Are your employee records up to scratch?
An increasing number of employers are being caught out and are facing hefty fines for failing to comply with their record keeping obligations contained in the Fair Work Act 2009 (Cth) (the Act) and the Fair Work Regulations 2009 (Cth) (the Regulations).
The purpose of this update is to give you a snapshot view of an employer’s obligations under the Act and Regulations and will assist when you ask the question, “are our employee records up to scratch?”
Employee records and pay slips
Division 3 of the Regulations contains a series of requirements regarding an employer’s obligation to make and keep employee records. For example, an employer is required to make and keep (for a period of 7 years), records regarding an employee’s:
a) basic employment details such as their name and the nature of their employment (e.g. part-time, full-time, permanent, temporary or casual);
c) overtime hours;
d) averaging arrangements;
e) leave entitlements;
f) superannuation contributions;
g) termination of employment (where applicable); and
h) individual flexibility arrangements and guarantees of annual earnings.
Under Regulation 3.33, an employer is required to make and keep clear pay records that specify:
a) the rate of remuneration paid to the employee;
b) the gross and net amounts paid to the employee; and
c) the details of any deductions made from the gross amount paid to the employee.
An employer is also required to include information regarding any incentive-based payment, bonus, loading, penalty rate, allowance or entitlement paid to an employee.
If the employee is a casual or irregular part-time employee who is guaranteed a rate of pay set by reference to a period of time worked, the record must set out the hours worked by the employee
Under Regulation 3.34, an employer is required to make and keep clear records regarding overtime worked by an employee. These records must outline:
a) the penalty rate or loading paid to the employee; and
b) the number of overtime hours worked by the employee during each day; or
c) when the employee started and ceased working overtime hours.
Regulation 3.36 requires an employer to make and keep clear records regarding an employee’s leave. Specifically, employers are required to ensure their records clearly set out when an employee takes leave and the balance of the employee’s leave entitlement.
If, at any time an employer and employee reach an agreement to cash out an employee’s annual leave, the employer is required to:
a) keep a copy of the agreement reached between the employer and employee; and
b) keep a clear record that sets out:
i) the rate of payment for the amount of leave that was cashed out; and
ii) when payment was made.
Many employers have admitted to relying on automated software or dated administrative processes for their pay slip needs and often don’t realise that there are strict requirements in place regarding their content. Specifically, section 536(2)(b) of the Act in conjunction with Regulation 3.46, requires pay slips to specify:
a) the employer’s name; and
b) the employee’s name; and
c) the period to which the pay slip relates; and
d) the date on which the payment to which the pay slip relates was made; and
e) the gross amount of the payment; and
f) the net amount of the payment; and
g) any amount paid to the employee that is a bonus, loading, allowance, penalty rate, incentive-based payment or other separately identifiable entitlement; and
h) on and after 1 January 2010 — the Australian Business Number (if any) of the employer.
If an amount is deducted from the gross amount of the payment, the pay slip must also include the name, or the name and number, of the fund or account into which the deduction was paid.
Employers are also required to include, if an employee is paid at an hourly rate:
a) the rate of pay for the employee’s ordinary hours (however described); and
b) the number of hours in that period for which the employee was employed at that rate; and
c) the amount of the payment made at that rate.
If the employee is paid at an annual rate of pay, the pay slip must also include the rate as at the latest date to which the payment relates.
Employers are also required to include information regarding superannuation contributions paid for the benefit of the employee. Their pay slip must include:
a) the amount of each contribution that the employer made during the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contribution was made; or
b) the amounts of contributions that the employer is liable to make in relation to the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contributions will be made.
Access to and requirements of form
Under the Regulations, an employer must ensure their employee records are legible, accurate and are readily accessible for inspection by a Fair Work Inspector.
Employers are also required to provide a copy of an employee’s record, should they request it.
A Fair Work Inspector has the authority to issue infringement notices to employers who fail to comply with their record keeping obligations under the Act and Regulations and they have the power to issue a notice for each individual breach.
At this point in time, each individual infringement notice carries a value of $540 per breach for an individual and $2,700 per breach for a corporation.
As you can see, failing to comply with your employee record obligations could be a costly venture and it’s important you ensure your workplace is compliant before it is too late.
If you require any further information regarding employee records and the obligations contained in the Act and the Regulations, please contact our Workplace team.
Please also note the above summary is simply a snapshot of the relevant provisions and is by no means an extensive list of an employer’s record keeping obligations under the Act and Regulations. If you would like a more in-depth overview or you would like particularised advice for your business, please contact us.