You can offer employees higher hourly rates, secure a strong vote in favour of an enterprise agreement and still run into problems at the Fair Work Commission.
The issue is often the Better Off Overall Test, better known as the BOOT.
Before approving an enterprise agreement, the Fair Work Commission must be satisfied that each relevant award-covered employee would be better off overall under the agreement than under the applicable modern award.
That sounds simple enough. But the comparison can become complicated once you factor in overtime, weekend penalties, allowances, casual loading, public holidays and the different rosters employees may work.
A rate that looks comfortably above award during ordinary weekday hours may fall short for an employee who regularly works nights or weekends. An agreement that benefits most of your workforce may also disadvantage one classification or roster group.
That is why passing the BOOT is not simply a matter of paying above the award. You need to understand how the agreement will operate in practice. Find out more from our employment law team today.
What is the Better Off Overall Test?
The BOOT forms part of the enterprise agreement approval process under the Fair Work Act 2009 (Cth).
The Fair Work Commission compares the proposed agreement with the relevant modern award. It looks at which terms are more beneficial, which are less beneficial and whether the overall result leaves each relevant employee better off.
Not every clause needs to improve on the award. For example, an agreement may replace separate penalty rates with a higher hourly rate. That can still pass the BOOT, provided the higher rate genuinely compensates employees for the award entitlements they are giving up.
The key point is that an employee must be better off overall, not merely no worse off.
Why employers get caught out
Most BOOT problems do not arise because an employer is deliberately trying to reduce employee entitlements. They usually arise because an assumption has not been properly tested.
You may assume that a higher base rate will cover everything. You may model the agreement against the current roster without considering other hours the agreement allows employees to work. You may overlook an allowance that applies only occasionally or to a small part of the workforce.
These issues often remain hidden until the agreement has already been drafted, explained to employees and put to a vote.
By then, fixing the problem may be more difficult. You could be asked to provide undertakings, revise your calculations or reconsider part of the proposed pay structure. In some cases, further bargaining or another vote may be needed.
The practical lesson is simple: start thinking about the BOOT while you are designing the agreement, not after employees have approved it.
Planning an enterprise agreement? Prosper Law’s Brisbane employment lawyers can review your proposed terms and identify potential BOOT issues before the agreement goes to a vote.
A higher base rate does not guarantee the agreement will pass
One of the most common misconceptions is that an hourly rate above the award automatically means employees are better off – it does not!
Imagine that your agreement pays an employee several dollars above the award rate but removes separate weekend penalties. The employee may be better off during an ordinary Monday-to-Friday week. However, if that employee regularly works Saturdays, Sundays or public holidays, the result may be very different.
The same issue can arise where a flat or loaded rate is intended to cover overtime, shift penalties, casual loading or allowances.
A loaded rate is not automatically a problem. It simply needs to be tested carefully. You should be able to explain what the rate covers, which working patterns were used to calculate it and what happens if an employee works outside those assumptions.
Learn more in our Fair Work Act Guide for Employers.
The BOOT is not limited to the current roster
Another common mistake is to model only the hours employees are working today. The Commission may also consider work that employees could reasonably be expected to perform under the agreement.
Suppose your business does not currently operate on Sundays, but the agreement allows Sunday work. If Sunday work is reasonably foreseeable, you may need to account for the relevant award penalty rates.
This does not mean you need to model every theoretical possibility. The comparison should remain realistic.
However, you should consider the ordinary and foreseeable ways your workforce may operate during the life of the agreement, particularly if your business is growing, changing its opening hours or introducing new shifts.
One employee can expose a problem
The BOOT is not based on whether your workforce is better off on average. You need to consider the position of each relevant employee.
A proposed agreement may be generous to employees who work ordinary weekday hours but less favourable to employees who perform evening, weekend or overtime work. Casual employees may also have a different outcome from permanent employees because of casual loading and other award entitlements.
This is why broad averages can be misleading. Your modelling should separate employees according to their classification, employment type, roster and relevant allowances. The purpose is to identify the employee or group most likely to fall short.
Start with the correct award and classification
Before comparing pay rates, make sure you have identified the correct modern award and classification. This is more important than it may sound.
Employees working for the same business may perform different roles and fall within different classification levels. In some workplaces, more than one modern award may apply.
If the starting award or classification is wrong, the rest of the BOOT analysis may also be wrong.
You should confirm the employee’s classification, employment type, ordinary hours, span of hours, overtime rules, penalty rates, loadings and relevant allowances before finalising the proposed pay structure.
Questions about award coverage are often where an apparently straightforward enterprise agreement becomes more complicated.
Unsure which award or classification applies? Getting that question right early can prevent the entire BOOT comparison from being built on the wrong foundation.
Model the work employees may actually perform
A useful BOOT analysis should reflect the reality of your workplace. A single comparison based on a standard weekday roster is rarely enough where employees may work evenings, weekends, public holidays or overtime.
You may need to model several representative scenarios. These could include an ordinary week, a weekend-heavy roster, overtime before or after a shift and a week involving a public holiday.
You should also consider any employees who receive award allowances, such as first-aid, leading-hand, meal, tool or travel allowances. The goal is not to produce an enormous spreadsheet for its own sake. It is to understand where the proposed agreement is strongest and where it is most vulnerable.
If one scenario produces a shortfall, you can address it before the agreement is put to employees.
