CO-WRITTEN / PARTNER | Staff Reporter, Australia

Employment Practice Audits: A necessary compliance tool

By Steve Champion, Managing Director, ER Strategies

Employment Minister Michaelia Cash recently launched the new Migrant Worker Taskforce, saying that the taskforce would bolster the Government's efforts to crack down on employers seeking to take advantage of migrant workers and deliver on its pre-election commitment to better protections for all workers.

The taskforce is charged with developing strategies and making improvements to stamp out exploitation of vulnerable workers. Vulnerable workers include people from non-english speaking backgrounds, student /visitor visa holders, or new entrants to the workplace.

Whilst this Taskforce, chaired by Professor Fels, is specifically targeted at migrant workers, the issue of Franchisor responsibility for the practices of franchisees remains firmly in the media spotlight.

Our view - the question is no longer “Should we?" audit, but “How?"

Recent cases publicised in the media show that franchisors are expected to assess the risk of non-compliance in their business, and to be taking appropriate mitigating actions. In 92% of prosecutions launched by the Fair Work Ombudsman in the last 12 months, the FWO has pursued other "accessories" such as the franchisor, under 'accessorial liability' provisions of employment laws.

In view of the risk of prosecution and promises of more legal changes to come, Franchisors and Franchisees whose businesses have a large proportion of vulnerable workers should have a documented audit program and records to demonstrate what action has been taken where failures to meet employment legislation have been identified.

One-Size does not fit all...

Franchisors should assess their own risk profile and develop an audit program fit for their business. On-site reviews, desktop analysis of audit data, and reporting processes to the organization’s executives and directors are critical parts of an effective program.

Effective audit tools cover key employment related matters such as:

  • Knowledge and appropriate application of industrial instruments
  • Application of required employment conditions e.g. leave records and application process, payslip information, payment of allowances
  • Time & wages records, payroll reports & records
  • Application process related to “Right to Work” evidence for foreign workers and students.

Audit Resourcing, Training

Depending on the resource capability of the franchisor, a combination of internal & external resourcing may be useful to focus the program on the key risks for the individual business.

A further consideration is the technical nature of the audit - internal auditors may require education on the reasons why the questions are being asked, to appreciate the subtleties of responses.

Options developed by some franchisors include franchisee 'Self Audits' and reporting by franchisees to identify priority areas of concern, with calibration audits regularly conducted by the franchisor.

Many franchisors have recently initiated or extended their own internal programs with an external audit component. An external audit may be useful to identify current status of franchisee compliance, and to provide a platform for franchisee & franchisee staff education. External audits can also be a useful method of calibrating internally sourced data.

What happens with the Audit results?

Effective audit programs will ensure that consolidated, accurate information is available to the franchisor about their organization’s past and current risk profile, and the actions management are undertaking to minimize payroll compliance risk.

Visibility of the audit data PLUS the appetite to do something with the results are necessary to provide protection for the Franchisor’s brand into the future. Appropriate follow up will take many forms, at minimum putting into place improvements in franchisee education through to potential breach or termination of the franchise agreement.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by QSR Media. The author was not remunerated for this article.

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