Most Australian business owners don't think about HR documentation until something goes wrong. A resignation turns hostile. An employee lodges a Fair Work complaint. A workplace injury leads to an investigation. By then, the absence of proper documentation isn't just inconvenient — it's expensive.
We've worked with SMEs that have faced $50,000+ in legal costs defending claims that could have been dismissed outright if the right documents had been in place. The good news: you don't need a large HR team or a stack of complex policies to be protected. You need five core documents, properly written and consistently used.
1. Employment Contracts
An employment contract isn't optional — it's the foundation of every employment relationship in your business. But most of the contracts we see at SMEs are either dangerously outdated, copied from a template that doesn't reflect Australian law, or so vague they offer no real protection.
A compliant employment contract must cover: employment type (full-time, part-time, casual), remuneration and how it's calculated, hours of work, the applicable Modern Award or enterprise agreement, leave entitlements, notice periods, confidentiality obligations, and any relevant post-employment restrictions.
What it actually needs to say
Generic contracts fail because they don't reflect the specifics of the role, your business, or current legislation. Your contract should explicitly state whether the agreed salary satisfies all award entitlements — or how any shortfall will be made up. It should reference the current National Employment Standards. And it should be reviewed every time Fair Work legislation changes, which happens more frequently than most business owners realise.
2. Position Descriptions
Position descriptions are the most undervalued HR document in most SMEs. They're treated as a recruitment tool — written once for a job ad, then forgotten. But a current, accurate position description does much more than attract candidates.
It defines the scope of a role for award classification purposes. It sets the performance expectations that form the basis of your management process. It provides the benchmark you need when an employee claims they weren't told what was expected of them. And it's the document you'll be asked to produce if you ever face an unfair dismissal claim.
What it actually needs to say
A useful position description includes the role's core responsibilities, the skills and qualifications required, who the role reports to, how performance will be measured, and any physical or operational requirements of the position. It should be reviewed at least annually and updated whenever the role substantially changes.
3. Policies and Procedures Manual
You don't need a 200-page policy manual. But you do need a small set of documented policies that cover the areas most likely to generate disputes or compliance exposure. At minimum, these are: a Code of Conduct, a Workplace Health and Safety policy, a Bullying and Harassment policy, and a Leave Management policy.
Since 2024, a Communications and Right to Disconnect policy has become essential for most employers. If you have employees who handle sensitive data, a Confidentiality and Data Handling policy is also non-negotiable.
What it actually needs to say
Policies need to be specific enough to be actionable and enforceable. "We are committed to a safe workplace" is not a policy — it's a statement of intention. A policy must describe expected behaviours, the process for raising concerns, how breaches will be addressed, and who is responsible for managing compliance. Every employee must receive, read, and acknowledge the policies in writing.
4. Performance Management Records
Performance documentation is the document most businesses wish they had and the one they're most likely to be missing when they need it. If you've ever had to dismiss an employee for performance reasons, you'll know exactly how vulnerable you are without a paper trail.
Fair Work requires that any performance-based termination follows a procedurally fair process. That means the employee knew what was expected, was told when they weren't meeting expectations, was given a genuine opportunity to improve, and had the chance to respond before any decision was made. Without documentation, none of that can be proven.
What it actually needs to say
Performance records should capture: the specific performance concern, the date it was raised, what was discussed, what the employee said in response, what improvement was agreed, the timeframe for review, and the outcome of that review. Every significant performance conversation should be followed by a written summary sent to the employee and filed. This doesn't require a formal warning every time — but it does require a consistent, documented habit.
5. Separation and Exit Documentation
The end of the employment relationship is where most compliance failures occur. Resignations that aren't properly documented. Terminations that happen without a written record of the process. Final pay calculations that don't account for all outstanding entitlements. Each of these is a risk.
Separation documentation should include a signed resignation letter or a written record of the termination decision and the reasons for it, a calculation of all final pay entitlements (including accrued but untaken leave), return of company property, and a record of the handover process.
What it actually needs to say
Don't rely on verbal resignations. If an employee resigns verbally, follow up in writing the same day confirming the resignation, the notice period, and the last day of employment. For terminations, document the process in real time — not after the event. Keep these records for at least seven years after the employment ends.
The Cost of Not Having These Documents
The Fair Work Commission resolves around 14,000 unfair dismissal applications per year. The median time to resolve a claim is four to five months. Legal costs for the employer — even when the claim is ultimately dismissed — typically start at $15,000 and can exceed $50,000 for more complex matters.
The documents above don't guarantee you'll never face a claim. But they significantly reduce your exposure, give you a strong foundation for defence if a claim is made, and demonstrate to the Commission that you operated a fair and proper process.
If you're not sure whether your current documentation is adequate, a short HR compliance audit is usually the fastest way to find out — and to fix it before it becomes a problem.
Frequently Asked Questions
Do I need different contracts for casual and permanent employees?
Yes. Casual employment contracts must clearly state the nature of the casual arrangement, including that hours are not guaranteed and the employment is irregular. Since the casual conversion amendments came into effect, your casual contracts also need to reflect conversion entitlements and obligations.
Can I use a template contract I found online?
With caution. Free template contracts are often outdated, jurisdictionally incorrect, or missing provisions required under current Fair Work legislation. If you use a template, have it reviewed by an HR professional or employment lawyer before you use it — and review it every time legislation changes.
How long do I need to keep HR records?
Under the Fair Work Act, employee records must generally be kept for seven years. This includes time and wages records, leave records, and superannuation records. Given the potential for employment claims long after the relationship ends, we recommend keeping all HR documentation for a minimum of seven years from the end of the employment.
What if an employee refuses to sign their contract?
Document the fact that the contract was provided and the employee began work. The terms of the contract generally form part of the employment relationship once the employee commences work, regardless of whether they've signed. However, the absence of a signed contract can complicate disputes — which is why it's worth addressing promptly rather than letting it slide.