Be careful when relying on non-financial benefits
Not every benefit under an enterprise agreement needs to be financial. Additional leave, predictable rosters and genuine flexibility may all have value. However, you should be cautious about relying on vague or discretionary benefits to offset a clear financial disadvantage.
A benefit is easier to rely on when employees have a clear and enforceable right to it. For example, a defined entitlement to additional paid leave is easier to assess than a general statement that the employer will try to provide flexible working arrangements.
Ask yourself whether the employee can actually use the benefit, whether it applies to the employees who may otherwise be worse off and whether its value can be explained clearly.
If the benefit exists only at management’s discretion, it may be difficult to rely on it.
Explain the trade-offs clearly
Employees should understand how the proposed agreement will affect them. If you are offering a higher base rate in exchange for separate penalties or allowances no longer applying, say so plainly. Show employees how the proposed arrangement compares with the award using realistic examples.
A simple side-by-side comparison is often more useful than a long technical explanation.
Clear communication also gives employees an opportunity to raise practical issues you may have missed. Someone may point out that a particular shift regularly runs into overtime or that an allowance applies to work performed at one location.
It is much easier to address those matters before the vote than after the agreement has been lodged.
What happens if the Commission identifies a BOOT issue?
A concern raised by the Fair Work Commission does not always mean you need to start again. In some circumstances, the Commission may accept a formal undertaking from the employer.
An undertaking might preserve an award entitlement, provide an additional payment, introduce a top-up clause or require a reconciliation process. Once accepted, the undertaking operates with the agreement.
However, there are limits to how much an undertaking can change the agreement employees voted for. It should therefore be treated as a fallback rather than your main strategy.
Where your modelling shows that an agreement only narrowly passes, it may be sensible to prepare a possible top-up or reconciliation mechanism before lodgement.
If your enterprise agreement is ready to lodge, a pre-lodgement review can identify calculation gaps, inconsistent documents and likely Commission questions before they delay the application.
Preparing the approval application
Your BOOT analysis should be easy for the Commission to understand.
Before lodging, check that the agreement, forms and supporting calculations all use consistent titles, dates and employee information. Make sure the correct awards and classifications are identified and that the figures use current award rates.
The comparison should explain how the agreement affects the different employee groups it covers. Any unusual pay structure, loaded rate or significant departure from the award should be addressed clearly.
The Commission should not have to guess how you reached your conclusion. Clear supporting material may reduce follow-up questions and make the approval process more efficient.
What happens after the agreement is approved?
Approval is not the end of your compliance obligations. You still need to pay employees in accordance with the agreement, keep accurate records and monitor changes to award minimum rates.
An agreement is not automatically subjected to a complete new BOOT assessment every time award wages increase. However, the base rate payable under an enterprise agreement generally cannot fall below the relevant modern award base rate.
You should therefore review agreement rates after annual award increases and check that payroll is applying the agreement correctly.
This is particularly important where the agreement uses loaded rates, annual salaries or other arrangements that absorb multiple award entitlements.
Can you use a BOOT-style test for annual salaries?
The statutory BOOT applies to enterprise agreements. It is not the legal approval test for an individual annualised salary arrangement.
However, the same type of comparison can be extremely useful. A salary may look generous when compared only with the award base rate. Once overtime, penalties, allowances and annual leave loading are included, the result may be much closer than expected.
A BOOT-style salary review asks a practical question: Would the employee have received more if each applicable award entitlement had been paid separately?
Depending on the award and salary arrangement, you may also need to record working hours, identify which entitlements the salary absorbs, conduct reconciliations and correct any shortfall.
This type of review can help you identify underpayment risks before they become a dispute or affect multiple employees.
A final question before you proceed
Before putting an enterprise agreement to a vote, you should be able to explain:
Which award and classification applies? What agreement benefits compensate for any reduced award entitlements? Which realistic rosters have been tested? Could a particular employee, casual or shiftworker still be worse off? Can the calculations be understood by both employees and the Commission?
If the answers are unclear, the agreement may not be ready.
The BOOT is much easier to manage when it is built into the drafting and bargaining process from the beginning. Careful modelling, clear communication and practical drafting can reduce the risk of undertakings, delays and unnecessary rework.
Speak with Prosper Law before your agreement goes to a vote. Once employees have voted, correcting a BOOT problem can become more difficult and expensive.
We help employers with award coverage, classifications, enterprise agreement drafting, BOOT modelling, loaded rates and Fair Work Commission approval applications.
Frequently asked questions
Does every clause need to be better than the award?
No. The Commission considers the agreement overall. A less beneficial term may be offset by another benefit, provided each relevant employee is better off overall.
Can one employee cause an agreement to fail the BOOT?
Potentially, yes. The test is not based on whether most employees benefit. Each relevant employee must be better off overall.
Is an employee vote enough to pass the BOOT?
No. Employee support is important, but the Fair Work Commission must independently assess whether the agreement satisfies the legal approval requirements.
Can a high hourly rate compensate for penalty rates?
It can, but only if the rate leaves employees better off across the work they may reasonably perform. You need to test the rate against relevant weekend, overtime, public holiday and shift scenarios.
Can a side letter fix a BOOT problem?
An informal side letter is not the same as a formal undertaking accepted by the Fair Work Commission. Any proposed solution must satisfy the statutory approval requirements.
Does the agreement need to be retested whenever award rates increase?
Not automatically. However, you must continue monitoring award minimums, including the requirement that the agreement base rate generally not fall below the relevant award base rate.
About the Author
Farrah Motley
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