By Simon Ford, Regional Director NSW – Solution Minds Consulting
The Bakers Delight ruling has sent a clear message to Australia’s franchise sector: compliance risk doesn’t stop at the franchisee level.
While many franchisors assume payroll accuracy sits firmly within each franchisee’s responsibility, recent legal developments show otherwise. If a franchisor’s systems, processes, or oversight contribute to underpayments or compliance failures, head office can be held liable, even when they didn’t directly employ the affected staff.
And in 2025, with Fair Work reforms tightening enforcement and data transparency increasing across payroll platforms, that risk has never been greater.
Most franchise networks rely on centralised or legacy HR and payroll systems that have evolved piecemeal over time. Different franchisees use different versions of software, workarounds are common, and data accuracy often depends on manual entry and inconsistent reporting.
On the surface, these systems appear functional. But beneath that surface are blind spots: outdated award configurations, unverified pay categories, missing audit trails, and integration failures between rostering and payroll. Each of these can quietly accumulate risk, and when regulators investigate, “we didn’t know” is not a defence.
In several cases we’ve reviewed, head offices were shocked to discover compliance gaps created not by franchisees’ negligence but by their own infrastructure. A mismatched system update here, a manual data correction there, and over time those small cracks can lead to systemic failure.
The Bakers Delight decision underscored that franchisors cannot separate themselves from the operational tools that underpin their networks. When systems are outdated or poorly governed, the entire brand carries the exposure.
For many franchisors, that means it’s time to move beyond audits and policy updates and focus on the technology that drives compliance day to day. It’s not enough to have the right intentions; your systems must actually support them.
Begin with a structured review of how HR, rostering, and payroll systems are configured across the network. Identify version discrepancies, manual dependencies, and integration gaps. Independent advisors can often complete this assessment within weeks, producing a clear map of vulnerabilities.
Full system replacements are expensive and disruptive. In many cases, targeted improvements such as re-mapping pay categories, standardising configuration templates, or aligning data feeds can restore compliance and consistency without starting over.
Compliance isn’t a one-off project. Establish clear ownership for maintaining award interpretations, system settings, and user access controls. Pair this with structured change management so franchisees understand why updates are happening and how to adopt them effectively.
When community-based services provider Just Better Care faced major challenges with a stalled systems transformation, the network risked compliance issues and operational breakdowns. Working alongside our team at Solution Minds Consulting, they re-mapped processes, tightened system governance, and re-established project momentum. The result? The project was delivered five months ahead of schedule and restored confidence across the network, proving that structured remediation works. Read their story here
With payroll reform, wage-theft legislation, and regulator scrutiny intensifying, waiting for a compliance breach is not an option. Legacy technology and fragmented processes may have been manageable five years ago, but today they represent real financial and reputational risk. The cost of proactive remediation is small compared with the potential fallout of public penalties, brand damage, and franchisee distrust.
The Bakers Delight case was not an anomaly; it was a warning. Franchisors who take action now to modernise their systems, strengthen governance, and support change across their networks will not only reduce risk but also improve efficiency, visibility, and trust.
FAQ: Payroll Compliance Risk for Franchisors
Why are franchisors now being held responsible for payroll compliance?
Recent rulings show franchisors can be liable if their systems, processes, or oversight contribute to underpayments, even when franchisees employ the staff.
Does this mean franchisors must manage payroll for every franchisee?
No. Franchisees still run their own operations. Liability arises when franchisor-level systems or governance create payroll errors.
What are the most common system-related risks?
Outdated award settings, mismatched pay categories, inconsistent system versions, manual entry, failed integrations, and missing audit trails.
How do system version differences create compliance issues?
Different versions or inconsistent updates mean franchisees may operate on outdated logic, producing inconsistent pay outcomes.
Is replacing the entire payroll system necessary?
Often no. Most issues come from configuration and governance, not the software itself. Targeted improvements usually resolve the risk.
What does a network-wide system review involve?
Configuration assessment, data flow mapping, award setting validation, access control review, and identifying discrepancies across franchisees.
How often should payroll systems be checked?
Quarterly or biannual validation helps prevent drift, especially as awards and system updates change frequently.
What governance responsibilities sit with franchisors?
Maintaining templates, updating award interpretations, managing configuration changes, and ensuring network-wide consistency.
Why is payroll compliance risk increasing in 2025?
Fair Work reforms, wage-theft laws, and improved reporting increase visibility and scrutiny of franchise networks.
What Else Should Franchisors Know?
Regulators expect franchisors to understand how payroll and rostering systems are configured across their networks. Many issues stem from outdated settings rather than deliberate underpayment. Governance and regular configuration reviews are essential.
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