Balancing operational efficiency and legal compliance is a hill climb for many franchisors. One area where this balance is essential is managing employee wages. This may seem like a subject filled with legal terms and complexities, but it's a critical concept for the franchising industry and how businesses handle their employees.

Our topic focuses on franchisor liability. In simple terms, a franchisor is a company that allows another party, known as the franchisee, to run a business using its brand and system. Although this partnership can be advantageous, it can also result in complicated legal proceedings, particularly regarding employee wages. Lately, there has been a growing concern about how workers at franchise establishments are compensated. 

When payment discrepancies arise, the question arises: should the franchisee, which directly hires the employees, be held accountable, or should the franchisor, whose reputation is at stake, take responsibility? Franchisor liability becomes relevant in this situation. In specific legal systems, franchisors may be responsible for ensuring that their franchisees follow employment laws, such as fair wage practices. 

At the same time, if a franchisee pays their employees less than they should, the franchisor might face legal consequences, which could harm their reputation and financial stability.

The Relevance of Roster Software in Franchising Business

Roster software goes beyond being a simple management tool for franchising businesses; it acts as a shield of protection. 

By ensuring franchisees follow wage laws, franchisors consistently minimise the risk of being held accountable for underpayments. 

This safeguards the franchisor's reputation and financial interests and promotes an ethical and legally compliant environment. In the upcoming parts, we will delve into the legal aspects of franchisor liability, the challenges of maintaining wage compliance in a franchise model, and how roster software can effectively tackle these challenges. 

Whether you're a franchisor, franchisee, or simply interested in understanding the dynamics of this business model, this exploration will offer valuable insights into how technology is revolutionising how we manage and safeguard our businesses.

Understanding Franchisor Liability

Franchisor liability is a big deal in the franchise business, especially regarding underpayments. Franchisors are legally responsible for what their franchisees do, especially with personalised employment laws.

Examples of Franchisor Liability Cases 

Some high-profile cases have brought this issue to light. One example is the 7-Eleven franchise in Australia. It was discovered that many of their franchisees were underpaying their employees. 

This caused many problems, including paying back wages and a major public relations crisis. This case and others showed that franchisors must keep a close eye on their franchisees to prevent these issues.

The Legal System governing franchisor responsibilities in Australia

In Australia, the laws have changed to make franchisors even more responsible for their franchisees' actions. 

The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 clarified that franchisors need reasonable control over their franchisees. They can face severe penalties if they don't take the necessary steps to prevent underpayments. 

This means that franchisors need to be involved in ensuring their franchisees are paying their employees fairly. It's not just about following the law; it's also about protecting the franchise's reputation and keeping everything running smoothly.

The Challenge of Managing Wage Compliance in Franchises

Wage Compliance Complexity Across Different Regions and Industries

Franchise networks frequently cover various regions with labour laws and wage regulations. This spread across different geographical areas adds a layer of complexity regarding compliance

For example, the minimum wage rate can differ significantly from one state to another, and even within states, local laws may impose additional requirements. 

Specific industries, such as hospitality or retail, have specific wage standards that further complicate the payroll process. 

To go through this web of regulations, franchisors and franchisees must stay constantly informed and adaptable, ensuring that their practices align with the applicable laws in each location.

Common Pitfalls in Franchise Models Leading to Underpayment Issues

Franchises often face problems with underpayment due to a lack of clarity and proper supervision. 

One common mistake is when employees are wrongly classified as independent contractors, which exempts them from certain wage protections. 

Another issue arises when overtime pay is not calculated accurately, especially in businesses with varying work hours. 

Franchises may unintentionally ignore regional differences in wage laws because of a centralised payroll system that doesn't consider local nuances. These pitfalls not only cause underpayment problems but can also have serious legal consequences for the franchisor.

Roster Software: A Solution to Wage Compliance

Maintaining wage compliance in the complex world of franchise operations can be a tough nut to crack. There's a game-changing solution in the form of roster software like RosterElf. 

This powerful tool simplifies the process and guarantees precise wage calculations, making it a must-have for any franchise.

The Workforce Management Software was created to streamline and handle employee scheduling, payroll, and adherence to labour laws. 

Take RosterElf as an example; it seamlessly connects with third-party payroll solutions such as Xero, MYOB, Sage, and Wage Easy. 

