Enterprise Business Agreements (EBAs)

If you employ (or plan to employ) staff in Australia, you’ve probably heard the term “enterprise agreement” thrown around - sometimes alongside “EBAs” or “collective agreements”.

From a business owner’s perspective, an enterprise agreement can be a powerful tool. It can help you set clear pay and conditions across your team, introduce flexibility that actually suits how your business operates, and reduce uncertainty compared to juggling multiple individual arrangements.

But enterprise agreements also come with real legal obligations. There are strict rules about how agreements are negotiated, what must be included, and how they’re approved. If you get it wrong, you can face delays, disputes, or even costly underpayment issues later.

Below, we’ll break down what an enterprise agreement is, when it makes sense for small and growing businesses, and the practical steps to create one in Australia.

What Is An Enterprise Agreement (EBA)?

An enterprise agreement (commonly called an EBA) is a legally enforceable agreement that sets employment terms and conditions for a business (or part of a business).

In most cases, an enterprise agreement is made between:

An employer (your business); and
Your employees (sometimes with a bargaining representative, such as a union).

Once approved by the Fair Work Commission, the agreement becomes binding. It will generally set the minimum pay rates and conditions for employees covered by it. In many cases, it will displace the operation of the applicable modern award for those employees, but the National Employment Standards still apply and the award can remain relevant as a reference point (including during approval and for classifications and interpreting certain entitlements).

Why Businesses Use EBAs

For businesses, the goal is usually to create a tailored set of conditions that better match your operations than a “one size fits all” award.

For example, an enterprise agreement might help you:

set pay structures that work for your roster patterns and peak periods;
introduce agreed flexibility around ordinary hours, penalty rates, allowances, and overtime rules;
create consistent terms across teams or worksites;
reduce ambiguity by consolidating “custom” arrangements into one formal document.

What An EBA Is Not

An enterprise agreement is different from:

Employment contracts (individual agreements between you and an employee);
Modern awards (industry/occupation-based safety net conditions); and
Company policies (internal rules and expectations, usually not a full substitute for pay/conditions documents).

It’s also not a quick fix for payroll complexity. You still need compliant payroll practices and careful drafting, especially around rates, hours, and classifications.

When Does An Enterprise Agreement Make Sense For A Small Business?

Not every small business needs an enterprise agreement. In fact, many businesses operate successfully using an award, a well-drafted employment contract, and clear workplace policies.

That said, an enterprise agreement can be worth considering when your business is reaching a point where award conditions don’t reflect how you actually operate.

Common Signs An EBA Might Be Right For You

You may want to explore an enterprise agreement if:

You have a growing headcount and want consistent terms across the workforce;
Your rosters are complex (shift work, weekends, public holidays, mixed duties);
You operate across multiple sites and want a single set of rules and rates;
You want to trade certain award conditions for higher base rates or different structures (while still meeting legal minimum standards);
You’re experiencing recurring disputes about interpretations of award terms;
You need a clearer framework for consultation, dispute resolution, and operational flexibility.

When A Simpler Setup May Be Better

If your workforce is small, your award coverage is straightforward, and your business doesn’t need unusual rostering flexibility, you might be better served by:

making sure you’re on the right award and classifications;
using strong Employment Contract templates that match your operations; and
implementing clear Workplace Policy documents (especially around conduct, leave, and workplace expectations).

As a practical rule: the more “custom” your pay and conditions become, the more valuable it can be to formalise them properly - but you want to weigh that against the time and process involved in bargaining and approval.

How Do You Make And Approve An Enterprise Agreement In Australia?

Enterprise agreements follow a structured legal process. While the exact steps can vary depending on whether employees are represented and whether it’s a new agreement or a replacement agreement, the overall pathway is consistent.

1. Preparation: Clarify What You’re Trying To Achieve

Before bargaining starts, it helps to map out:

which employees will be covered (and which won’t);
which modern award(s) currently apply as the baseline;
your “must have” operational needs (hours, shift arrangements, allowances, classifications);
your budget and commercial limits; and
where you want standardisation vs flexibility.

This is also the stage where businesses often do an Award Compliance check, so you understand what the minimum legal baseline looks like before you propose changes.

2. Bargaining: Negotiating With Employees (And Possibly Representatives)

To create an enterprise agreement, you generally need to bargain in good faith with employees (and any bargaining representatives).

“Good faith bargaining” typically includes things like:

attending meetings and participating genuinely;
disclosing relevant information (where required);
responding to proposals in a timely way;
not acting in a misleading or unfair way; and
recognising bargaining representatives.

In practical terms, this means treating the process seriously and keeping clear written records of communications and drafts.

3. Drafting The Agreement: Getting The Legal Mechanics Right

An enterprise agreement isn’t just “whatever you and your staff agree on”. It needs to be drafted so it:

clearly identifies coverage (who is included);
sets wages and conditions in a way that can be administered in payroll;
contains mandatory terms (like a dispute resolution process); and
does not contain unlawful content.

This is often where businesses benefit from involving an Employment Lawyer, because small drafting issues can cause major approval delays or create long-term compliance risks.

4. Explaining The Agreement To Employees

There are strict requirements around providing employees with access to the proposed agreement and explaining what it means.

From a business perspective, this is a chance to:

reduce confusion and questions before the vote;
show employees the practical impacts (pay, rostering, allowances); and
demonstrate transparency - which can help buy-in and reduce disputes later.

5. Employee Vote

Employees covered by the proposed enterprise agreement must be given a genuine opportunity to vote, and the agreement must be approved by a majority of those who cast a valid vote.

6. Approval By The Fair Work Commission

After the vote, the agreement is submitted to the Fair Work Commission for approval.

