Section 535 Fair Work Act: Employer Record-Keeping Requirements

Hiring staff is a big step for any small business - and with it comes legal obligations you can’t afford to ignore.

One of the most important is record‑keeping under section 535 of the Fair Work Act 2009 (Cth). Get this right and you’ll reduce risk, streamline payroll, and stay compliant if the Fair Work Ombudsman comes knocking.

In this guide, we’ll explain what section 535 requires, which records you must keep (and for how long), how this interacts with payslips, and practical steps to build a compliant process from day one.

What Is Section 535 Of The Fair Work Act?

Section 535 is the Fair Work Act provision that requires employers to make and keep accurate employee records for a set period. These records must:

• Be in English and readily accessible
• Be kept for at least 7 years
• Not be false or misleading

The goal is simple: ensure there’s a reliable, auditable history of the employment relationship. This helps resolve disputes, supports payroll accuracy, and enables Fair Work inspectors to check compliance.

Section 535 sits alongside other key obligations - most notably section 536 (payslips) and rules around authorised deductions (for example, section 324). Together, they form the backbone of your day‑to‑day employment compliance.

Which Employee Records Do You Need To Keep?

Your records must capture the core facts of the employment relationship as it changes over time. In practice, that usually includes:

• Employment details: the employee’s name, start date, employment status (full‑time, part‑time, casual) and their Employment Contract.
• Pay records: rate of pay, gross and net amounts, loadings, allowances, bonuses, and any authorised deductions.
• Hours of work: for casuals and any employee with variable hours or overtime - include start/finish times and total hours (especially when an award or enterprise agreement requires it).
• Leave: accruals and takings for annual leave, personal/carer’s leave and any other applicable entitlements.
• Superannuation: contribution amounts, fund details and dates paid.
• Individual Flexibility Arrangements (if any): signed copies and how the employee is better off overall.
• Averaging arrangements or guarantees of annual earnings: written agreements and supporting calculations.
• Terminations: date employment ended, how it ended, and any termination payments (including notice or pay in lieu).

Records should be contemporaneous (created at the time events happen), consistent, and backed by source data (timesheets, rosters, payroll reports). If you change systems, migrate the data carefully so you don’t lose your 7‑year history.

How Do Payslips Fit In With Section 535?

Payslips are covered by section 536 of the Fair Work Act, which requires you to issue payslips within 1 working day of paying employees and include specific details (pay period, gross/net amounts, super, etc.).

While payslips are a separate obligation, they work hand‑in‑hand with section 535. Your underlying records should be accurate enough that the payslip can be generated correctly every time. If payslips and records don’t match, that’s a red flag in any audit.

If an employee queries a payslip or final pay, robust records make it much easier to resolve the issue quickly. They’ll also support your processes when managing employment notice periods, leave balances and termination payments.

Electronic Records, Storage And Privacy: What’s Allowed?

Electronic record‑keeping is fine - and often the most efficient - provided your records are secure, accurate and can be produced in a legible form on request.

There are a few practical guardrails to follow:

• System reliability: choose payroll and HR systems that time‑stamp entries and preserve an audit trail.
• Access controls: limit who can edit employment and pay data, and separate duties where you can.
• Backups: regularly back up your data and test your restore process, especially before system changes.
• Privacy compliance: if you collect personal information, publish and follow a clear Privacy Policy and only collect what you need for employment purposes.
• Retention and disposal: keep records for at least 7 years, then securely destroy them in line with your retention schedule and Australia’s data retention laws.

Tip: if you scan paper timesheets or forms, make sure the scans are complete, readable and stored against the correct employee profile.

What Happens If You Don’t Comply?

Non‑compliance with section 535 can lead to significant civil penalties per contravention. The Fair Work Ombudsman can also issue infringement notices, require enforceable undertakings, or commence court proceedings in serious cases.

Common pitfalls we see include:

• Not recording hours for casuals or staff with variable rosters
• Incorrectly recording deductions without written authority (see section 324)
• Letting leave and super records drift out of sync with payroll
• Gaps in termination records (why the role ended and what was paid)
• Inconsistent storage between paper, spreadsheets and payroll exports

The easiest way to avoid these issues is to embed record‑keeping into your everyday processes. That means clear policies, simple checklists, and assigning responsibility to specific roles - not leaving it to chance at pay run time.

