If you don’t, it will become a very expensive exercise…
Written by Sid Sidhu and Justine Ansell, NRA Legal
Record keeping can be a time consuming and tedious task for most businesses, especially those without a dedicated payroll team. However, members must be vigilant in this space given the strict legal requirements and in light of the new offences and massive penalties recently introduced by the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017. It is more important than ever that employers implement a robust system which complies with their record-keeping obligations.
What are my legal obligations and what penalties do I face?
On 15 September 2017, new laws came into effect with regards to record keeping obligations. All members should be aware of these changes and be proactive in addressing any non-compliance issues.
In short, these new laws mean that the Courts can now presume that an employer has breached the Fair Work Act 2009 (Cth) (FWA) where they fail to provide sufficient records to disprove allegations by an employee of an underpayment. This means that, if an employee makes a claim against their employer alleging that they were underpaid, and the employer is unable to provide the relevant records to dispute the claim, then the Courts are entitled to accept that employee has in fact been underpaid, and issue an order for compensation to the employee, as well as hand down massive fines to be paid by the employer and potentially individuals in the employer’s business.
Employers are at risk of significant penalties where they knowingly make, keep or provide false or misleading pay slips. The maximum penalties in this regard have now doubled to $12,600 against individuals – such as the director or payroll officer – and $63,000 against the corporation.
Significantly higher penalties of up to $126,000 against individuals and $630,000 against corporations will apply in cases of ‘serious contraventions’ of the FWA. A serious contravention arises when an employer has engaged in a systematic pattern of conduct. We expect that a systematic pattern of conduct is likely to be established where:
- record-keeping obligations have been contravened over prolonged periods of time;
- multiple employees have been affected;
- the employer has failed to address complaints over alleged underpayments; and/or
- accurate records have not been kept, making underpayments difficult to establish.
According to the Fair Work Ombudsman (FWO), more than one in four businesses fail to comply with their payroll obligations. As a result, we are beginning to see a substantial increase in the auditing activity of the FWO and fines being handed down. We expect this trend to continue in coming months.
Case example – employer fined $6,000 for failing to keep required records
To demonstrate, in the case of Transport Workers’ Union of New South Wales v Contract Courier Services Pty Ltd, a New South Wales courier company was fined more than $6000 for failing to keep the required records in relation to a courier contractor who worked for the business. Despite using a computerised system to calculate daily hours, the New South Wales Industrial Relations Commission found that the company was aware of the system’s faults and sought to take advantage of its short comings.
Increase in FWO activity
Furthermore, this year we have seen the FWO conduct a number of surprise on-site audits around Brisbane, Sydney and Melbourne’s CBDs. We have also seen reputational and significant brand damage when underpayments have been exposed within a number of high profile brands. It is important to be aware that the FWO has broad powers when visiting businesses and can also issue penalties for hindering or obstructing its inspectors. Remember that NRA and NRA Legal can support and advise your business in the event you are subject to a FWO audit or on-site inspection.
How can I avoid penalties?
There is no way around it. Employers will need to demonstrate that they are compliant with the FWA and Modern Awards by producing accurate records and pay slips which are legible and complete.
At the NRA, we are supporting our members in this space with a suite of templates at no charge that you can access at any time, including:
- time sheets,
- leave application forms, and
- much more – members can access these at any time by logging into our member resources portal at nra.net.au.
These templates can be used to help maintain accurate records in your business and reduce the risks of your business being non-compliant.
Additionally, the NRA can conduct audits of your business records and produce a detailed report which will identify any non-compliance issues. These reports are extremely useful in demonstrating to the FWO that you have taken sufficient steps to identify and address any issues within the business.
Further, in light of the recent changes to the FWA regarding vulnerable workers, we have a wide range of solutions, training and services tailored to our members regarding what you need to be doing to best protect your business and manage the risks.
We remind members to be vigilant in this space and start taking immediate steps to check your records and compliance.
If you need any further information or advice or would like to discuss our range of solutions, training and services in this space, please contact the NRA on 1800 RETAIL (1800 738 245) to speak with an advisor.