Greens MP introduces franchise wages bill
A new bill called the Fair Work Amendment (Recovery of Unpaid Amounts for Franchisee Employees) Bill 2015 was introduced to Parliament last week. The bill, sponsored by Melbourne Greens MP Adam Bandt, is a direct response to the recent 7-Eleven saga, in which the Fair Work Ombudsman has already found over $600,000 in underpaid wages and entitlements.
The bill aims to prevent this by making the franchisor responsible for correcting underpayments if the franchisee is not able to pay staff correctly and on time. You can read the text of the bill here, as well as its explanatory memoranda.
Nobody would argue that it’s fair how 7-Eleven staff were underpaid, but this bill skirts a fine line that all franchisors should be aware of. The bill is written in the typical legalese of the Fair Work Awards and the National Employment Standards, but the gist of it is:
- If a franchisee employer does not pay an employee by pay day, then the employee, or someone acting on their behalf, can give the franchisor a written demand for payment.
- The employee doesn’t need to do this immediately. They have 6 years from the pay day in which they can make this request.
- The franchisor has 14 days to pay the employee what they’ve requested.
- If the franchisor doesn’t pay the employee within the given 14 days, the employee (or a lawyer) can take the franchisor to court. So if the franchisor disagrees with the employee’s written request… it must go to court!
- The court must add interest to the amount already owed to the employee. This interest is calculated from the pay day (so at this point it’ll already be 14 days worth).
In short, if this bill became law, every franchisor in Australia would have unknown liabilities on their books for the wages of everyone who’s ever worked at one of their franchises any time in the past 6 years. And they could get these written notices if a franchisee gets their payroll out an hour late.
This bill could certainly set a precedent for even more responsibilities for head office over what franchisees are doing. We think this could significantly change the dynamics of franchise agreements and cause a lot of headaches.
It’s important for franchises to be ready for this sort of thing. Whether mandated by law or common sense, as a franchisor you need to be sure that your franchisees aren’t doing dodgy things with payroll that are going to see your brand on the front page of the Australian.
About the author
Jake Phillpot is a Director of Tanda, a specialist time and attendance company focusing on the interpretation of Australian Modern Awards and Enterprise Agreements. Tanda maintains templates of popular Modern Awards including Fast Food, Hospitality, Retail, and Restaurant. These templates include the Fair Work mandated minimum wages of all levels of staff, as well as rules for penalty rates, allowances, and overtime based on the times that staff worked. For more information, read a Franchise Case Study with Red Rooster or call Jake on 1300 859 117. You can also request an enterprise POA.
Industry Insights | read
What the hell is happening at 7 Eleven’s head office?
The Australian Senate enquiry into franchise business 7 Eleven’s alleged underpayment of staff has heard that two thirds of stores have been underpaying staff – that’s up to 10,000 people. In a scramble to resolve the issue, 7 Eleven’s management recently wrote to 15,000 former and current staff, encouraging underpaid workers to come forward. Early results have shown the underpayment has been endemic across the group. Where did 7 Eleven go wrong? As the enquiry rolls on, 7 Eleven will likely claim the data was unavailable to have enough oversight into the practices of franchisees. The other side of the argument will claim the 7 Eleven was simply hiding from a tough business conditions, and was happy to underpay staff to get ahead. What’s going to happen to 7 Eleven? The total liability of the losses is still unknown, but 7 Eleven has set up a third-party company “Independent Claims” which will hide the balance sheet liabilities, handle the underpayments and manage the claims. Head office is going to back pay staff directly, and then attempt to recover underpaid amounts from franchise owners. The big questions is how widespread this is across other groups. The fundamental economics of the competitive pricing models in franchise groups will likely come into question as the enquiry rolls on. It wasn’t too long ago that Dominos and Pizza Hut franchisees were up-in-arms about $5 pizzas, claiming it would force them to find cost cuts in other parts of the business. What should 7 Eleven and other franchise groups do? Head offices should review IT systems and get with the times. Franchise models are successful because of the combination of hard-working and well incentivised owners and best-practice scalable business systems. The best franchises are the ones with the best systems. It was this formula which saw the franchising model take the world by storm in the 20th century. Everyone is talking about big-data and the potential to be unlocked in customer data. A better place to start is to get all of the financial and payroll data in once place. Not only does this give full oversight into wages, but also allows head office to focus on optimising labour costs. The most successful franchisees we work with do one thing very well – they correlate their wage cost with their revenue extremely tightly. Only time will be able to tell the outcome of the enquiry. Our guess is this just the start and the recent Fair Work amendment bill will throw some serious fuel on the fire.
