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01 March 2019

First time's a charm

Employment Law
Federal

Asked

Employment contract - Small business hiring first employee

A small business wants to employ its first employee. Is an enterprise agreement appropriate or just a one-off contract of employment that can be used for any future employees?

Answered

Thank you for the question.

While it may depend upon the precise nature of the business and any expectations for its future growth, a contract of employment would generally be suitable here.

An enterprise agreement is negotiated between a National System Employer as defined under the Fair Work Act 2009 (Cth) and some or all of its employees, regulating the minimum wages and employment conditions. An enterprise agreement must be lodged with the Fair Work Commission.

A common reason for entering into an enterprise agreement is where the employer is not happy with some of the modern award provisions that may apply to the employer and its workplace. Once operative an enterprise agreement covers all employees of the particular workplace who come within a classification in the agreement, including future employees.

A common law contract of employment, by way of contrast, is an agreement between the employer and an individual employee. A contract of employment cannot oust minimum conditions contained in any applicable award, however, there is no impediment to a contract prescribing superior conditions than in an award. An employee who is ‘award free’ is nevertheless covered by the ten National Employment Standards, as is an award-covered employee, which the contract also cannot displace.

With a small business about to employ its first employee, an enterprise agreement would not usually provide any tangible benefit over an employment contract, particularly when the associated costs of preparation and lodgement of the agreement with the Fair Work Commission are taken into account.

The By Lawyers Employment Law guide contains precedent employment agreements.

Regards,

Mentor