Despite the fact some franchises have made the headlines for all the wrong reasons this year, owning a franchise is still for many, the ideal way to go into business.
There’s every reason to believe in the dream. After all, you’re buying into a pre-existing and well-established model; there’s a head office that makes or builds the product and is there if you need advice; plus, you’re able to share in their marketing collateral to promote your franchise. What could possibly go wrong?
The answer, unfortunately, is plenty – if you’re not prepared.
Beyond the obvious responsibilities of sales and financials, as a franchise owner, you are ultimately responsible for managing employees. Do you have sufficient business experience to take on this responsibility, or access to advice and resources that will support you? It’s essential to understand the complexities and fundamentals of becoming an employer and franchise owner if you’re looking to be successful.
Understand Your Ongoing Obligations
When it comes to the franchisor-franchisee relationship, it’s commonly mistaken that the franchisee depends on the franchisor for all employment decisions regarding its employees, and that a franchisor generally has the authority over the franchisee’s employment obligations.
Breaching the Fair Work (or any other regulatory requirement for that matter) can actually put a franchise agreement in jeopardy. Many franchisors will include clauses in an agreement that safeguard the franchisor from legal liabilities.
Understanding and applying Australian employment law is crucial for any business owner who employs staff – including a franchise owner. Following a number of recent high-profile cases involving franchisees breaching their obligations as employers, the Government introduced the Fair Work (Protecting Vulnerable Workers) Bill 2017.
“A franchise that does not treat its staff fairly and safely will never be successful – after all, a fair and safe workplace sets solid foundations for success.”
The provisions in the Vulnerable Worker’s Bill are aimed at the franchise models. Although the franchisor has a degree of responsibility, franchisees also have key responsibilities.
The increased penalties magnify the impact on franchisees and validate that they are still liable for their workplace practices.
Alarmingly, only 1 in 3 small business employers are confident they are compliant with the Fair Work Act according to the Employsure Workplace Index. Further, the research revealed 1 in 5 admit they know very little or nothing at all about the Fair Work Act.
As an employer, there are requirements which you need to adhere to guarantee employees are treated fairly and your franchise complies with the Fair Work Act. Regardless of your specific franchise model or industry, employees are entitled to certain rights and entitlements associated with your industry, most notably a minimum rate of pay. It’s important employers understand their obligations under Fair Work legislation as well as maintain them within their franchisees. Failure to do this can result in investigations and fines.
New laws mean there are harsher penalties for serious breaches of employment entitlements and record keeping failures starting today. If an employer fails to keep records and an employee claims they have been underpaid, the employer must also prove they did in fact meet their obligations and paid the employee correctly.
An Award sets out the minimum wages and conditions for a certain job or industry. For example, a shop assistant may be covered by the General Retail Industry Award 2010 and a hairdresser may be covered under the Hair and Beauty Industry Award 2010. They apply automatically unless your employees are covered by a registered agreement. Awards apply on top of the NES and can include information on:
- minimum wages – including annual wage or salary arrangements;
- types of employment – full-time, part-time or casual;
- extra payments – penalty rates, overtime and allowances;
- work arrangements – rostering or variations to working hours;
- extra leave – annual leave loading and arrangements for taking leave;
- superannuation; and
- procedures for consultation, representation and dispute settlement.
Some employees aren’t covered by an Award or agreement. These employees are still covered by the NES and the National Minimum Wage.
What goes in an employment contract?
You wouldn’t enter into a commercial relationship without a written agreement, so why would you enter an employment relationship without one? It’s best practice to provide contracts for your employees, even where there is Modern Award coverage or an existing collective agreement.
A contract should provide a simple and useful reference point for both parties across all aspects of the employment relationship. It must provide the same or more generous conditions than the NES and any relevant Award or agreement and can’t undercut an employee’s minimum entitlements.
Payment is an important element in the contract between an employer and an employee. Details of the rate of pay, the method and frequency of payment should be shown in the employee’s contract of employment.
What to pay your employees?
The Government sets minimum levels of pay dependent on a variety of factors, including franchise sector and job duties. An employee’s minimum pay rate is set by the relevant Award or agreement.
Where there is no Award, pay rates in a registered agreement can’t be less than the National Minimum Wage. This rule only applies to base pay rates, while penalties, loadings and allowances still come from the agreement. If an employee is not covered by an Award or agreement, they’re entitled to be paid at least the National Minimum Wage.
There are ‘pay as you go’ (PAYG) taxation deductions you are required to make from your employees’ pay on behalf of the Australian Taxation Office. Also, be conscious of your franchise’s obligations under the Superannuation Guarantee.
You are required by law to issue an itemised pay statement to each employee within one working day of pay day and to keep records of these for seven years.
Pay slips must cover details of an employee’s pay for each pay period. Below is a list of what to include:
- the employer’s name and ABN;
- the employee’s name;
- date of the payment and period the pay slip covers;
- before and after-tax amounts;
- if paid hourly – the employee’s hourly rate, the hours worked at that rate, and the total amount paid at that rate;
- if paid a salary – the employee’s salary rate;
- loadings/allowances/bonuses/incentive payments/other separate monetary amounts;
- any deductions; and
- super contributions made or required for that pay period and the fund name or name and number.
You can pay employees weekly, fortnightly, or monthly – it’s up to you but you must pay the correct amount and on time. Payment to your staff must be your first priority.
Protecting your investment
With all these provisions and increased penalties, how do you protect your franchise? By:
- Knowing your obligations;
- Ensuring you have appropriate documentation and / or records; and
- Ensuring you have appropriate policies, complaint procedures and audits set up.
Running a franchise comes with challenges, but becoming an employer means there are many more complexities to consider. You need to manage the relationship with staff and workplace health and safety while simultaneously staying focused on growing your franchise.
Australia’s workplace relations system is a highly regulated minefield. As one of the most complicated employment relations systems in the world, navigating your way through this system can be difficult but you must get it right. Managing employee paperwork, conduct, behaviour, and performance can be time-consuming– even for experts.
Often, employers only become familiar with the employment relations system when something goes wrong. They may have had a claim or complaint made against them with the Fair Work Ombudsman or Fair Work Commission.
Positively, employees can also be the franchise’s best assets when the relationship is healthy and you have the foundations built for a successful franchise.
This is where regular assistance from experts will give the franchise far more efficiency and build in extra safeguards. Best practice involves knowing your rights and obligations and knowing who to contact if you need assistance.
A franchise that does not treat its staff fairly and safely will never be successful – after all, a fair and safe workplace sets solid foundations for success. For that reason, the requirement for employee management is a perpetual investment as your franchise grows, evolves or changes.
The requirement for employee management is a perpetual investment as your franchise grows, evolves, or changes. Since the most important resource for any franchise is its people, it pays to give the issue close attention.
You can’t afford not to.
Josh Vikis is a Senior Workplace Consultant at Australia’s leading workplace specialists Employsure. Josh has a wide range of employment relations, and workplace health and safety experience.
Prior to joining Employsure, he was a union representative and majored in Human Resources and Employment Relations at the University of Newcastle.
Customised expert advice, documentation and solutions across employment relations and health and safety, packaged for small and medium businesses. Employsure empowers over 15,000 small to medium sized Australian businesses to succeed.
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