Types Of Enterprise Agreements: Choosing The Right One For Your Business

If you employ (or plan to employ) staff, you’ve probably come across the idea of an “enterprise agreement” at some point - especially when you’re trying to balance fair pay and conditions with a sustainable cost base for your business.

For many small businesses, the challenge isn’t whether employment law matters (it absolutely does). It’s figuring out what option actually fits your situation: should you stick with a modern award, or are you at the stage where an enterprise agreement makes sense?

This guide breaks down the main types of enterprise agreements in Australia, how they work in practice, and what to think about before you commit. The goal is to help you choose an approach that supports your business now and still works as you grow.

Note: This article provides general information only and doesn’t constitute legal advice. Because enterprise bargaining can be complex (and the right approach depends on your circumstances), it’s a good idea to get advice for your specific situation.

What Is An Enterprise Agreement (And When Do You Need One)?

An enterprise agreement (sometimes called an “EA”) is a legally enforceable agreement made between an employer and employees (and sometimes other employers) that sets out employment terms and conditions.

In most cases, an enterprise agreement will cover things like:

• rates of pay (including penalty rates and allowances)
• hours of work, rostering and overtime rules
• leave arrangements
• consultation and dispute resolution processes
• flexibility provisions (where allowed)

For many businesses, the starting point is a modern award (or, in some cases, award-free employment). Enterprise agreements sit alongside that system and can replace the award terms for employees covered by the agreement, as long as the agreement passes the legal tests.

You don’t “need” an enterprise agreement simply because you have staff. Many businesses operate perfectly well by staying award-compliant and using tailored employment contracts and policies. If you’re working with a modern award, it’s worth getting on top of Modern Awards early - it often solves the issue enterprise agreements are meant to fix.

Where enterprise agreements can become useful is when you want a more business-specific arrangement that still protects employees and is formally approved under Australia’s workplace relations system.

Common Signs An Enterprise Agreement Might Be Worth Considering

Every business is different, but enterprise agreements often come up when you:

• have a growing team with regular rosters and complex penalty arrangements
• operate across multiple sites or departments with different working patterns
• need certainty and consistency in wage costs and conditions
• want to standardise arrangements that differ from the award (while still meeting minimum standards)
• are tendering for work where a particular agreement framework is expected

That said, enterprise agreements can add administrative workload and legal complexity. So it’s important to choose between the types of enterprise agreements with a clear business purpose in mind.

The Main Types Of Enterprise Agreements In Australia

Under the Fair Work framework, there are three main agreement structures most businesses encounter:

• Single-enterprise agreements
• Multi-enterprise agreements
• Greenfields agreements

Each works differently and suits different business situations.

1) Single-Enterprise Agreements

A single-enterprise agreement is made between one employer (your business) and your employees.

This is the most common type of enterprise agreement for small and medium-sized businesses because it’s built around your operations, your workforce, and your commercial needs.

In practice, it can be useful if you want to:

• simplify award interpretations (for example, creating clearer rules for overtime or roster changes)
• set a pay structure that’s easier to administer (while still meeting legal minimums)
• offer trade-offs that employees genuinely support (for example, higher base pay in exchange for simpler penalty structures)

Important: you generally can’t use a single-enterprise agreement to undercut minimum standards. Enterprise agreements must meet legal requirements, including the “better off overall test” (BOOT) in most cases.

2) Multi-Enterprise Agreements

A multi-enterprise agreement involves two or more employers and their employees.

For a small business, multi-enterprise agreements usually come up if you:

• operate in a network or group where businesses want consistent employment terms
• work closely with other businesses in the same industry and want aligned conditions
• are part of a broader project or arrangement where a shared agreement is proposed

From a business owner perspective, multi-enterprise agreements can create consistency - but they can also reduce your flexibility, because you may be bargaining alongside other employers whose needs and risk tolerances are different to yours.

