How will single touch payroll impact your franchise?

How will single touch payroll impact your franchise?

All around us, we hear that businesses are gearing up for the introduction of single touch payroll (STP). A term that’s all over the news, it describes the new system that all businesses with over 20 employees will have to operate under from July 1, 2018.

The changes will mean employers have to report payments such as salaries, wages, superannuation information and pay as you go (PAYG) withholding to the tax office in real time as it goes out to their employees. While all businesses need to gear up for the changes, franchisors operating under the amendment to the Fair Work Act for protecting vulnerable workers are particularly at risk.

Here’s what you need to know.

Single touch payroll and the Fair Work Amendment

The government introduced the Fair Work Amendment (Protecting Vulnerable Workers) Act  2017 in light of a number of high-profile franchising wage scandals such as the ones experienced by Domino’s and Caltex. Specifically targeted at franchises, the amendment states that the franchisor is directly liable if any franchisee breaches employment or labour laws.

This creates difficulties when it comes to the new STP laws, because the franchisor itself may not have access to the STP information of all its franchisees, yet it will still be liable for any STP breaches.

What are the franchisor’s legal obligations?

The Fair Work Amendment states that the franchisor may be held liable for the actions of its franchisees if it “knew or could reasonably be expected to have known that the contravention by the franchisee entity would occur.” The franchisor can defend itself if it shows it’s taken reasonable steps to prevent a contravention.

It’s essential that you understand the new laws so that you don’t run into any risk and compliance issues.

When considering reasonable steps, the court may take into account:

• The size and resources of the franchise.
• The ability of the franchisor to influence the franchisee’s conduct.
• Any action the franchisor took to ensure the franchisee knew the laws.
• The franchisor’s compliance assessment arrangements.
• The franchisor’s arrangements for receiving and addressing possible complaints about alleged violations.
• The extent to which the franchisor’s arrangements with the franchisee employer encourage or require the franchisee to comply with employment laws.

Although there are defences available under the new amendment when it comes to STP, it’s still essential that franchises take steps now to prevent any risk and compliance issues further down the line. Ensuring payroll systems are STP-reporting enabled is central to this – currently, a number of payroll software providers are working with the ATO to create technology that will be able to comply with the new laws.

It’s also important to assess any potential liability risks and work out compliance measures now, so you know how to deal with franchisee breaches in future.

If you do run into any legal difficulties, the franchise lawyers at Turnbull Hill Lawyers can help. Contact us today for more information.