Employment law continues to evolve at a rapid pace in Australia, with recent legislative reforms and Court decisions significantly expanding employer obligations and increasing regulatory scrutiny. While many of these developments apply directly to employers, franchisors should not assume they sit safely outside the employment relationship.
In modern franchising, workplace compliance now sits squarely within the franchisor risk profile. This is particularly so following the introduction of the “vulnerable workers” provisions under the Fair Work Act 2009 (Cth), which can expose franchisors to liability where franchisees contravene workplace laws and the franchisor knew, or could reasonably have known, of those contraventions.
Against that background, there are several recent developments franchisors should be paying close attention to.
Offshore Workers May Still Be Protected by Australian Employment Laws
A significant recent development is the increasing willingness of Australian courts and tribunals to extend Australian workplace protections to workers located overseas where there is a sufficient connection to Australia.
In Pascua v Doessel Group Pty Ltd [2025] FWC 1833, the Fair Work Commission considered whether an employee based in the Philippines could pursue an unfair dismissal claim in Australia. Importantly, despite the employee working remotely overseas, the Commission found there was a sufficient connection to Australia to enliven the protections of the Fair Work Act.
The Commission considered matters including:
- the Australian location of the employing entity;
- where management and control of the business was exercised;
- the fact the employee worked exclusively for the Australian business; and
- the practical integration of the employee into the Australian operations.
This decision is important for franchisors because many franchise networks now utilise offshore labour in some form, particularly for:
- customer service functions;
- administration;
- bookkeeping;
- marketing support;
- social media management; and
- virtual assistant roles.
Historically, many businesses assumed offshore workers fell entirely outside the Australian employment framework. That assumption is becoming increasingly unsafe.
Where offshore workers are sufficiently connected to Australian business operations, employers may face exposure not only for underpayment claims, but also:
- unfair dismissal claims;
- leave entitlement claims;
- sham contracting allegations;
- superannuation issues; and
- broader Fair Work Act compliance obligations.
Importantly for franchisors, this issue is not confined to head office operations. If offshore staffing models are encouraged, recommended, facilitated or widely adopted throughout a franchise network, this may create broader systemic compliance risks.
Franchisors should also carefully consider the impact of these developments when preparing Item 14 financial disclosures under the Franchising Code of Conduct. In some networks, labour assumptions may be based upon offshore administrative support or labour structures that may not fully account for potential Australian employment law obligations. If those assumptions are inaccurate, there is a risk the labour component of franchise costing models may materially understate the true operational cost of the business.
Payday Super Begins 1 July 2026
One of the most significant upcoming workplace reforms is the introduction of “Payday Super”.
From 1 July 2026, employers will be required to pay superannuation guarantee contributions at the same time as employees are paid salary or wages, replacing the current quarterly payment regime.
Under the new rules:
- super contributions must generally reach an employee’s nominated superannuation fund within seven business days of payment of wages; and
- limited exceptions apply, including for new employees, where the first contribution may be made within 20 business days.
This represents a substantial operational shift for many businesses, particularly franchise networks with high employee turnover, casual workforces, and payroll systems administered at store level.
The practical implications are significant:
- payroll systems will need updating;
- cash flow management will become more important;
- payroll timing errors may become more visible;
- and compliance failures are likely to be identified far more quickly by regulators.
For franchisors, these reforms create both legal and reputational risks. Given the vulnerable worker provisions, widespread superannuation non-compliance within a franchise network may expose franchisors to regulatory scrutiny, particularly where systemic payroll practices are known within the network.
Franchisors should now be:
- reviewing payroll systems and templates used within the network;
- updating operations manuals and compliance policies;
- considering franchisee training regarding payroll compliance; and
- auditing whether franchisees have sufficient payroll infrastructure to comply with the new regime.
Further Expansion of Paid Parental Leave Protections
Paid parental leave entitlements continue to expand.
From 1 July 2026, the Commonwealth paid parental leave entitlement will increase by a further two weeks to a total of 26 weeks.
In addition, on 3 November 2025, the Fair Work Amendment (Baby Priya’s) Bill 2025 was passed. The legislation, which commenced on 7 November 2025, requires employers to continue to honour paid parental leave entitlements in circumstances involving:
- stillbirth; or
- the death of a child where the employee would otherwise have been entitled to parental leave.
These reforms reflect the broader trend toward increasingly employee-protective workplace laws and place additional obligations on employers to ensure leave policies and HR processes are appropriately updated.
For franchisors, this again raises broader network compliance issues. Franchise systems often involve relatively unsophisticated small business operators managing employees without dedicated HR support. This creates heightened risk of accidental non-compliance.
Franchisors should therefore consider:
- updating franchisee HR guidance materials;
- reviewing template workplace policies;
- and ensuring franchisees understand evolving leave obligations.
Salarised Employees and the Woolworths / Coles Set-Off Decision
Another critical recent development concerns annualised salary arrangements.
In Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd (2025) 343 IR 340, the Full Federal Court delivered an important decision regarding set-off clauses and annual salary arrangements.
The proceedings arose from widespread underpayment allegations involving salaried employees covered by the General Retail Industry Award 2010.
Importantly, the Court held:
- set-off clauses generally operate only within a single pay period;
- employers cannot “pool” over-award payments across multiple pay periods to offset later underpayments; and
- employers remain subject to strict record-keeping obligations even where employees are paid annual salaries.
The decision highlights a critical compliance issue in many franchise networks: businesses often assume a salaried arrangement automatically satisfies Award obligations without properly reconciling actual hours worked, overtime, penalties and allowances.
That approach is now highly dangerous.
For franchise systems — particularly in retail, hospitality and food service — the implications are substantial. Franchisees frequently rely upon salaried arrangements for store managers or senior staff, often without sufficiently sophisticated payroll monitoring systems.
Franchisors should consider:
- reviewing template employment agreements used within the network;
- auditing whether set-off clauses are properly drafted;
- ensuring franchisees maintain compliant time and wage records;
- reviewing payroll reconciliation processes; and
- considering whether operations manuals adequately address Award compliance obligations.
Final Comments
Employment law compliance is no longer a peripheral issue for franchisors. Regulators increasingly expect franchisors to take active steps to promote lawful workplace practices throughout their networks, particularly where there are signs of systemic non-compliance.
The financial and reputational consequences of getting it wrong can be substantial.
Accordingly, franchisors should ensure employment law compliance forms part of broader franchise governance and risk management processes, including:
- franchisee onboarding;
- operations manuals;
- payroll systems;
- audit programs;
- disclosure document preparation; and
- ongoing network training and compliance monitoring.