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Record keeping for employees on annual salaries

Record keeping for employees on annual salaries

Published: 22 Jan 2024

Record keeping for employees on annual salaries
Written by
Luis Izzo
Luis Izzo
Managing Director - Sydney Workplace

Record keeping for employees on annual salaries

Published: 22 Jan 2024

The sleeping landmine hiding in the new Federal wage-theft laws
 
The Fair Work Act 2009 and Fair Work Regulations 2009 (the Regulations) have long imposed very specific record keeping obligations that are largely unknown or misunderstood by employers.
 
These record keeping obligations have not previously attracted significant attention. However, with new wage-theft laws increasing the penalties for non-compliance to $469,500 per breach or $4,695,000 per breach for ‘serious contraventions’, employers will need to take notice.
 
The most forgotten of these obligations pertains to Regulation 3.34, which requires employers to keep a record of each ‘overtime hour’ worked by an employee on each day that might attract a penalty or loading for overtime hours.
 

The record keeping obligation regarding overtime


Regulation 3.34 of the Regulations specifically provides as follows:
 
For subsection 535(1) of the Act, if a penalty rate or loading (however described) must be paid for overtime hours actually worked by an employee, a kind of employee record that the employer must make and keep is a record that specifies:

                     (a)  the number of overtime hours worked by the employee during each day; or
                     (b)  when the employee started and ceased working overtime hours.

What this means is that, for any employees covered by a modern award, where those employees work more than the maximum ordinary hours permitted for a day or more than the maximum ordinary hours permitted for a week, a record must be kept of these additional hours.
 
This applies even if an employee is engaged on an annual salary that is intended to compensate for all their award entitlements or where employees are being paid ‘over-award’.
 

The sleeping landmine - salaried employees


It is apparent that a large number of employers engage supervisory or middle managerial employees who may be award covered on annual salaries. These salaries tend to range from anywhere between $65,000 to $100,000 and are often intended to compensate for all the hours worked by employees.
 
This is most notable with the country’s 1.8 million clerical workers, with ABS data identifying that 50% of these clerical employees are paid ‘above award’ rates.
 
Whilst these salary arrangements are lawful if they ensure that the employee receives more pay than what they would have received had the employee be strictly paid under the applicable modern award, these over-award salary arrangements do not exempt an employer from keeping a record of every hour the employee works beyond the daily maximum ordinary hours (often eight hours per day or ten hours per day for most awards) or the weekly maximum ordinary hours (38 ordinary hours per week).
 
Unless employers are implementing time and attendance systems of some kind for such salaried employees, they are likely in breach of the Fair Work Act and Regulations.
 

Is there any alternative solution?


For those employers who have difficulties monitoring time and attendance for managerial employees, there are limited lawful alternative options.
 
Even those awards that provide for annualised wage arrangements (which have not often been adopted due to their complexity), such awards still require employers to keep a signed record of the starting and finishing times of work for every day.
 
Business NSW and Australian Business Industrial (represented by AVо) are currently seeking to amend the Clerks - Sector Award 2020 to create an exemption rate which would enable employers who pay employees’ salaries 55% above the award to not keep records of each hour worked until an employee reaches 50 hours per week. It may be that Award exemption rates provide the avenue to give employers a practical means of engaging employees on annual salaries that avoids what is a looming pecuniary penalty landmine.
 
Until such time as exemption rates become more common, employers will need to be vigilant regarding employees working extended hours in a day or over week. Should you want any further advice in relation to this issue, please contact our team of experts who are more than happy to provide pragmatic expert advice on this topic as well as all employment and industrial relations related matters.

As always, if you have any queries, please feel free to contact our team at info@ablawyers.com.au.                              



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The content of this article is general in nature, and is intended to provide commentary only. It does not constitute advice, and should not be relied upon as legal advice. Targeted formal legal advice should be obtained prior to any action being taken in relation to a matter arising in response to the content of this article.

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