The importance of keeping proper employment records

Record-keeping might not be the most exciting part of running a business, but it’s also a vitally important legal obligation that assists with the effective management of prospective, past, and present employees. 

Not only are there legal requirements to maintain certain records for specific periods, but there are also significant civil penalties for failing to comply. So, what employment records do businesses need to keep? 

In this article, we share what employment records need to be kept and best-practice suggestions that can save employers considerable stress in the future if an employee initiates a claim. 

Records to be kept for seven years

Employers are required to retain most employment records for seven years in a legible and accessible format. These records must be produced should a Fair Work Inspector (FWI) require access during an investigation.   

To ensure legibility and accessibility at law, it’s best to generate employment records in plain English and store them in both a hard and soft copy, to prevent loss or corruption of files.  

It’s also essential records are accurate, absent of false or misleading information, and only altered when correcting an error or a change of information, such as where an employee’s name or residential address is updated. Records should be kept in a secure location with access limited to the relevant personnel: for example, HR and payroll.  

The records that employers must retain for seven years under the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009 (Cth) include: 

1. Employee details:
   • their name;
   • their starting date; and
   • employment type: permanent full-time or part-time, temporary, or casual.
2. Employer details:
   • their name; and
   • their ABN (if applicable).
3. Pay details:
   • pay rates;
   • gross and net payments;
   • any deductions; and
   • details of incentive-based payments, bonuses, loadings, penalty rates or monetary allowances and separately identifiable entitlements paid to the employee.
4. Hours of work details:
   • for casual or irregular part-time employees paid by the house, their hours of work;
   • for employees who receive higher overtime rates, their overtime hours of work (or starting and ceasing times of such overtime); and
   • averaging of hours agreements.
5. Leave details:
   • leave which is taken;
   • the balance of the employee’s leave entitlements from time to time; and
   • cashing out agreements (including the rate of payment wen the payment was made).
6. Superannuation details:
   • amount of superannuation paid;
   • the period over which the superannuation was paid and the date on which that payment was made;
   • name of the superannuation fund; and
   • the basis on which the superannuation was payable (for example, the Superannuation Standard Choice Form in which the employee nominated superannuation to be payable into a particular account).
7. Other details:
   • Individual flexibility agreements;
   • Guarantees of annual earnings; and
   • Termination records (including how the employment was terminated, and the name of the person who affected it).

Some industrial instruments such as modern awards or enterprise agreements may also impose additional requirements on employers to keep remuneration or hours of work records. For example, full-time employees paid by way of an annualised salary under the Clerks – Private Sector Award 2020 are required to have all their hours of work recorded in full, including any hours which would attract overtime or penalty rates under that award. 

Outside of the Fair Work Act 2009, you may be obligated to keep other types of employment records, including reimbursements of work-related expenses, workers compensation insurance, and taxation records (including PAYG withholding). The minimum limits on these records usually range from five to seven years.  

Record keeping best practices

To ensure a full picture of the employment relationship and maximise your compliance, it’s also best to keep ancillary information about employees such as their resume and job applications, performance reviews, formal warnings, leave applications and approvals, job descriptions, employment contracts and any trade certifications, licences, or qualifications on file.  

For example, performance reviews and formal warnings can be utilised to defend further disciplinary action if an employee repeats unfavourable conduct in the workplace, while an employment contract may be used to resolve a dispute about employment entitlements.  

Penalties for inaccurate or missing records

Failure to make and maintain the correct employment records can result in the business (and any individual accessorily liable) receiving tens of thousands of dollars in civil penalties for each contravention. If an FWI seeks access to employment records and they’re deemed to be incorrect, misleading, or incomplete, employers can be issued an infringement notice and may find themselves before a court to prove there haven’t been instances of underpayment or breaches of other workplace obligations and entitlements.  

Furthermore, recent amendments to the Fair Work Act 2009 have reversed the burden of proof, such that where an employee claims a breach of a modern award or enterprise agreement, the National Employment Standards or certain other civil remedy provisions and the employer has failed to keep the requisite employment records, then it’s the employer who must disprove the claim (rather than the employee being required to prove it).  

It’s incredibly important that your organisation’s records are complete, accurate and accessible. At Citation HR, we offer a tailored HRIS solution that can manage and store employee records, complete with API capability to integrate with other best-in-class systems like payroll software, to give you that peace of mind that your employment records are up to date.