Your Practical Compliance Checklist (Step‑By‑Step)

1) Map The Obligations That Apply To Your Business

Start by identifying which awards or enterprise agreements apply, and what records those instruments require in addition to the Fair Work Act. If you’re unsure, speak with an employment lawyer and your payroll provider to get on the same page.

2) Lock In Contracts And Policies

Consistent documents make consistent records. Use a tailored Employment Contract that clearly sets out hours, pay, allowances and any flexibility or averaging arrangements.

Complement this with a practical set of workplace policies (for example, rostering, leave requests, overtime approvals and deductions). A well‑structured Staff Handbook helps keep everyone following the same process.

3) Choose A Payroll/HR System That Captures The Right Data

Ensure your system can record all fields required under section 535 - not just wages. That includes leave accruals, super fund details, deductions and termination payments, plus time records where needed.

Where employees clock on/off, ensure timesheets flow directly into payroll and are approved by a manager to reduce errors.

4) Build A Clean Onboarding Workflow

Create a checklist that captures the contract, tax and super forms, bank details, emergency contacts, and award classification on day one. Store everything in one secure employee file.

At the same time, give staff access to your Privacy Policy and explain how their personal information will be used for payroll and HR.

5) Document Deductions And Special Arrangements

If you make deductions (e.g. salary sacrifice, staff purchases), ensure you have a current, written employee authority and that it aligns with section 324. Keep these authorities on file and review them annually.

For flexibility or averaging arrangements, keep signed copies and a simple calculation showing why the employee remains better off overall.

6) Keep An Eye On Leave, Super And Terminations

Reconcile leave balances monthly between payroll and your rostering tool. Record superannuation contributions and payment dates, and store contribution reports to support your records.

When employment ends, file the reason for termination and a breakdown of final pay. This links naturally with notice, leave payouts and any entitlements in your notice period obligations.

7) Audit, Train And Improve

Run a quick internal audit each quarter: pick a sample of employee files and check that records are complete and up to date. Close gaps immediately.

Train managers on approvals and record‑keeping basics so compliance isn’t just a payroll task. Small improvements each cycle will save you headaches - and potential penalties - later.

How Section 535 Interacts With Other Employment Laws

Section 535 doesn’t operate in a vacuum. Your record‑keeping should reflect the broader employment law picture, including:

• Minimum entitlements under awards/agreements (rates, loadings, overtime) - your records must show you’ve applied them correctly.
• Payslip rules under section 536 - your underlying records should support the data on each payslip.
• Lawful deductions (as noted, section 324 is key here).
• Leave, notice and termination entitlements - ensure your records align with your contracts and any relevant award terms.
• Privacy and data security - employee files inevitably contain personal information, so your Privacy Policy and internal access controls matter.

When you make changes to your processes or your workforce grows, review your documentation and records framework so it scales with you.

Common Questions From Small Business Owners

Do I have to keep paper records?

No. Electronic records are fine if they are accurate, secure and can be produced in a legible form on request. Many businesses keep everything digital and only print when needed.

Can an employee see their records?

Employees can request access to their own records. You should have a straightforward process to provide copies promptly while protecting other employees’ privacy.

How long do I need to keep records?

At least 7 years. If another law or your insurer requires longer, follow the longest applicable period and document your retention schedule.

What about deductions and salary sacrifice?

Never make deductions without proper authority and always record them clearly. Cross‑check your process with section 324 and your payroll system’s setup.

Should I update my employment documents?

Yes. As your team grows or arrangements change, refresh your Employment Contract templates and policies so they reflect how you actually work.

Key Takeaways

• Section 535 requires employers in Australia to keep accurate, English‑language employee records for at least 7 years - and those records must be readily accessible.
• Your records should cover pay, hours (where required), leave, superannuation, special arrangements (like flexibility or averaging), and terminations.
• Payslips (section 536) and deductions rules (such as section 324) sit alongside section 535 - treat them as one joined‑up compliance process.
• Electronic record‑keeping is acceptable, provided you manage security, backups and privacy with a clear Privacy Policy and sensible access controls.
• Build a practical framework: solid Employment Contracts, a simple Staff Handbook, a capable payroll/HR system, and regular internal audits.
• If you’re unsure about awards, deductions or termination documentation, getting tailored advice from an employment lawyer early will save time and reduce risk.

If you’d like a consultation on setting up compliant record‑keeping under section 535 for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.