Businesses operating in Australia are subject to a number of requirements around record-keeping obligations. Whilst it may not seem like the most important part of running a business, it plays a significant role in employment compliance and the punishments for not being compliant can severely impact a business. Through this guide we’ll specify what details businesses must record and why it is so important for businesses to record them.
How long do you need to keep records for?
Employee records must be kept for 7 years. Furthermore, they must:
- Be kept in a form that is in English and is legible,
- Be kept so it is readily available to a Fair Work Inspector
- Not be altered unless correcting an error, and
- Not be false or misleading.
What information needs to be kept in the employee records?
Here is a detailed list of everything that an employer should be recording about their employees.
- Employer and employee’s name
- Employer’s ABN (if any)
- Employee’s commencement date
- Employee’s type of employment – full time, part time, casual
- Employee’s pay rate
- Gross and net amounts paid to the employee, including any deductions from the gross amount
- Information regarding any monetary allowances such as incentive based payments, bonuses, loading, penalty rates or any other entitlement paid.
Hours of work:
- Any overtime penalties or loadings paid to employees
- The hours a casual or irregular part time employee works, who is paid based on their time worked for the set period of time worked by casual or irregular part time employees
- If an employer and employee have agreed to averaging the employee’s work hours, a copy of the written agreement must be kept.
- How much leave an employee has
- Any leave taken by an employee
- If an employee has received annual leave cashed out, the employer must keep a copy of the agreement to cash out the leave and a record of how much was paid, the amount of leave cashed out and when the payment was made
- The amount paid
- The pay period and dates paid
- The name of the super fund
- And the reason the employer paid into that fund (e.g. employee fund choice record)
Individual flexibility arrangements:
- A copy of the written agreement and
- If applicable, a copy of any notice or agreement to terminate the flexibility arrangement must be kept if the employee and employer had agreed to an individual flexibility arrangement under the relevant award or agreement
Guarantee of annual earnings:
- The guarantee
- If applicable, the date the guarantee was cancelled
End of employment:
- How the employment was terminated (by agreement, summarily, or by any other specified way)
- How much notice was provided
- The name of the person who terminated the employment
The benefits of record-keeping
Record-keeping should be a standard practice in all businesses as it brings a number of benefits which contribute to a successful, sustainable business. Benefits of record-keeping include:
- Being able to keep track of the financial health of your business and put yourself in the position to make the best decisions for your business,
- Meeting your tax and super obligations,
- Managing profits, revenues, and cashflow, and
- Demonstrating your financial position to banks, lenders, and corporate partners.
Additionally, having good record-keeping practices in a business can be useful in the event a legal claim is made against your business. If an employee lodges an underpayment, unfair dismissal or general protections claim, having records relating to the employee may be crucial in defending your business and avoiding penalties.
What can happen to a business if it is non-compliant?
The penalties businesses can receive for being non-compliant with record-keeping obligations can be crippling to a business, so it makes sense to do everything possible to avoid them. The Fair Work Ombudsmen can hand out infringement notices to businesses they find doing the wrong thing, similar to ‘on the spot’ fines. The fines for individuals will be $1,332 per contravention, and for companies it is $6,660 per contravention.
However, if the contraventions are found to be either serious, wilful, or repetitive, the offending party can be taken to court where the penalties can be more severe. If the courts find that the contraventions occurred knowingly, or as a systematic pattern of conduct, they are treated as serious contraventions and carry a fine of $133,200 for individuals and $666,000 for companies, per contravention. If the contraventions haven’t occurred knowingly, or in a systematic manner, then the maximum fine per contravention will be $13,320 for individuals and $66,600 for companies.
If you are having trouble with managing your record-keeping compliance obligations, ER Strategies would be happy to assist. You can get in contact with us here to see how we can help your business. Or if you just want to read more about payroll compliance, take a look at the guide covering it from top to bottom.