The proper payment of employee entitlements is an area of compliance that many employers find complex. It is also a high-risk issue for employers, with the compliance framework of the Fair Work Act 2009 imposing large monetary penalties and potentially even criminal penalties for underpayments.
The increasing scrutiny from regulators and the courts makes it clear that it is not enough for employers to simply be confident that an employee has been paid correctly. Employers must also be able to demonstrate, through clear and accessible records, exactly how each employee entitlement has been met.
Modern awards underpin the minimum working conditions for many employees, but they are far from simple instruments.
Each award contains a diverse assortment of entitlements, including overtime, allowances, loadings and penalty rates. This creates a web of entitlements that go beyond base salary. The amount of these payments and the circumstances in which they are paid depend on factors such as time of day, job duties, location and employee classification. Without a robust system for tracking these elements, employers risk non-compliance and significant consequences.
The Fair Work Regulations impose strict obligations on employers to maintain accurate and detailed records of employee payments. These records are not limited to total remuneration. They must also set out each instance where an employee is entitled to receive an:
Adequate records require an employer to identify not only that a payment was made, but also provide enough details to show the basis on which the amount was calculated.
Records must be readily accessible to a Fair Work inspector upon request. Critically, “readily accessible” does not mean that an inspector can piece together information from multiple sources or conduct their own analysis. The records must present the relevant information in a way that is clear, direct and does not require deduction or interpretation.
Many employers choose to pay an employee a higher salary intended to absorb award entitlements. While a properly drafted employment contact can be effective to absorb award entitlements and prevent underpayment claims, it is vital for employers to be aware that the obligation to track each individual entitlement still remains.
The importance of this obligation was reinforced in the Federal Court decision in Fair Work Ombudsman v Woolworths Group. In that case, the Court confirmed that even where an employee is paid an above-award salary, employers must still record the specific award-based entitlements that the salary is intended to cover. Simply paying a higher amount is not enough—there must be a clear, auditable record of how that amount relates to the employee’s minimum entitlements.
To effectively manage these record-keeping obligations, employers should consider the following steps:
Australian Industry Group publishes 14 Annotated Modern Awards which provide additional explanations, interpretations and guidance notes to help employers correctly interpret and apply award entitlements
Members of Australian Industry Group can contact the Workplace Advice Line on 1300 55 66 77 for specific assistance on workplace matters including award coverage and interpretation.
Australian Industry Group Legal can provide comprehensive advice on managing compliance and risk, including auditing contracts, payroll and record-keeping systems to ensure compliance with legal obligations.
Take advantage of more than 150 years of experience actively solving members’ workplace issues and representing their interests at the highest levels of national and state government. Being a member of Australian Industry Group makes good business sense. Call us on 1300 55 66 77 or visit our Why join page to sign up for a consultation with one of our member representatives.
Clinton is the Publications Manager at the Australian Industry Group.
He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres.
Clinton has a master's in Employment Relations and previously held advisory roles with the Workplace Authority and Department of Employment and Workplace Relations.