The Commission will assess whether:

the agreement was genuinely agreed;
it passes the relevant legal tests (including that employees are “better off overall” compared to the award in many situations);
mandatory terms are included; and
there is no unlawful content.

Once approved, the enterprise agreement becomes enforceable and will apply according to its coverage and start date.

Key Terms To Get Right In Your Enterprise Agreement

When you’re negotiating and drafting an enterprise agreement, the “headline” pay rate is only part of the picture.

The real operational impact often comes from how the agreement handles hours, overtime, allowances, and classification structures - because those determine what your business pays (and what employees receive) in real working conditions.

Pay Rates, Classifications, And Progression

You’ll want to be clear about:

base rates and how they’re calculated;
classification levels (especially if employees perform mixed duties);
how increases apply (annual wage increases, progression steps, promotions); and
any all-inclusive rates (and what exactly they are intended to cover).

Be careful with “all-inclusive” arrangements - they can be useful, but only if they’re drafted and administered properly. Otherwise, you can end up with underpayment exposure if the all-inclusive rate doesn’t cover what it needs to cover in practice.

Ordinary Hours, Rosters, And Flexibility

Many businesses pursue an enterprise agreement to better reflect shift work reality.

Common items include:

span of hours and how ordinary hours are worked;
roster cycles and notice of changes;
breaks (paid/unpaid) and how they’re scheduled; and
rules for shift swapping and make-up time.

Overtime, Penalty Rates, And Allowances

This is often the most sensitive area - and the easiest place for payroll errors if the drafting is unclear.

You’ll want to define:

when overtime starts (daily vs weekly thresholds);
how weekends and public holidays are treated;
any loadings or penalties that are modified from the award; and
allowances (e.g. travel, tools, leading hand, first aid, uniform).

Leave And Leave Loading

Your enterprise agreement should clearly set out leave entitlements, including annual leave, personal/carer’s leave, parental leave, and any additional leave types your business offers.

If your agreement includes leave loading rules, make sure they align with your payroll system and are applied consistently (this is an area where businesses can inadvertently underpay if rates are misconfigured).

Consultation, Dispute Resolution, And Workplace Change

An enterprise agreement typically includes processes for:

consultation around major workplace change;
resolving disputes; and
representation during disputes.

Even if you don’t expect disputes, these clauses matter. When issues do arise, having a clear process can prevent escalation and keep your operations stable.

How Does An EBA Interact With Awards, Contracts, And Workplace Policies?

One of the most common areas of confusion for business owners is how an enterprise agreement fits with everything else you already have in place.

In practice, you usually have a “stack” of documents and legal rules that work together.

EBA Vs Modern Award

A modern award is the minimum safety net that applies to many employees based on their industry and role.

If you have an approved enterprise agreement that covers certain employees, the agreement will generally set the minimum terms and conditions for those employees in place of the award terms that would otherwise apply. However, the National Employment Standards still apply, and the award can still be relevant as a benchmark during approval and as a reference point for classifications and certain entitlements.

However, awards still matter because:

the award is often used as the comparison baseline during approval (for “better off overall” concepts);
award classifications may still be relevant reference points; and
if an employee is not covered by the EBA, the award may still apply to them.

EBA Vs Employment Contracts

Even with an enterprise agreement, you’ll often still issue individual employment contracts.

The contract generally shouldn’t try to undercut the enterprise agreement. Instead, your contract usually covers things like:

role-specific details (title, reporting line, location);
confidentiality and intellectual property clauses;
termination and notice mechanics (in a way that’s consistent with the agreement); and
any role-specific expectations not fully covered by the agreement.

For many businesses, the enterprise agreement sets the baseline “workplace rules”, and the Employment Contract is the tailored wrapper for the individual.

Where Workplace Policies Fit In

Workplace policies don’t replace an enterprise agreement, but they’re still important - particularly for behavioural expectations, safety, and consistent processes.

If your business is scaling, you may want a core set of policies (often consolidated into a handbook) to support how the EBA operates day-to-day, such as:

leave request processes;
code of conduct and disciplinary steps;
privacy and acceptable IT use; and
complaints handling (including bullying and harassment complaints).

This is where a Staff Handbook can help create consistency across teams, especially once you move beyond a small founding group.

Don’t Forget Your Business Structure Documents

Enterprise agreements are employment instruments, but they often sit alongside broader governance decisions - especially if you’re growing, bringing on investors, or changing how your leadership team makes decisions.

For example, if you operate as a company, having a fit-for-purpose Company Constitution can support decision-making and signing authority while your workforce arrangements evolve.

Key Takeaways

An enterprise agreement (often called an EBA) is a legally enforceable agreement that sets minimum terms and conditions for a business’s employees and, for covered staff, generally applies in place of the modern award terms (while the National Employment Standards still apply and awards may remain relevant as a benchmark/reference).
For small and growing businesses, an EBA can be useful when your rostering, pay structures, or operational needs don’t fit neatly within award rules.
EBAs must follow a formal process (bargaining, clear drafting, employee vote, and Fair Work Commission approval), so planning and documentation matter.
The highest-risk areas are usually pay rates, hours, overtime/penalties, allowances, and classifications - because unclear drafting or payroll setup can lead to underpayments.
An EBA often sits alongside individual employment contracts and workplace policies, which help cover role-specific terms and day-to-day procedures.
Getting the structure right upfront can save you significant time and cost later, especially as your business grows or expands across sites.

If you’d like a consultation about putting an enterprise agreement in place for your business (or reviewing one you’ve inherited), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Official Sources to Check

Rules and regulator guidance can change. Check the current official material most relevant to this issue before relying on the article:

ACCC: Contracts and unfair contract terms

Enterprise Business Agreements (EBAs) in Australia: A Practical Guide