October 2023
The Importance of Keeping Records – Employers beware!
A recent NSW case demonstrates the importance of an employers’ compliance with the Fair Work Act and Regulations, on accurate and detailed record keeping for employee records.
It is crucial that all records be kept up to date, not be false or misleading, and are accessible to the relevant personnel.
Employers are subject to significant penalties if they do not comply.
Key Takeaways
- Employers are required to make and keep certain employee records, relating to pay, hours of work, leave entitlements and other agreements made with its employees. It is not sufficient to solely rely on payroll software records (for example, Xero, MYOB, etc).
- The legislation provides for requirements to keep records for a minimum of 7 years.
- Fines of up to $66,000 for each contravention of non-compliance, and fines of up to $666,000 for significant contraction of the Fair Work Regulations apply to employers.
- Employers should be aware that time or leave in lieu, work hour amendments, and cashing out leave should be by way of written agreement by employees and the employer, and records of this must be kept.
- Employers must have employees’ records available for an employee to access, to enable them to identify leave entitlements, payment records, hours worked, and all other relevant employee records.
University of New South Wales and the Fair Work Ombudsman
The Fair Work Ombudsman recently made a claim against the University of New South Wales (UNSW) for underpayment of staff. During the course of these proceedings, the Fair Work Ombudsman’s investigations revealed that UNSW failed to keep records, pay slips and frequency of wage payments in accordance with their obligations under the Fair Work Act.
The Fair Work Ombudsman alleges, in its investigation between 2017 to 2022, that UNSW breached the Fair Work Act by:
- Failing to make and keep records of hours, rates of pay and details of loadings and other entitlements owed to casual academic employees;
- Failing to include lawfully required information in pay slips, such as basic information relating to pay rates and casual loading; and
- Failing to pay staff wages at least monthly for all hours worked.
It is alleged UNSW staff were often unlawfully paid certain parts of their entitlements, several weeks, or even months, after they actually performed the work.
If the allegations are proved correct, UNSW may face penalties of up to $66,000 per contravention, and up to $666,000 per serious contravention.
What all employers and business owners can take from this is the need to adhere to strict and accurate record-keeping obligations, to avoid legal consequences and to ensure your employees’ rights are protected.
Obligations for employers
The Fair Work Act 2009 (Cth) (Act) and Fair Work Regulations 2009 (Cth) (Regulations) provide that all employers must make and keep employee records for at least 7 years relating to pay, hours worked and leave entitlements (See section 535 of the Act).
Employees records must be legible, properly maintained, accurate, not altered unless correcting an error and must not be false or misleading to the employer’s knowledge. Records can be kept electronically, for example keeping scanned copies that can be printed on request.
The main reasons business owners and employers should maintain records includes:
- Compliance – employers must comply with employment laws, including but not limited to minimum wages, working hours, leave entitlements and termination procedures. Ensuring your employee records are up to date, accurate and detailed can assist in any audit or requirement to disclose payroll.
- Dispute Resolution – records assist in circumstances where complaints or disputes arise. This can be crucial in supporting either party’s claims.
- Audits and inspections – audits and inspections of records by Government agencies, like the Fair Work Ombudsman, may take place to ensure business owners and employers are acting in accordance with the law and keeping records that are detailed and up to date, which can avoid significant penalties for breach of record keeping obligations.
- Employee rights – records assist employees confirm their entitlements like leave and payment history, including assisting employees for tax purposes.
Record-keeping requirements
Records should be securely stored with access only to authorised people, as most records, particularly employee records, are private and confidential. An exception to personnel able to access these records is Fair Work Inspectors, who may access these employee records to determine the employers’ compliance with the laws.
What records must you, as an employer, keep?
- General Employment Records: employers must maintain records for each employee, including information, such as:
- Employers name and ABN;
- Employees name;
- Employees date of commencement;
- Whether employee is full-time or part-time; and
- Whether the employees’ employment is permanent, casual, or temporary.
(See Regulation 3.32 of the Regulations).
- Pay records: employers are required to keep records of payment to employees, including:
- Pay rates;
- Gross and net amounts paid to employees;
- Deductions made from gross payments; and
- Additional entitlements, such as bonuses, incentive based payments, penalty rates, loading, monetary allowances, or separately identifiable entitlements.
(See Regulation 3.33 of the Regulations).
- Hours worked: a record must be maintained by employers of each employee, including:
- For casual and irregular part-time employees, a record of hours worked by each employee;
- For any other type of employee, the number of overtime hours worked each day, or when the employee started and finished overtime hours;
- A copy of the written agreement, if an employee and employer agree to time off in lieu of being paid overtime worked; and
- A copy of the written agreement, if an employee and employer agree to an averaging of the employee’s work hours.
(See Regulations 3.34-3.35 of the Regulations).
- Leave Records: employers must keep track of and record each employee’s leave entitlements, such as annual, sick and other leave types, including the balance of the employee’s leave entitlements from time to time. Where an agreement between the employee and employer has been reached regarding:
- An employee taking annual leave in advance of an accrued amount of leave – keeping copies of the signed agreement between the employee and employer and amount of leave taken in advance;
- An agreement to cash out an accrued amount of leave – a copy of the agreement, a record of the amount of leave to be cashed out, and receipt of the payment made to the employee, including the date of payment.
(See Regulation 3.36 of the Regulations).
- Superannuation Records: records of superannuation contributions made, amounts made, date of payment and the super fund the payment is made to.
(See Regulation 3.37 of the Regulation).
- Termination Records: employers must make and keep records of:
- Whether the employment was terminated by consent, notice, summarily or in another manner;
- Name of the employee terminated; and
- If notice was provided, how much.
(See Regulation 3.40 of the Regulations).
Non-compliance penalties
The Fair Work Ombudsman has authority to investigate employers suspected of non-compliance with the Act and Regulations, and consequently take action.
As above, penalties for non-compliance can be up to $66,000 for each contravention and up to $666,000 for serious contraventions.
As serious contravention will occur when an employer knowingly breaches the provisions of the Act and Regulations, and that this breach is part of a systematic pattern of conduct relating to one or more other employees.
Contact Us
If you need further information or advice on your obligations as a employer and business regarding record keeping, contact us today on (02) 9189 5288
Craig Higginbotham and Nicole Sarraf
30 October 2023
