Annualised salaries and record-keeping: a federal court wake-up call for employers

The recent Federal Court decision handed down on 5 September 2025 by Justice Perram delivers an important warning for all Australian employers regarding workplace compliance, particularly in relation to salaried employees and record-keeping obligations.

This landmark case arose from significant underpayment claims against Coles and Woolworths, brought by the Fair Work Ombudsman and class action representatives. The Court found that despite sometimes paying annual salaries above Award minimums, both companies failed to maintain accurate and complete records of hours worked, overtime, penalty rates, and other employee entitlements.

Justice Perram clarified that under the Fair Work Act 2009 (Cth), simply paying a salary above the Award minimum is insufficient unless employers can substantiate compliance with all Award entitlements on a pay-cycle basis through meticulous record-keeping. Missing or inconsistent records about actual hours and extra duties left these companies unable to defend their payment arrangements adequately.

The decision sent the case back for detailed examination of employees’ actual work histories, highlighting the risks of relying on generic payroll systems or “set-and-forget” salary contracts, especially in large organisations with variable workloads.

For employers, this case serves as a timely reminder to:

• Conduct a comprehensive review of all Award obligations, not only minimum wages but also overtime, penalties, allowances, and loadings.
• Understand that employee entitlements under the Award are mandatory, not optional, and must be recorded accurately for every pay period, regardless of enterprise agreements, annualized salary arrangements or individual contracts covering employees.
• Ensure you utilize payroll systems that are robust, accurate, and readily accessible for inspection. Systems should have the capability to record work hours, calculate entitlements, and maintain up to date documentation.

Failing to meet these obligations places employers at risk of costly disputes, regulatory investigations, and potential reputational damage. This ruling is a clear indication that the Fair Work Act requires not just good intent but demonstrable, transparent compliance.

Master Builders ACT members are urged to treat workplace compliance and record-keeping as vital business safeguards rather than administrative burdens. Proactively upgrading payroll and timekeeping systems, conducting regular compliance audits, and maintaining clear documentation will protect businesses and support ethical employment practices.

Our Workplace Relations Team is available to assist members in understanding their obligations and establishing effective workplace compliance systems. Contact us at 6175 5900 or workplace@mba.org.au to safeguard your business operations today.