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Keeping lists, files and records can seem like an unnecessary and painful amount of work for small and medium businesses, particularly with so many other tasks demanding your attention. However, the law requires that you keep certain records for every employee. To minimise the administrative burden for your business, it is useful to fully understand your obligations. You also need to know how to make sure you are fulfilling them in the least time-intensive way possible. This article will explain: 

  • what employment records are;
  • what the legal requirements are for businesses; and
  • some tips on how to practically manage these obligations.

What Are Employment Records?

Employment records are documents showing that your business is providing minimum entitlements to all of your employees. They cover a range of details including information on: 

  • wages;
  • time;
  • holidays; and
  • leave.

These records must be accessible and able to show that employees are receiving the correct pay and receiving the holidays and leave that they have entitlements to by law.

While keeping detailed files for each employee can be burdensome, it is certainly an important task to ensure that your business is doing. Aside from the immediate legal obligation, having good records can avoid issues in the future if there are misunderstandings between an employee and the business about their:

  • pay;
  • leave; or 
  • holidays.

Note that your employees have the right to know everything you are recording on their file, and have the right to see these lists and records.

What Are The Legal Requirements In Terms Of Employment Records?

You need to keep records of the following information for each employee:

  • name, postal address, age (if under 20 years) and the date they started working;
  • whether the employee is on an individual employment agreement or a collective agreement. This includes the title and expiry date of the agreement and the employee’s classification;
  • a copy of the agreement;
  • the kind of work you have employed the employee for;
  • the number of hours the employee worked each day in a pay period and the pay for those hours. If these are agreed and they work them as usual hours, then a statement of those usual hours and pay will be enough. For an employee on a salary, usual hours include any additional hours worked that are consistent with the employment agreement;
  • the wages in each pay period for each employee. Also outline how you have calculated these;
  • dates the employee last became entitled to annual holidays and sick leave. Also, their current entitlement to annual holidays and sick leave;
  • the dates of any leave taken, including annual holidays, sick leave and bereavement, and payment received for each;
  • any annual leave cashed-up as well as the date and amount paid for each entitlement year;
  • the dates and number of hours worked on public holidays and the payment for these;
  • the dates of, and payments for, any public holidays or alternative holidays an employee did not work but we’re entitled to holiday pay;
  • cash value of any alternative holidays an employee gave up for payment;
  • cash value for any board and lodgings provided to an employee;
  • the date when an employee’s employment ended, and the amount of holiday pay they received at the end of employment; and
  • a copy of their tax code declaration (this is the common IR330 form).

Tips For Keeping Employment Records

It is much easier to keep correct and accurate employment records if your business has computerised payroll software. Keeping these details manually may seem viable if your business is extremely small, but it is extremely time-consuming and also means when your business grows, this difficulty will compound. Even with computerised payroll software, make sure to check the system regularly to ensure it is correctly recording details – if an employee’s hours or pay change, this must be reflected in the software.

It is worth taking the time each year to make sure that your employment records include the various mandatory details that are required. The Labour Inspectorate can issue a range of penalties depending on the severity of the breach. Companies can be fined up to $100,000, or three times the value of any financial gain from not keeping records – whichever is greater. Because of this, a small-time investment each year to ensure that your business’ record-keeping is up to scratch is well worth it in the event that errors turn up later on. 

Key Takeaways

Your business legally needs to keep a range of employment records for each of your employees. These include the employee’s basic details, employment agreement, wage and time records, holidays and leave records. There are additional details that should be recorded for certain events, such as if an employee is paid out for accumulated annual leave. It is much easier to track these records with a fully computerised system, relative to a manual system. Mistakes in these records risk a financial penalty if they are discovered by the Labour Inspectorate, so they are well worth getting right – this also makes it easier if an employee disputes an issue like their wages or leave balance. If you want to know more about employment records, contact LegalVision’s employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What are employment records?

Different documentation such as wage, time, holidays, and leave records that show that your business is complying with the relevant employment laws and providing employees with minimum entitlements. 

Do employment records have to be kept in paper form as well as electronically?

No, they do not. Electronic records are fine, so long as the information can be easily accessed. 

What are the penalties for not keeping required employment records?

The Labour Inspectorate can issue a range of penalties depending on the severity of the breach. Companies can be fined up to $100,000, or three times the value of any financial gain from not keeping records – whichever is greater.

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