It’s also worth knowing that, following recent reforms, “multi-enterprise bargaining” can happen in different ways depending on the circumstances (for example, bargaining that’s authorised across a group of employers with shared interests, bargaining in supported/low-paid settings, or cooperative bargaining where employers choose to bargain together). The details and eligibility rules matter, so it’s important to understand which pathway applies before you commit.

If you’re considering this path, it’s crucial to understand what you’re committing to and how your business can comply over the life of the agreement.

3) Greenfields Agreements

A greenfields agreement is designed for a situation where you’re starting a new enterprise, project, or major expansion and you don’t yet have employees to vote on the agreement.

Instead of being made directly with employees, greenfields agreements are typically made between an employer (or employers) and relevant employee organisations (such as unions) for the future workforce.

These agreements are most common in large projects (for example construction and infrastructure), but they can also be relevant in other industries if you’re building a new business unit from scratch and need workforce certainty before hiring begins.

For small businesses, this option is usually only appropriate in fairly specific circumstances - for example, if you’re gearing up for a major project with a set operational model and you need to lock in conditions before commencement.

How Enterprise Agreements Must Compare To Awards (And Why “Award Compliance” Still Matters)

One of the most common misconceptions we see is that enterprise agreements “replace awards, so the award doesn’t matter anymore”.

In reality, modern awards still matter because:

• awards often form the benchmark for assessing whether the enterprise agreement leaves employees better off overall
• award coverage can be relevant if your agreement stops applying or is terminated
• award obligations can still apply to employees who aren’t covered by the agreement

This is why it’s usually a good idea to get your baseline position right first. If your business is currently struggling with interpretation issues, payroll complexity, or risk exposure, strengthening your award compliance may resolve a lot of the underlying problems before you take on the added layer of bargaining and approval.

What Is The Better Off Overall Test (BOOT)?

In simple terms, BOOT is a legal check that asks whether employees covered by the enterprise agreement are better off overall compared to the relevant modern award.

This isn’t about whether every single term is better than the award. It’s a broader assessment of whether the package (as a whole) leaves employees better off overall.

From a small business perspective, BOOT is a key reason why enterprise agreements should be drafted carefully. If you build an agreement around operational simplicity but it fails BOOT, it may not be approved - which can cost time, money, and momentum.

Which Type Of Enterprise Agreement Fits Your Business? A Practical Decision Guide

Choosing between different types of enterprise agreements isn’t just a legal decision - it’s also an operational one. The “right” agreement is the one you can actually implement, administer, and afford, while still attracting and retaining staff.

If You Want A Tailored Deal For Your Team (Most Common): Single-Enterprise

A single-enterprise agreement often makes sense when you want to build terms around:

• your roster patterns
• your trading hours
• your business model (for example, peak periods vs quiet periods)
• a consistent approach across a growing team

It can also be a good fit if you want to formalise conditions that are already working well - and ensure they’re clearly documented and legally enforceable.

If You Operate With Other Businesses Under A Shared Model: Multi-Enterprise

Multi-enterprise agreements can be helpful when alignment is the goal - for example, where multiple businesses need consistent conditions for commercial or operational reasons.

But before you go down this path, consider:

• Will the agreement terms still suit your business if the other employers negotiate different priorities?
• Do you have the systems to administer the agreement consistently?
• Are you comfortable with the reduced ability to independently adjust employment settings in response to market changes?

Because there are now different multi-enterprise bargaining pathways (including those based on “common interests”, supported bargaining settings, and voluntary cooperative bargaining), it’s also important to clarify which pathway you’re entering and what that means for your negotiation process and timeframes.

If You’re Launching A New Project And Need Certainty Before Hiring: Greenfields

Greenfields agreements are usually about setting stable workforce conditions from day one.

