HR for franchises in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Franchises sit in one of the most compliance-heavy corners of Australian employment law — the franchisor's brand, the franchisee's legal responsibility, and a workforce that often spans casuals, juniors and shift workers all at once.
Who is actually the employer?
In most Australian franchise arrangements, the franchisee is the legal employer. They hire staff, set rosters, run payroll and bear the obligations under the Fair Work Act 2009. The franchisor is generally not a party to those employment contracts.
That said, the distinction matters less than many assume. Under the Fair Work Act's "responsible franchisor entity" provisions, a franchisor can be held liable for a franchisee's underpayments if the franchisor knew, or ought reasonably to have known, that contraventions were occurring and failed to act. Compliance failures in a franchisee's back office can become a headline problem for the whole network.
Practical implication: franchisors should build minimum payroll compliance standards into their operations manual and conduct periodic audits — not as a courtesy, but as a legal risk-management measure.
Awards and enterprise agreements
Most franchise workforces are covered by a modern award. The applicable award depends on the industry, not the franchise brand. A fast-food franchise will typically fall under the Fast Food Industry Award; a cleaning franchise under the Cleaning Services Award; a retail franchise under the General Retail Industry Award. Getting this wrong is the single most common source of underpayment claims.
Key variables within any award:
- Ordinary hourly rates for full-time, part-time and casual employees (casuals attract a loading on top of the base rate)
- Penalty rates for evenings, weekends and public holidays
- Junior rates, which apply to employees under 21 in many awards and are expressed as a percentage of the adult rate by age band
- Allowances for split shifts, uniforms, meals or vehicle use
Some larger franchise networks negotiate enterprise agreements that replace the underlying award. If a franchisee is party to an enterprise agreement, those rates and conditions apply instead — but the agreement must still pass the Better Off Overall Test against the award.
Payroll obligations: what every franchisee must do
Regardless of the franchise type, Australian employment law imposes a consistent set of payroll obligations.
PAYG withholding. Income tax is progressive and must be withheld from each payment to employees. Amounts are determined by the ATO's tax tables, adjusted for the employee's tax file number declaration and any claiming of the tax-free threshold.
Medicare levy. The Medicare levy is 2% of taxable income and is factored into standard withholding calculations.
HECS/HELP repayments. Where an employee has a study debt, additional withholding applies on a banded scale based on their income. Employees disclose this on their TFN declaration.
Superannuation. The Superannuation Guarantee is 12% of ordinary time earnings, paid to a complying fund on at least a quarterly basis. Franchisees must accept employees' choice of fund and, where no choice is made, use the employee's stapled fund or the default fund. Missing super payments attracts the Superannuation Guarantee Charge, which is not tax-deductible.
Single Touch Payroll. Every pay event must be reported to the ATO via STP at the time of payment. Year-end finalisation must occur by 14 July. Most payroll software handles this automatically, but the franchisee is responsible for accuracy.
Leave and the National Employment Standards
The National Employment Standards set the floor for leave entitlements across all Australian employees. Full-time and part-time employees accrue four weeks of paid annual leave per year (shift workers may accrue more under their award). Casual employees do not accrue annual leave but are entitled to unpaid carer's and compassionate leave.
Redundancy pay under the NES scales with years of continuous service. This matters in franchise contexts when a franchisee sells or closes an outlet — employees may have a redundancy entitlement that the incoming franchisee does not automatically assume.
Franchisees should also be aware that long service leave entitlements in Australia are state and territory-based, not federal. The accrual rates and eligibility periods differ between jurisdictions.
Common compliance traps in franchise HR
Misclassifying casuals. A high casual headcount is common in franchises, but regular and systematic rosters can give casual employees the right to convert to permanent employment. The casual conversion pathway under the Fair Work Act requires franchisees to offer conversion to eligible employees at set intervals.
Relying on the franchise manual for legal advice. Operations manuals are not legal documents. Award rates change, legislation changes, and a manual last updated two years ago may already be non-compliant. Franchisees need to verify rates independently, using the Fair Work Commission's pay guides or a qualified adviser.
Treating the franchise fee as an offset against wages. Royalties, marketing levies and equipment costs are business costs. They cannot be offset against employee entitlements. Employees must be paid their full award or agreement entitlements regardless of the franchisee's cost structure.
Incomplete record-keeping. Under the Fair Work Regulations, franchisees must keep time and wages records for seven years. In a dispute, the burden can shift to the employer to disprove underpayment if records are absent or incomplete.
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