Enterprise Agreement vs Award — What's the Difference?
Enterprise agreements and Modern Awards both set workplace conditions, but they work differently. Learn the BOOT test, how EAs are made, zombie agreements, and how to check which applies to you.
What is a Modern Award?
Modern Awards are legal instruments created and maintained by the Fair Work Commission (FWC) that set minimum terms and conditions for employees in specific industries or occupations. There are 122 Modern Awards covering the vast majority of the Australian workforce. Each award specifies minimum pay rates (classified by role and experience level), hours of work, overtime and penalty rates, allowances (uniforms, tools, travel), leave arrangements beyond the NES, rostering rules, and consultation and dispute resolution procedures. Awards are updated annually — minimum wage increases flow through to all award pay rates each July. They are legally binding on all employers covered by the national workplace relations system. You do not need to 'sign up' to an award — if your industry or occupation falls within an award's coverage, it applies automatically. Awards represent the minimum floor — employers can pay and provide more, but not less. The Fair Work Ombudsman maintains the full text of all awards and provides a Pay and Conditions Tool to help identify which award applies.
What is an enterprise agreement?
An enterprise agreement (EA) is a collective agreement negotiated between an employer (or group of employers) and their employees, setting terms and conditions tailored to that specific workplace. Unlike awards, which are industry-wide, an EA applies only to the employees and employer who are parties to it. EAs are negotiated through a formal bargaining process. The employer must notify employees of their right to be represented by a bargaining representative (usually a union), and must bargain in good faith. Once a proposed EA is finalised, it must be put to a vote of the affected employees — a majority must vote to approve it. The approved EA is then lodged with the Fair Work Commission for approval. The FWC will only approve an EA if it passes the Better Off Overall Test (BOOT) — meaning employees covered by the EA must be better off overall than they would be under the applicable Modern Award. An EA can run for a maximum of four years, after which it must be renegotiated or it continues to operate as a 'zombie agreement' until replaced or terminated.
The BOOT test explained
The Better Off Overall Test (BOOT) is the key safeguard that protects employees when an enterprise agreement replaces a Modern Award. Under section 193 of the Fair Work Act, the Fair Work Commission must be satisfied that each award-covered employee and prospective employee would be 'better off overall' under the EA compared to the applicable award. The test is applied at the time the EA is approved, not over its lifetime. It is an 'overall' test — meaning an EA can provide lower rates in some areas (for example, lower penalty rates on weekends) if it compensates with higher rates in other areas (for example, higher base pay or additional leave). The FWC examines the agreement holistically, considering all monetary and non-monetary terms. If the BOOT is not met, the FWC can refuse to approve the agreement, or can approve it with undertakings (modifications) from the employer to fix the deficiency. The Closing Loopholes reforms in 2024 strengthened the BOOT by requiring the FWC to consider how the agreement operates in practice, not just on paper.
How to check which applies to you
Determining whether you are covered by a Modern Award, an enterprise agreement, or both is essential for understanding your workplace rights. Start by asking your employer — they are legally required to give new employees a Fair Work Information Statement and, if an EA applies, a copy of the agreement. Check your employment contract, which should reference the applicable award or EA. Use the Fair Work Ombudsman's Find My Award tool at fairwork.gov.au — enter your job title, industry, and duties, and it will identify the most likely award. For enterprise agreements, search the Fair Work Commission's agreement database at fwc.gov.au — you can search by employer name to find any registered EAs. If both an EA and an award could apply, the EA takes precedence (it displaces the award) for the matters it covers. However, the NES always operates as the absolute floor — neither an award nor an EA can undercut the 11 NES entitlements. If you are still unsure, call the Fair Work Infoline on 13 13 94 for free advice.
Zombie agreements — a common trap
Zombie agreements are enterprise agreements that passed their nominal expiry date but were never replaced or terminated. Under the Fair Work Act, an EA continues to operate after its expiry date until it is replaced by a new EA or terminated by the Fair Work Commission. Some zombie agreements date back to the WorkChoices era (pre-2010) and contain pay rates and conditions that are significantly below current Modern Award rates. Because they were approved under older, less protective legislation, many do not meet the current BOOT. The Closing Loopholes reforms addressed this problem by introducing a sunsetting process: most zombie agreements that had passed their nominal expiry date were automatically terminated on 7 December 2023, unless the employer applied for and was granted an extension. This resulted in hundreds of thousands of employees being moved from outdated zombie agreements back to the applicable Modern Award — typically resulting in pay increases. If you suspect you are still on a zombie agreement, check the FWC database for your employer's agreements and their expiry dates.
The NES as the absolute floor
Regardless of whether you are covered by a Modern Award, an enterprise agreement, or an individual contract, the 11 National Employment Standards (NES) set the absolute minimum entitlements that cannot be reduced. The NES includes maximum weekly hours (38), requests for flexible working arrangements, parental leave (12 months unpaid), annual leave (4 weeks), personal/carer's leave (10 days), compassionate leave (2 days), family and domestic violence leave (10 days paid), community service leave, long service leave, public holidays, and notice of termination and redundancy pay. An enterprise agreement can provide more than the NES but can never provide less. If an EA purports to reduce an NES entitlement (for example, offering only 3 weeks of annual leave), that term is of no effect and the NES entitlement applies instead. Similarly, a Modern Award cannot reduce NES entitlements. This layered system — NES as the floor, awards building on top, and EAs potentially building further — is the foundation of Australia's safety net approach to workplace relations.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
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