If you’re considering a greenfields agreement, you’ll want to think carefully about:

• project timelines and costings (including labour cost certainty)
• which roles will be covered
• which employee organisations may need to be involved
• how you’ll implement the agreement once recruitment begins

If You’re Not Sure You Need Any Agreement Yet: Consider Strengthening Contracts And Policies First

Many small businesses can achieve a lot by putting strong foundations in place, such as:

• a clear Employment Contract for each role
• consistent workplace rules through a Workplace Policy
• a reliable payroll and rostering process that matches the relevant award

This can reduce disputes, improve consistency, and make it easier to scale - without needing to run a bargaining process straight away.

What’s Involved In Making And Approving An Enterprise Agreement?

Enterprise agreements don’t become enforceable just because you and your team agree informally. There’s a formal bargaining and approval process, and you’ll want to plan for it.

While the detail depends on the agreement type, the process often includes:

1) Preparing A Draft That Matches Your Operations

This is where a lot of problems start (or are avoided). If the agreement doesn’t match how your business actually runs - for example, how overtime happens in real life, or how rosters are built - you can end up with compliance headaches later.

It’s also the stage where you’ll want to ensure the terms are consistent with minimum legal standards and likely to pass BOOT.

2) Bargaining And Communicating With Employees

Bargaining isn’t only a legal step - it’s also a trust step. Employees need to understand what is changing, what stays the same, and what the practical benefits are for them.

Small businesses often do best when they take a “no surprises” approach: communicate early, keep it clear, and be honest about what the business needs to operate sustainably.

3) Employee Voting

In many cases (including single-enterprise agreements), employees who will be covered by the agreement must vote to approve it.

This is why clarity matters: if employees don’t understand the document, they’re less likely to support it - or they may support it and later feel it was unfairly presented, which can create longer-term culture issues.

4) Application For Approval And Ongoing Compliance

After approval by employees (where required), the agreement must generally be lodged for approval through the relevant process, and you’ll need to comply with its terms once it commences.

This includes practical implementation such as payroll settings, onboarding documents, and internal processes.

And remember: enterprise agreements don’t last forever. You should also plan for what happens when the agreement expires and what your options are at that stage. If you’re thinking ahead, it can help to understand when an enterprise agreement expires and what that can mean for operations and risk.

Key Legal Documents That Support Enterprise Agreements (And Reduce Disputes)

Even with an enterprise agreement in place, you’ll usually still need supporting documents to make your employment system work smoothly day-to-day.

Some of the most common ones include:

• Employment contracts: These are still important for role-specific terms (like duties, confidentiality, probation, and termination processes). A clear Employment Contract helps align expectations and reduce misunderstandings.
• Workplace policies: Policies help cover behaviour, conduct, leave processes, performance management, and workplace rules. A well-structured Workplace Policy can stop “grey areas” turning into disputes.
• Processes for pay and classification decisions: Many compliance issues come from misclassification, incorrect penalties, or inconsistent allowances - especially where the business is scaling quickly.
• Termination and change management documents: If your agreement affects notice, redundancy consultation, or operational change, you’ll want to ensure you have a consistent approach when decisions need to be made.

Good documentation doesn’t replace good leadership - but it does reduce risk, improve consistency, and make your business easier to run.

If you’re unsure which option is right, speaking with an employment lawyer early can save you a lot of time (and cost) compared to reworking an agreement after it’s already been circulated.

Key Takeaways

• The main types of enterprise agreements in Australia are single-enterprise agreements, multi-enterprise agreements, and greenfields agreements.
• For most small businesses, a single-enterprise agreement is the most relevant option because it’s tailored to one employer’s operations and workforce.
• Multi-enterprise agreements can be made in different ways depending on the bargaining pathway, and they can offer consistency but may reduce flexibility.
• Enterprise agreements generally need to meet minimum legal standards and are often assessed against the relevant modern award through the better off overall test (BOOT).
• If you don’t genuinely need an enterprise agreement yet, improving award compliance and tightening your employment contracts and workplace policies can achieve a lot.
• Enterprise agreements can reduce ambiguity and create consistency, but they also come with a formal bargaining/approval process and ongoing administration responsibilities.

If you’d like help choosing between the different types of enterprise agreements (or drafting and implementing the right one for your business), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.