Payroll Records: The Complete Compliance and Security Guide

Most payroll compliance problems don’t start with underpaying employees.
They usually start with something much simpler: Poor payroll records.

Missing timesheets, unclear payslips, outdated agreements, or unsecured payroll files are some of the most common reasons Australian employers end up dealing with Fair Work investigations, ATO reviews, or employee disputes. Many businesses believe that using payroll software or reporting through Single Touch Payroll is enough. Unfortunately, it isn’t.

Payroll record-keeping and data security are legal obligations. Getting them wrong can expose your business to penalties, back payments, and serious reputational damage.

Why payroll records matter more than you think

Payroll records are not just admin documents. They are your main line of defence if something goes wrong.

Accurate payroll records help you:

Prove employees have been paid correctly and on time
Demonstrate compliance with the Fair Work Act, awards, and agreements
Respond confidently to Fair Work or ATO audits
Resolve employee pay queries quickly and fairly
Protect the business from underpayment claims and penalties

If records are missing or incomplete, the risk shifts to the employer. Under Australia’s reverse onus of proof, if an employee alleges underpayment and you cannot produce proper records, the court may assume the employee’s claim is correct.

Minimum payroll record-keeping requirements

All Australian employers must make and keep complete and accurate records for each employee. These records must be:

In English
Legible and easy to understand
Readily accessible to a Fair Work Inspector
Kept for at least 7 years
Accurate and not false or misleading
Only changed to correct genuine errors

While employees and authorised parties can access records in certain situations, payroll records must otherwise remain private and confidential.

Employment details you must record

You must keep clear records showing:

Employer’s legal name
Employer ABN
Employee’s full name
Employment start date
Type of employment (full-time, part-time, casual, temporary or permanent)

These basic details form the foundation of payroll compliance and are often the first thing regulators look for.

Pay records: what Fair Work expects to see

Your pay records must clearly show:

Rate of pay
Gross wages paid
Net wages paid
Any deductions made
Details of bonuses, allowances, loadings, penalties, or other entitlements

Pay records should make it easy for an external party to understand how the final pay amount was calculated, without guesswork.

Recording hours of work properly

Hours of work are one of the most common failure points in payroll audits.

Employers must record:

Hours worked by casual employees
Hours worked by irregular part-time employees
Overtime hours, or start and finish times, where penalties apply
Any written agreements about hours of work

Some modern awards also require records for:

Time off in lieu (TOIL) agreements
Annualised salary arrangements, including
- Outer-limit hours
- Actual hours worked
- Reconciliation documents

If you use annualised wages, relying on a salary alone without tracking hours is a major compliance risk.

Leave records and special agreements

Employers must keep accurate leave records showing:

Leave taken by employees
Current leave balances

You must also retain signed copies of:

Annual leave in advance agreements
Annual leave cash-out agreements, including payment details

If your business uses individual flexibility arrangements under an award, records must include:

A signed copy of the agreement
Any document ending or changing the arrangement

Termination, transfers, and earnings guarantees

Certain events require additional payroll records, including:

How employment ended
Whether notice was given, and the notice period
Who made the termination decision

If a business is sold or transferred, records for transferring employees must be passed from the old employer to the new one.

Where a guarantee of annual earnings is used, employers must retain:

A copy of the guarantee
Any revocation or change

Superannuation and ATO payroll records

Superannuation records must clearly show:

Contribution amounts
Payment dates
The period the contributions relate to
The name and number of the super fund
The basis for super liability, including choice-of-fund forms

From an ATO perspective, employers must also keep records for:

Wages and salaries
Allowances, bonuses, and loadings
Termination and redundancy payments
Leave payments
Cash wages, if applicable

Single Touch Payroll does not replace payroll record-keeping obligations. It is a reporting tool, not a record-keeping exemption.

Payslip obligations: Small details, Big impact

Pay slips must be issued:

Within one working day of payday
Even when an employee is on leave
Electronically or as a hard copy
In clear, simple English

Every payslip must include:

Employer name and ABN
Employee name
Payment date
Pay period
Gross and net pay

Where relevant, payslips must also show:

Hours worked and hourly rates
Salary rate as of the end of the pay period
Details of deductions
Superannuation contributions

A critical privacy rule:

Family and domestic violence leave must never be identified on payslips.
Payments must appear as ordinary hours or another neutral category

Lawful deductions from pay

A deduction from wages is only lawful if:

The employee agrees in writing, and it is mainly for their benefit
It is required or allowed by law or a court order
It is allowed by an award or registered agreement
The employee authorises it, including variable deductions like salary sacrifice

Employees can withdraw their authorisation at any time, and deductions must stop immediately.

Payroll data security and privacy obligations

Payroll data includes some of the most sensitive information your business holds.

Best practice payroll security includes:

Limiting access to payroll information to authorised staff only
Secure storage of paper records
Password protection or encryption for digital files
Payroll systems that comply with privacy and data security standards
Secure delivery of electronic pay slips

Electronic pay slips must be provided directly to the employee and accessible privately, not through shared or unsecured systems.

Consequences of poor payroll records

Non-compliance can result in:

Infringement notices from the Fair Work Ombudsman
Court proceedings and financial penalties
Higher penalties for serious or reckless breaches
The reverse onus of proof is being applied
Reputational damage and loss of trust

For NDIS providers, payroll failures can also create funding, audit, and registration risks.

Quick payroll compliance self-check

Ask yourself:

Are all payroll records complete, accurate, and retained for at least seven years?
Can we quickly produce records during an audit or investigation?
Do our payslips include everything required and exclude prohibited details?
Are hours and annualised salaries properly tracked and reconciled?
Is payroll data access restricted and secure?

Conclusion

Payroll record-keeping and data security are not optional admin tasks. They are essential compliance responsibilities that protect employees and the business. Clear records, compliant payslips, and secure systems reduce risk, build trust, and help Australian employers stay confident in an increasingly regulated payroll environment.