Addressing underpayments in the franchise sector

By Steve Champion, Managing Director, ER Strategies

Allegations of underpayment of wages in the franchise sector have become a common occurrence, as demonstrated by recent negative media publicity.

Exploitation of workers in major franchises recently led Labor party leader Bill Shorten to promise to crack down on the underpayment of workers if elected, with significant increases in penalties for employers who deliberately avoid paying employees correctly.

The real problem

In a recent extensive series of payroll audits of franchised businesses, ER Strategies discovered that most underpayments were caused by franchisees not knowing which industrial instruments - such as awards or enterprise agreements - covered their business. Such instruments set the minimum legal entitlements of employees covered within its scope.

A lack of understanding of franchisee obligations under the instrument was another major cause of such underpayments.

Not knowing which industrial instrument applied to their business or the obligations contained within them, meant the franchisee operators obviously couldn’t comply with many aspects of their award or agreement. This can lead to significant negative impacts for franchisees including the accrual of significant backpay obligations, or the threat of substantial fines for contravening the terms of the applicable award or enterprise agreement.

The solution

The key to combatting and preventing non-compliance starts with the provision of simple employment information and education for franchisees. Franchisors should arrange to provide their franchisee network with detailed information regarding employer obligations, accurate wage rate calculations, simplified Award/Agreement summaries and training in rostering and payroll. Providing franchisees with as much easy-to-use information will take the guesswork out of a franchisee’s obligations and will allow them a greater chance of ‘getting it right’.

View our recent Fast Food Industry Audit Report to find out the other common areas where franchisees weren’t complying with workplace laws. Learn the steps you can take to resolve or prevent these issues.

We are here to help

If you want to get to the core of non-compliance and understand which of your franchisees have fallen through the net of compliance, contact ER Strategies on 1300 55 66 37. We can provide you with the tools to rectify compliance issues, before they reach the media or the Fair Work Ombudsman.