3 employment compliance tips for franchisors

By David Price | 04 Dec 2019 View comments

How do you best ensure employment compliance in a franchise? Here are three top tips for what to consider.

1. Data capture is critical

With the complexity of Australian legislation, mistakes will always happen, that’s life. However, by ensuring your network is capturing the data, with a technology solution preferably, you will always have the ability to remedy an issue. With the introduction of increased penalties for failing to capture and keep records, having uniformed systems across your network is a must.

Reverse onus of proof

One of the major changes introduced by the Vulnerable Worker’s laws, was the reversal of the onus of proof. Before the new laws, the onus of proof was on the applicant (the employee) to prove the wrongdoing by the employer. Under the new laws, employers who don’t meet their record-keeping or payslip obligations and cannot give a reasonable excuse for failing to do so, have the onus to disprove the allegation.

Data collection

Record keeping obligations are important and legislated in Australia. Critical data from a record keeping perspective includes rosters, timesheets and payslips. Rosters shows the plan, timesheets reflect what actually happened, and the payslips reflect how the employee was renumerated. 

The employer must ensure they have systems in place for record keeping and backing up those records. David urged the audience to seek technological solutions rather than rely upon paper-based records. 

2. Early detection is paramount

“ERS has completed thousands of payroll audits over the last few years, and the common theme is the earlier the issue is picked up, the easier the resolution between the parties. The simple analogy is finding a $1,000 underpayment and then having an education session with your franchisee, is always easier than fixing a $40,000 underpayment. 

Under the new laws, unless the franchisor has taken reasonable steps to prevent compliance breaches by their franchisees the franchisor can be held responsible for the breach. Audits and an employee helpline are two important ways to achieve early detection. 


A payroll audit is a great tool used by many franchisors to examine and detect employment compliance issues. The main areas an audit should examines includes –

  • Correct industrial instrument (Award/Enterprise Agreements)
  • Employment conditions (i.e. breaks, leave, payslips, wages)
  • Record keeping and payroll processing 
  • Employee engagement process (i.e. application forms, employment contracts, right to work in Australia and restrictions)

By examining the above areas, your audit will identify most essential employment compliance issues. Once issues had been identified through the audit, the franchisee needs to rectify the issue. 

After rectification, the franchisor may need to re-train and re-educate the franchisee in relation to the issues exposed to ensure the same issue does not occur again.

There is no hard and fast rule under the legislation on how many audits you should complete in your network to demonstrate you as the franchisor have taken reasonable steps. But as a minimum, ERS recommends that all new franchisees should be audited after three months of operation to ensure they are set up for success, rather than discover a much larger problem further down the road.

Employee helplines 

Employee helplines are another effective tool for employers to detect any underlying issues within their networks, early on. It acts as a channel of communication for employees to raise their concerns. Employers and managers can only do so much, and the gap can be filled by employees utilising the helpline. 

Employers should be very clear to their employees that no action will be taken against them for raising concerns. Complete confidentiality will be kept for them to raise concerns and without fear of retribution.  

Upon receiving complaints from employees, employers should promptly investigate and take appropriate action to rectify the issues. 

Once the complaint had been investigated and rectified, the company will also need to take reasonable steps to prevent similar issues from happening in the future. 

Don’t forget engagement

Engagement is where the franchisor and its franchisees work collaboratively to ensure employment compliance is achieved. Without buy-in from the network, auditing, helplines and uniform systems can be a hard slog to achieve. 

Methods by franchisors to achieve engagement can include a franchise council or committee.

The main advantages of having a franchise council:

  • Franchisors may set expectations and address major changes sought to a select few, and then the council will address the entire network. 
  • It is more efficient and effective because there’s no need for the franchisor to address the franchisees on an individual basis. 
  • When a franchisee raises a particular concern, the council will raise the issue with the franchisor and a resolution will be reached. If this is a common issue, the resolution may be communicated to the entire network. This will pre-empt any similar issues from arising  

Onboard with policies and procedures

To ensure compliance, franchisors need to have clear company policies and procedures in place. Franchisors need to educate franchisees on all policies and procedures and back that up with enforcement. 

Educate the franchisees by:

  • Training modules and online training 
  • Regular training updates 
  • A team in head office to answer questions about policies and procedures 
  • Online assessment for franchisees to check their understanding 

Enforcement through:

  • Regular audits 
  • Randomised site visits 
  • Strict compliance with policies and procedures incorporated into the franchise agreements. 

Employees should be able to come forward early and not be penalised 

Employees often will have first hand knowledge on issues which their employers are unlikely to discover or may overlook. There should be procedures in place to enable employees to voice their concerns through proper channels. The process must ensure confidentiality, allow employees to raise concerns anonymously and guarantee them no negative consequences for raising those concerns. In addition, it is important to promise employees that there will be prompt investigation and appropriate action taken to resolve issues.