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HR Glossary

Enterprise agreement

Australia · Fair Work and entitlements
What is an enterprise agreement?

An enterprise agreement is a collective agreement on pay and conditions made between an employer (or several) and its employees, usually negotiated with unions, approved by Australia's Fair Work Commission and enforceable in place of the modern award for up to four years.

How does an enterprise agreement relate to the award?

While in operation, the agreement displaces the award for the employees it covers, but two floors remain: the NES always apply, and the agreement must pass the Better Off Overall Test against the relevant award at approval. The base rate of pay can never fall below the award's. In exchange for that scrutiny, the employer gets terms tailored to its operation and a period of industrial stability.

How is one made and approved?

Bargaining follows the Act's good-faith bargaining requirements, employees vote, and a majority of those who vote must approve it. The agreement then goes to the FWC, which checks genuine agreement, the BOOT and mandatory terms before approval. Agreements have a nominal expiry of up to four years but keep operating after expiry until replaced or terminated.

When does an enterprise agreement make sense?

When the award genuinely fits the operation badly: rosters the award structure penalises, allowances that make no sense for the work, or a need for multi-year certainty on labour cost. An agreement that simply replicates the award adds process without benefit; the value is in the tailoring, priced honestly against the BOOT.

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Better Off Overall Test (BOOT)

The Better Off Overall Test (BOOT) is the test Australia's Fair Work Commission applies before approving an enterprise agreement: every award-covered employee, and every prospective employee, must be better off overall under the agreement than under the relevant modern award.

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Modern award

A modern award is a legal document that sets minimum pay rates and employment conditions for an industry or occupation in Australia, sitting on top of the National Employment Standards.

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National Employment Standards (NES)

The National Employment Standards (NES) are the minimum employment entitlements in the Fair Work Act that apply to all national system employees in Australia, covering hours, leave, notice, redundancy and superannuation.

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Common questions

Do all employees have to vote yes?

No. Approval needs a majority of the employees who actually vote, after a genuine access period to review the terms.

What happens when an agreement passes its nominal expiry date?

It continues to operate until it is replaced by a new agreement or terminated by the FWC. Expiry opens the door to renegotiation and protected industrial action, but the terms do not lapse automatically.

This page is general information, not legal advice. We check figures annually and update them on a best-efforts basis, but employment rules change and we cannot promise everything here is current or complete. Before you act on it, confirm the detail with the Fair Work Ombudsman (fairwork.gov.au) or your own adviser. Last reviewed July 2026.