Broken record (keeping) - The importance of keeping employment records and providing pay slips

Record keeping - it’s not many people’s favourite pastime, but it is a critical task for every responsible employer.

Under the Fair Work Act 2009 (Cth) (FW Act), employers can be penalised for failing to keep proper records and for failing to issue their employees with pay slips in a timely manner.

The types of records that employers must keep include (but are not limited to) information about the position of the employee (e.g. commencement date and type of employment), their pay, leave, superannuation and any changes to their employment including termination of employment.

Employers must also provide employees with pay slips that not only detail the employee’s pay, but also specify the employer’s details such as their ABN and any superannuation contributions made on behalf of the employee.

For many employers, the record keeping and pay slip obligations in the FW Act feel onerous, but as recently described in a decision of the South Australian Employment Tribunal, they are critical for ensuring compliance with workplace laws and enabling employees to understand their entitlements.

In Fair Work Ombudsman v Wuyu Pty Ltd & Ors [2018] SAET 15, two companies and a director were penalised for failing to keep records and to issue employees with pay slips.

The two companies operated a number of massage parlours in South Australia that were run by the same director, who was responsible for hiring, paying and managing employees.

In 2012, one of the companies and the director were investigated by the Fair Work Ombudsman (FWO) for failing to keep proper employment records and for failing to issue employees with pay slips. At that time, the FWO issued a fine and provided the company and director with information on how to comply with their obligations.

In 2014, the FWO conducted a follow-up investigation and found that the same company and the director had continued to fail to comply with their record keeping and pay slip obligations. They were issued with a further fine and provided with more material and information on how to comply.

Between 2014 and 2016, the director registered a new company which took over control of some of the massage parlours.

In 2016, the FWO conducted a second follow-up investigation which included the new company as well. The second follow-up investigation found that although the director had been issuing pay slips to some employees for a short period of time following his previous interactions with the FWO, he stopped doing so and only issued pay slips to employees when they asked for them.

In an email to the FWO, the director wrote, “During the past few years, I did not do the records and other things properly, because I am too busy and lazy.” He also wrote, “I do not want to make fake data. Because I do not keep records.”

The FWO commenced proceedings against the two companies and the director on the basis that they had repeatedly failed to comply with their obligations, despite knowing that it was a legal requirement, having been advised of such on numerous occasions by the FWO.

The companies and director admitted to contraventions of the FW Act prior to the hearing of the matter, and so the task of the Tribunal was to determine the appropriate penalties.

The director argued that - although aware of the need to keep records and provide pay slips - he was not aware of how serious his failure to do so was.

The Tribunal found that there was a need for both specific and general deterrence in this case, noting that the conduct of the companies and the director was serious in nature.

The Tribunal found that there was a need to set the penalties at a level that was significant enough so as not to be viewed by either the offending parties or employers more generally as “the cost of doing business.”

The Tribunal also commented that one of the reasons that the actions of the companies and the director were so serious was because their failure to keep records and issue pay slips frustrated the investigation process and meant that the FWO could not establish if any employees had been underpaid or lost other entitlements.

The Tribunal said, “Proper record keeping and the provision of pay slips is essential to ensure there is compliance with workplace laws.”

The companies were ordered to pay $18,000 each in penalties and the director was ordered to pay $7,200 for his vicarious involvement in the companies’ contraventions of the FW Act.

Lessons for employers regarding pay slips and record keeping

Record keeping and the provision of pay slips are a non-negotiable reality of being an employer.

The FWO has demonstrated time and again its willingness to pursue employers for offences relating to records and pay slips. In turn, the courts have demonstrated the ongoing intention to set penalties at a level that is more than “the cost of doing business.”

In fact, the introduction of the new “serious contravention” provisions in the FW Act means that penalties are set to increase and, in future, are likely to be considerably higher than those ordered in this case.

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