Record-keeping blunders should be ‘wake-up call’ for employers

Education and proactivity are the key to avoiding wage and overtime entitlement breaches, but workforces and systems remain deficient in contemporary practices, one legal expert has warned.

Many employers remain unaware of entitlement and payment obligation breaches despite intensified scrutiny, even after the Federal Court’s September 2025 rejection of claims made by Coles and Woolworths that annual salaries featuring set-off clauses omit the need for entitlement tracking and record keeping.

While the case concerned hospitality and retail, the distinction applies to any organisation paying annual salaries, and many are overlooking risks that can turn into underpayment claims, according to Sarah Wood, partner at global law firm Clyde & Co.

She said: “Even if an employer is paying above award per pay period, there is still the need to keep records of overtime or penalty hours worked. And to keep a record of overtime or penalty hours, there first needs to be a system for capturing working hours.”

Failure to implement accurate record keeping, Wood said, could risk a civil penalty breach, with one or multiple significant fines should it affect more than one employee, and a reverse onus of proof in a wages claim, whereby the employer must disprove any underpayment claim, as seen in the aforementioned case.

Wood said: “Without records to show the specific breakdown of hours an employee has worked, it may be difficult to defend a claim.”

“This is not new legislation, but there was a lack of awareness of it until the recent judgments against Coles and Woolworths, and we are likely to see more off the back of these cases.”

“Even where there are good systems in place for accurately recording working hours, these systems often rely on employee input. It can be challenging to ensure staff are using the system accurately recording their working hours in a timely way.”

Wood also noted that informal processes or vague structures can heighten the risk of unintentional overtime and further breaches.

In this way, employees are urged to seek specialist legal advice in consideration of relevant awards and job classifications, and seek staff and payroll systems that possess the necessary knowledge.

“Appoint someone to become familiar with the awards that apply to your business – each award can vary significantly, and if multiple awards cover different workers, employers need to be familiar with the ways in which the awards are different and how that impacts on entitlements,” Wood said.

“Once there is a good understanding of how the relevant award works, the challenge of putting in place a system for recording working hours, keeping records and regularly auditing wages should become clearer.”

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