This integration makes it easier to sync employee profiles and data, simplifying the payroll process and ensuring compliance with Fair Work regulations, which is vital for any business.

Features of Roster Software Aiding in Compliance

Award Analysis Feature: The software's built-in award analysis feature allows businesses to analyse labour costs while creating rosters. This helps identify payroll errors and ensures accurate wage calculations that comply with regulations. 

Efficient Shift Allocation: With RosterElf, businesses can allocate shifts among employees fairly and efficiently. The software provides transparency over contracted hours and streamlines the filling of vacant shifts. With the evolution of Mobile app rostering, shift scheduling can be done anywhere and anytime.

Quick and Effective Roster Updates: Flexibility is crucial in roster management, and RosterElf understands. It allows for fast and efficient updates to the roster, accommodating unexpected changes while maintaining profitability. 

Simplified Leave Management: Employee scheduling software makes managing employee leave requests a breeze. The software provides a clear view of leave requests, ensuring staffing levels are maintained, and leave is managed without payroll errors. 

Compliance with Roster Rules: It helps businesses comply with rostering regulations by providing visibility into each shift's necessary credentials and requirements. This makes sure that all the rules are being followed and helps in avoiding any compliance issues as well. 

Labour Budgeting Made Easy: The labour budgeting tool offers real-time visibility into labour costs, allowing managers to optimise the workforce according to business needs and sales trends. This helps in effective budgeting, resource allocation and business management. 

Seamless Payroll Integration: It integrates smoothly with popular payroll systems or accounting software like Xero and MYOB, simplifying the payroll process. This integration of processing payroll reduces the chances of human error and ensures compliance with Fair Work regulations.

The Rising Issue of Underpayments

In recent years, allegations of underpayment have presented legal issues for many franchisors.

The franchisors involved in these cases have suffered reputational harm as a result of the widespread publicity that these cases have received. 

Franchisees who mismanage their employees' wages may face underpayment difficulties, resulting in investigations that often involve the parent company.

What are the Legal Consequences

Franchisors found liable for underpayments can face severe consequences such as:

(i) Substantial Fines - A famous Coffee chain was fined $475,000 for exploiting young Taiwanese students through internships from the year 2016-17. 

(ii) Legal costs 

(iii) Damages the brand image

(iv) Affects the Profitability and growth of the business

How Roster Software Can Prevent Underpayments


Automated Payroll Calculations 

Payroll calculations can be automated with roster software, ensuring that workers are paid correctly and following labour regulations.

It reduces the possibility of human error, which frequently results in underpayment problems.

Real-time Tracking

Employee hours can be tracked in real-time with a roster software time clock system. 

It helps managers and franchise owners monitor their staff's activities and ensure that staff members aren't overworked or underpaid. It also helps in the prevention of wage thefts as well.

Compliance Alerts

Compliance alerts serve as a feature of the majority of present-day roster software. 

These alerts notify management when they approach labour law thresholds, helping them stay in line with rules and regulations.

Centralized Data Management

Roster Software centralizes employees' data, making it easier to maintain proper records and simplifying audits or investigations.  

Doing this decreases the possibility of underpayments due to inaccurate or missing records.

Customisable Reporting

Roster software allows franchise owners to generate customisable, complete reports that can be used to assess labour costs, compare wage expenses to revenue, and identify areas where cost-saving measures can be applied.

The growing number of cases in which franchisors are held accountable for underpayments serves as a reminder of the significance of fair compensation and compliance with labour laws. Franchise businesses need to be proactive in preventing underpayments. 

In this process, roster software is helpful, providing automated payroll calculations, real-time tracking, compliance notifications, consolidated data administration, and personalized shift reports.

Owners of franchises can protect their brand's reputation and guarantee that their staff members are correctly paid by using roster software, increasing employee productivity and motivation.

As the business world evolves, staying ahead of labour compliance issues is crucial for success, and staff management software can play a crucial role in achieving that goal.

Important Notice

The information contained in this article is general in nature and you should consider whether the information is appropriate to your needs. Legal and other matters referred to in this article are of a general nature only and are based on RosterElf's interpretation of laws existing at the time and should not be relied on in place of professional advice.

RosterElf is not responsible for the content of any site owned by a third party that may be linked to this article and no warranty is made by us concerning the suitability, accuracy or timeliness of the content of any site that may be linked to this article.

RosterElf disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on this information.