The Fair Work Commission (FWC) has determined a new model flexibility term for enterprise agreements, which began operation from 26 February 2025.

An enterprise agreement must include a flexibility term that enables an employee and their employer to agree to an individual flexibility agreement (IFA) varying the effect of the enterprise agreement to meet the genuine needs of the employee and employer. An IFA must comply with certain requirements spelled out in the Fair Work Act 2009 (Cth) (FW Act).

The Closing Loopholes amendments to the FW Act that came into effect in 2024 required the FWC to make new model flexibility terms for enterprise agreements.

The model flexibility term is taken to be included in an enterprise agreement that fails to include a flexibility term. The model flexibility term allows IFAs to be made to vary terms dealing with arrangements about when work is performed, overtime rates, penalty rates, allowances and/or leave loading.

There is no obligation on the parties making an enterprise agreement to adopt the model flexibility term. The flexibility term in the enterprise agreement can allow IFAs to be made that vary terms in the enterprise agreement dealing with different matters than those specified in the model term. However, it can only allow IFAs to be made about matters that would be permitted if the IFA was an enterprise agreement, and it must not include a term that would be an unlawful term if the arrangement were an enterprise agreement.

The new model flexibility term makes it clear that the IFA must:

• meet the genuine needs of the employer and employee in relation to the matters it deals with;
• be genuinely agreed to by the employer and employee without coercion or duress; and
• only be made with an employee after they have commenced employment with the employer.

A change to the IFA term makes it clear that disputes in relation to an IFA can be dealt with under the dispute settlement procedures in the enterprise agreement. In addition, a provision has been inserted to enable an employer or employee to terminate an IFA either at any time by agreement in writing or unilaterally by giving 28 days written notice.

The new model flexibility term sets out the steps an employer needs to take to propose an IFA to an existing employee:

1. The employer must give the written IFA proposal to the employee.
2. If the employer is aware, or reasonably should be aware, that the employee has a limited understanding of written English, the employer must take reasonable steps to ensure the employee understands the proposal.
3. The employer must meet with the employee to discuss the proposed IFA if the employee requests such a meeting.
4. If the IFA is agreed, it must be signed by the employer and employee and, if the employee is under 18 years of age, by a parent or guardian.
5. The employer must give the employee a copy of the IFA within 14 days after it is agreed to.