Awards & Rostering | read
Australian Minimum Wage Update for 2016
With the End of Financial Year fast approaching, it’s time for you to start thinking about minimum wage and what is required of you as a business owner for the New Financial Year. Fair Work Australia has recently released its decision on national employment standards, which include wage increases for Modern Award rates. As of July 1 2016, the national minimum wage will increase by 2.4% or $15.80 per week. As a business owner, it is your responsibility to ensure that you are aware of these changes and have updated your pay rates for your employees correctly. How does the minimum wage update affect you? July 1, 2016 is the official day set by Fair Work for the proposed changes to take action, so it’s important that you are aware of any changes and understand what is expected of you in regards to workplace compliance, before July 1. Employers who have employees covered by a Modern Award… have the responsibility to check the updates to the Modern Award rate or the national minimum wage, and ensure that their records are updated as of July 1, and that the first pay run after July 1 is paid at the new pay rates. For example: Taylor, aged 24 is employed as a Casual Level 3, on the General Retail Award 2010. Typically, Taylor will work: Monday – 11:00am to 5:30pm (6 hours) Thursday – 5:00pm to 9:00pm (4 hours) Saturday – 10:30am to 5:00pm (6 hours) Sunday – 11:00am to 3:30 pm (4 hours 30 minutes) Prior to 1 July 2016, Taylor would have received $584.30 for working the 20.5 hours above. But in the New Financial Year, Taylor would now receive $598.51 for the same shifts which is an overall increase of $14.21 per week*. So that could be an extra $730 in Taylor’s bank account for the year. *The above example was automatically calculated using Tanda’s Award Interpretation software. Employers who have a custom agreement… whether this is an ‘above award rate’ or an Enterprise Agreement have the responsibility to carry out a ‘better off overall test’ (BOOT). This confirms that the current payment arrangement is better for the employee than the industry Modern Award. If the above award rate is higher than the new rate, then as an employer your responsibility is to ensure that you continue paying above the award rate. Why is it such an issue and what does this mean for businesses? National employment standards are important markers for employers as they provide the outline for what is expected by Fair Work, when managing and paying staff. Challenges have arisen over the years for employers who have struggled to keep up with the intricate details and updates to the numerous awards. Many employers experience paperwork headaches when trying to update their pay rates based on changes to Awards, and it is often further complicated by the additional factors of penalty rates and overtime. How can Tanda help? Managing minimum wage updates every year is a tedious and unnecessary task. But there are tools that automate this process… Tanda is workforce management software specialising in automating award interpretation in addition to rostering and timesheets. The market-leading award interpreter automatically calculates the gross wage for your staff based on your industry award and additional factors such as penalty rates and public holidays. Tanda then takes this information and transfers it into your payroll software, in a format that is ready to be processed, so you can pay your staff quickly and effectively. The best part about all of it- is that Tanda automatically updates Modern Award pay rates each year for you, in accordance with Fair Work’s minimum wage update. Tanda stores all your records securely in the cloud to meet your compliance expectations, but it also takes the stress out of your EOFY paperwork. Give up the calculator for good this EOFY! Get rid of the pay rates headache, and get ready for a stress-free EOFY with Tanda. Simply sign up for a free trial with Tanda to see what the award rates increases means for your business: www.tanda.co/award-interpretation For more information regarding Fair Work’s updates, visit the Fair Work Commission website.
Events & Media Industry Insights | read
Embracing Smart Tech for Franchise Success
The Australian franchise space is embracing technology to become more heavily engaged with their consumers, strengthening their brand and relationships with customers. However, issues such as compliance, brand reputation and franchisor oversight are becoming more regulated, franchisors must be proactive in protecting their brand reputation and mitigating potential risks. Best practice franchisors are embracing smart tech as the tool to strengthen their franchise both internally with their staff, and externally with their customers. To first understand the benefits and value that smart tech can provide to franchises, it is important to understand the concerns that franchisors are facing. The franchise model typically works by decentralising responsibility to franchisees. This grants them a degree of autonomy, while also providing them with the support and guidance of the broader franchise network. While this framework is central to the success of the franchise model, it also provides one it’s greatest risks – that it becomes increasingly difficult for the franchisor to maintain appropriate governance and oversight over the wider franchise. Therefore, the main concerns franchisors have when it comes to workforce management, stem mainly from; compliance, governance and oversight. Labour force compliance concerns, specifically wage rate compliance, tops the list as the number one concern franchisors have regarding their workplace responsibilities. These concerns are derived largely from the fact that franchisors lack ability to oversee the franchise’s labour compliance as a whole. Failing to observe factors such as Industry award rate calculations, employment and payroll requirements can have massive implications for not only the franchisee, but the franchise brand as a whole. Employing smart cloud technology like Tanda, means that franchisors not only gain the ability to set and lock pay rates for every employee, but also the assurance that the system is in accordance with regulatory laws. Award interpretation engines, and fail-safe attendance tracking software gives greater compliance comfort for each level of the franchise, ensuring that employees are paid accurately for the time they work. Smart cloud-based technology provides franchisors and franchisees with greater governance and oversight into the business, at each level. The ability to access data and resources provides greater insight into the franchise’s functioning, but also assists managers to make smarter strategic decisions for the workforce. These decisions have the ability to influence franchise profitability, productivity and workplace satisfaction. More than just managing risks however, a Tanda workforce management solution also provides significant upside to Franchises. Workers are typically more engaged in the rostering process, are happier that they will be accurately paid for the time they work and are typically less likely to turnover and express a more positive attitude than the alternatives. Furthermore, with a better managed roster, Franchisees are given the tools to minimise Overtime Expense and thus reduce costs while Franchisors can gain effective benchmarking between their stores and add more value back into their Franchise network. Our vision is to help our clients build more open, connected and predictive workforces, through the use of smart technology, that helps our clients to get the most from their workforce. Smart technology is about empowering franchisees with the correct tools to further grow their franchise success, and providing peace of mind for Franchisors to protect their brand’s reputation and success. Tasmin Trezise was a Panelist at the National Franchise Convention 2016, addressing the topic; “Risky Business- How smart tech can protect your brand and mitigate risk in your Franchise”. Panel facilitated by Keran McKenzie of MYOB.