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10 March 2021

Importance of HR for the Franchise Sector

Human Resources (HR) is generally not a function in business that owners want to deal with. Unfortunately, the reality is, as a Business Owner managing the complexities of the employment framework under the Fair Work Act it is a requirement of employing staff.

When it comes to HR in a franchise system, the question of who is responsible for HR becomes uncertain with multiple opinions on the law. Is it the Franchisor or the Franchisee?

One thing that can be agreed on is, if there is an argument the function of HR is the responsibility of both the Franchisor and Franchisee.

The boundary on where the liability sits is when the question becomes ambiguous. Depending on who you speak to a different answer may be provided.

As a Franchisee, you are the Director in your own right and employing staff comes with responsibilities under the Fair Work Act. Although as a Franchisor there are also responsibilities under the Protecting Vulnerable Workers Act, that if a Franchisor knew or could reasonably have known about a contravention of underpayment by one of their Franchisees and failed to take reasonable steps to prevent this contravention the responsibility also applies to the Franchisor’s entity along with the Franchisee’s entity for underpayment.

Why should HR be involved in a franchise system?

• To play a role of an educator – upskilling and sharing knowledge with Franchisees on obligations under the Fair Work Act.
• Provide advice on Award interpretation – with 122 Modern Awards no one is an expert. How a certain award applies for the specific industry or job a Franchisee operates under is what must be understood. What clauses impact the Franchisees and most importantly the minimum rate of pay and how this must be applied.
• Focus on proactive advice rather than reactive solutions to situations – being on the front foot of an underperforming employee is going to save a Franchisee time, money, headaches and brand image in the long run.
• Ensure appropriate processes are undertaken from a legal perspective. Dismissing an employee because they are no longer working out unfortunately is not also as simple as it sounds. Conducting the appropriate termination process is one of the key factors to avoiding an Unfair Dismissal Claim in the Fair Work Commission.
• Provide an expert opinion on a complicated area of law – the employment framework in Australia is known to be one of the most complex in the world. As a Franchisee you wear multiple hats running a successful business but added to that, needing to know the appropriate obligations under the Fair Work Act is an additional stress to anyone… Having HR support is a key element to a successful business just like having an expert accountant or bookkeeper.

There is a myriad of reasons as to why HR should be involved within a franchise system, only some of which have been mentioned above. Franchisees need to be aware of their responsibilities and look for the support in that Specialised area.

Reflecting as a Franchisor, should HR support be an automatic function that you implement within the system like marketing? The short answer is YES.

HR in a franchise network ensures compliance with the law

A Franchisor must take reasonable steps to make sure their Franchisees are complying with the rules and regulations when it comes to employing staff.

One of the best ways a Franchisor can take the lead of HR is not only providing the support as part of the system either at the cost of the Franchisor or the Franchisee but introducing a regular and consistent HR Audit across the franchise network.

At the end of the day, the Franchisor is not wholly responsible for a Franchisee underpaying, but they are responsible for providing the adequate education, tools and resources. Thereby, introducing a HR Audit provides the Franchisor with an opportunity to assess where each Franchisee is from complying with obligations under the Fair Work Act. It is an opportunity to review, reflect, highlight areas of concern and make changes.

Taking a proactive approach is the key to success – it costs an employee $74.50 to lodge a claim in the Fair Work Commission and they can represent themselves. It will cost a Franchisee or Franchisor a lot more than that to defend a claim not to mention the brand damage and media attention in the community.

10 reasonable steps a franchisor can take in establishing an HR function:

1. Educate and train your Franchisees on correct process;
2. Audit and monitor your Franchisees to ensure compliance;
3. Support and assist your Franchisees and their employees by providing the tools and resources to support the HR function like employment contract templates, correct rates of pay, policies on performance issues etc.
4. Keep your Franchisees updated about their workplace law responsibilities and refer your Franchisees to trustworthy workplace law advice
5. Incorporate Fair Work resources into operations, franchise manual or intranet etc;
6. Ensure your franchise business model takes into account the costs of lawfully employing satisfactory numbers of staff;
7. Make certain your franchise agreements require Franchisees to abide by workplace laws and allow for auditing and monitoring for compliance;
8. Consider introducing software to assist your Franchisees to comply with workplace law responsibilities
9. Provide your Franchisees with compliant template documents and resources; and
10. Consider negotiating a registered agreement with Fair Work for consistency of employment conditions across the franchise network.

Franchisors should aim to create a network that is attractive and delivers best practice support to their Franchisees. HR is one of the support services they need to consider.

Now Actually specialises in providing HR support for franchise networks and would love to talk to you about how we can add value to your Franchise. Contact us now.