The Importance of Keeping Good Employee Records – An Employer’s Perspective
It’s not just good practice to keep adequate employee records. It’s a legal requirement under the Fair Work Act 2009 (Cth) (“the Act”). For the nonchalant employer, if that is not incentive enough, it will save the employer much hassle and money down the track should the Fair Work Ombudsman (“FWO”) feel the need to investigate the employee records.
Two companies and their directors have experienced the unpleasant consequence of failing to keep proper records relating to their three Chinese workers who were on temporary work visas when the Federal Magistrates Court of Australia imposed heavy fines on them.
The two companies’ records failed to keep details of remuneration paid to the workers and given the lack of records, the argument that the workers had not been paid for a period of time could not be rebutted. The directors, who were Singaporean nationals, tried to argue that they were unaware of Australia’s workplace relations laws. However, this argument was not accepted given these directors had been involved in sophisticated property, corporate and employment arrangements during their careers and therefore should have known of their employer obligations.
The Court found it appropriate to impose the following fines:
- $12,100 against both companies; and
- $2,200 and $2,420 against the directors.
This article explains the characteristics of good record keeping by discussing certain record keeping requirements and the importance of maintaining good records.
Record Keeping Requirements
Under the Act, an employer is required to keep employment records as prescribed by the Fair Work Regulations 2009 (Cth) (“the Regulations”). Records must be kept in relation to each employee and must detail:
- Basic employment details such as the name of the employer including their ABN and the employee and the nature of their employment (for example, part-time, full-time, permanent, temporary or casual), when the person commenced employment; and
- Overtime hours;
- Averaging arrangements;
- Leave entitlements;
- Superannuation contributions;
- Termination of employment (if relevant); and
- Individual flexibility arrangements and guarantees or annual earnings.
Records must be kept in legible form and in English and they must be readily accessible (reg 3.31). They must also be accurate. If an employer notices an error on the record, this must actually be noted clearly and corrected as soon as the employer becomes aware of the error (reg 3.44).
In relation to the specific details of record keeping, our experience has revealed that most employers get the basic requirements right. However, the more uncommon requirements tend to be ‘glossed’ over and are discussed below:
If an employer and employee agree to an averaging of the employee’s hours of work, a copy of the agreement is a kind of record that the employer must make and keep. It is often beneficial to have the parties execute a written agreement to show mutual consent (reg 3.53).
Individual Flexibility Arrangement
If an employer has an agreement with the employee in relation to individual flexibility, which is common for returning parental leave employees, this agreement must be kept on the record and any termination of that agreement must be kept (reg 3.38).
An employer must have records of how the employee’s employment was terminated, for example, whether it was by consent, notice, summarily, or some other manner, and the name of the person who terminated the employment must be noted (reg 3.40). These records will be relied upon should the matter be pursued further for workplace actions, like an unfair dismissal claim or an adverse action claim.
Transfer of Business
Where a transfer of business has occurred, the old employer must transfer to the new employer each employee record in relation to the transferring employee. It is also important that any promises and/or assurances made in relation to the transfer of the business regarding employee conditions, should also be noted and kept on record. These records can be relied on, should a dispute arise on new employment conditions.
If the transferring employee becomes an employee of the new employer after the transfer, the new employer must ask the old employer to provide them with the employee’s records and the old employer must provide these records (reg 4.31).
The ‘How’ and ‘Why’ of Maintaining Employee Records?
The ‘How’ – Pay Slips
Employers have an obligation to issue (whether in hard copy or electronically) pay slips to each employer within one working day of pay day, even if the employee is on leave (section 536 of the Act).
The pay slip must provide details of:
- The employer’s name;
- The employee’s name;
- The period to which the pay slip relates; and
- The date on which the payment to which the pay slip relates was made;
- The gross amount of payment; and
- The net amount of payment; and
- Any amount that is a bonus, loading allowance, penalty rate, incentive-based payment or other separately identifiable entitlement; and
- The ABN of the employer.
If deductions are made from the gross amount (aside from tax), employers must clearly provide the name or name and number of the fund or account into which the deduction was paid. It is recommended that employers also maintain personnel files to assist in managing employees and keeping clear track record of other employee related issues.
How Long Should Employee Records Be Kept?
General employment records, superannuation records and termination of employment records must be kept for a period of 7 years from the date the entry was changed, or the date the worker’s employment is terminated, whichever occurs first.
All other records must be kept for a period of 7 years after the date on which the entry was made (see sections 535 of the Act)
The ‘Why’ – What Happens When Complaints Are Made About Employee Pay?
Requests for Copies of Records
In the event of a complaint being made against an employer, employees/former employees may request copies of their employment records. As employers, regulation provides that copies of records kept at the business place must be made available at the business within 3 business days of the request or post a copy to the employee/former employee within 14 days of the request (reg 3.43 and 3.42).
If the records are not kept at the premises, employers must make a copy available at the premises or post a copy as soon as practicable after the request.
Inspection of Records
Once the employment records are issued, Fair Work Inspectors are permitted to inspect and copy employee records for the purposes of the Act (see section 708 and 709 of the Act).
The Fair Work may issue a permit to a union official who may investigate a suspected breach of the Act and may make copies of union member records or documents directly relevant to the alleged breach (see section 482).
Depending on the outcome of the inspection, the matter may have two outcomes:
1) The matter may proceed to Conciliation (often in instances of minor breaches); or
2) If the Inspector is of the view that the employee has not been paid in accordance with the industrial instrument, agreement or contract (often in instances of major breaches), the Fair Work has the power to prosecute the employer.
Consequences of a Breach of Record-keeping Laws
Under the Act, a Fair Work Inspector may issue an infringement notice in respect of an employer’s conduct that occurred within 12 months prior to the issuing of the notice. Employers must then pay the fine attached to the notice within 28 days.
Maximum fines currently are:
- $510 per contravention for individuals; and
- $2,550 per contravention for a body corporate.
If the employer’s failure to meet the record keeping obligations is serious, wilful or repetitive, the matter may be referred to the Court.
Please contact our Brisbane Employment Lawyers for legal advice on this particular issue that can save you significant costs in the long run.