which makes the arrangement even more complicated.

An enterprise agreement can level out all the variables across these awards establishing a simplified employment agreement with all your employees.

The process of setting up an Enterprise Agreement is relatively simple and once approved will provide the organization with a consistent employment platform for a period of 4 years after which time it will require renewal.

There are multiple types of Enterprise agreements but for most it will be a ‘single-enterprise’ agreement. An imperative in developing your Enterprise agreement is to work with your employees in a consultative manner gaining their agreement throughout its development. The best way to do this is to allow the employees to nominate a ‘bargaining representative’ who will represent the wishes of the employees. Likewise, the employer is also entitled to appoint a bargaining representative thereby making the development process simple and efficient.

How to get started?

If you don’t have an on board HR specialist, you may want to consider contracting someone who has experience in this type of work to help you through the process as it is a specialized field requiring knowledge in modern awards and related ACTS.

In the first instant, it’s important to understand what it is that you’d like the EA to achieve over the 4 year period; what are the business goals. An example might be to simplify payroll processing by paying a salary where the employee agrees to forgo the 17.5 % holiday loading and penalties, agree on salary adjustments over time so you can forward plan on your cost base and make determinations about how overtime, leave and related issues are to be managed etc.

Next, it is important to closely consult with the employees to gain their agreement. This necessitates the employees being given a copy of the agreement to review and then voting to accept or reject the agreement as negotiated. If the majority of employees agree, then the agreement is given to the Fair work Authority who will formally ratify it.

Short-term pain for long term gain.

The concept of introducing an Enterprise Agreement might, for some, seem a “bitter pill to swallow”. On the other hand, a few week’s worth of work (most of which is delegated) will help your organization focus on what’s important over the next 4 years and will provide stability, efficiency and improved productivity.    
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