Time tracking and Fair Work compliance: What Australian businesses need to know

Accurate time tracking is no longer just about payroll efficiency—it’s a legal obligation for Australian businesses under the Fair Work Act. Employers must ensure that all employee hours, including overtime and breaks, are properly recorded. Failing to do so can result in serious legal risks, from underpayment claims to Fair Work Ombudsman investigations.

A clocking in app like BrightHR's, Blip, does all of that and more.

Legal Risks of Inaccurate Time Tracking 

Inaccurate or incomplete records expose businesses to several risks. 

In this guide, we’ll go through a few of these risks: 

Underpayment claims 

Inaccurate time tracking can expose your business to serious legal risks, particularly around underpayment. It’s not just base wages that matter—missed overtime, incorrect penalty rates, unpaid allowances, and superannuation all count. 

If an employee believes they’ve been underpaid, they can lodge a complaint with the Fair Work Ombudsman or take legal action, and claims can go back as far as six years. Even if the error was unintentional, courts expect employers to “get it right,” not simply “try their best.” 

That means relying on manual systems or inconsistent processes is no longer safe—accurate, compliant timekeeping is essential. 

Fair Work penalties 

Non-compliance with time and wage record-keeping obligations isn’t just a technicality—it can lead to substantial financial and legal consequences. 

Under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023, which came into effect on 1 January 2025, penalties have become significantly tougher. Civil fines can reach up to $93,900 per breach for individuals and $469,500 for companies, or three times the underpaid amount, whichever is greater. 

In cases of intentional underpayment, criminal penalties now apply—individuals can face up to 10 years in prison and fines of $1.565 million, while companies may be fined up to $7.825 million. Importantly, employers are legally required to keep accurate time and wage records for seven years, and failing to do so is a breach in itself—even if no underpayment occurred. 

For SMEs, this means that robust time tracking and payroll systems are not just operational tools—they’re essential safeguards against serious legal exposure. 

Reputational damage 

Wage theft and poor compliance don’t just carry legal consequences—they can seriously damage your business’s reputation. Many SMEs underestimate these risks, but in today’s climate of heightened regulatory scrutiny and public awareness, getting compliance right is non-negotiable. 

Allegations of underpayment can erode customer trust, especially as consumers increasingly expect ethical business practices. Negative media coverage or social backlash can quickly follow. Internally, employee morale and retention suffer when staff feel undervalued or exploited, leading to higher turnover and reputational risk through word-of-mouth or public complaints. And in industries like hospitality and retail, we've seen how brand damage from wage issues can escalate into national scandals. 

For small businesses, the cost of poor compliance goes far beyond fines—it can impact your ability to attract talent, retain customers, and grow sustainably. 

How to Avoid Compliance Issues

One of the most effective ways to reduce compliance risk is by implementing a reliable, Fair Work-compliant clocking system. Manual timesheets are prone to human error, inconsistencies, and disputes, which can quickly lead to underpayment issues or record-keeping breaches. 

In contrast, digital time tracking solutions offer greater accuracy, transparency, and auditability—all critical for meeting Fair Work obligations. For SMEs, choosing the right system means ensuring it can capture real-time data, store records securely for seven years, and handle complex award conditions like overtime and penalty rates. Investing in a robust solution not only protects your business legally—it builds trust with your team and supports long-term operational efficiency. 

Tracks start, finish, and break times automatically 

Manual entry is prone to human error, forgetfulness, and even manipulation. Automated tracking ensures: 

• Accuracy: Every shift is recorded precisely, reducing disputes over hours worked

• Consistency: Standardized data collection across all employees and locations

• Audit-readiness: Clear records that can be easily reviewed during Fair Work inspections or internal audits

This is especially important for businesses with casual or shift workers, where start and finish times can vary daily. 

Stores data securely for at least 7 years (as required by Fair Work) 

Fair Work regulations require employers to retain employee records for seven years, including time and wage details. A compliant system should: 

• Ensure secure cloud or on-premise storage with access controls

• Prevent data loss through backups and redundancy

• Support retrieval of historical records quickly and accurately, even years later

Failing to produce records when requested can result in penalties, even if underpayments didn’t occur.

Integrates with payroll systems to reduce errors 

Disconnected systems increase the risk of: 

• Incorrect wage calculations 

• Missed overtime or penalty rates 

• Delays in payment processing 

Integration ensures that time data flows directly into payroll, reducing manual handling and improving: 

• Efficiency: Less admin time spent reconciling hours

• Accuracy: Fewer discrepancies between hours worked and wages paid

• Compliance: Ensures correct entitlements are applied automatically

Is easy for staff to use, whether on-site or remotely 

A system that’s difficult to use leads to poor adoption and inaccurate data. A user-friendly solution should: 

• Support mobile and desktop access for remote or hybrid teams

• Allow real-time clocking from job sites, offices, or home

• Provide clear interfaces so employees can verify and confirm their hours

Ease of use boosts employee trust and participation, which is crucial for maintaining accurate records. 

Discover the best app for time management for your Australian business 

For small and medium-sized companies, investing in the best time tracking app for small business Australia can help avoid costly compliance breaches. 

Blip, our clocking in app, is a surefire way to improve the accuracy and efficiency of your processes and the productivity and flexibility of your people. No more timesheet headaches, no more payroll mishaps and no more compliance issues — it’s built for businesses that are building for the future. 

See Blip in action. Book your free product demo or call 1 300 029 198 today.