Many franchisors are increasingly concerned about payroll, but they are mistaken if they pin their hopes on technology as a silver bullet.

It’s no surprise that some franchisors have started to look for a fail safe solution to the complicated problems surrounding payroll. But addressing the issues will take team work by more than franchisors and their technology vendor.

Payroll is complicated – and a bit scary!

In many franchises, payroll is complicated. It’s generally much more complicated than the franchisor’s payroll. And on top of this, there are difficulties caused by the fear factor which has now arisen around this topic.

To run a ‘tidy’ payroll, a franchisee needs a process that takes care of employment agreements, rostering, Award compliance, time and attendance, calculation of pay, super and benefits, wages payments and payslips … and reporting to the ATO. Even thinking about it is exhausting!

We find that the requirements in this area are often misunderstood – and not only by new franchisees. The Fair Work Ombudsman has highlighted that many franchisees derive their understanding of payroll from their past experience as employees, from other franchisees – or from ill-informed advisers.

This misunderstanding and embedded poor practice means that anyone who tries to ‘sort out’ payroll must deal with the fear they might have been paying staff incorrectly for years.

“What if I’ve been making mistakes?” is the inevitable question. The next fear might be “If I have to pay staff properly I won’t make money”.

Within this context, many franchisors are concerned that they might be in the firing line if their franchisees are found to be breaking the law.

Beware the lure of silver bullets

We’ve noticed that some franchisors are seeking out a technology silver bullet to quell their anxiety around their own legal exposure. But, since there are many areas of the pay process in which problems can arise, it typically takes wider thinking to come up with a good approach to the issues.

For instance, some franchisors latch on to the idea that rostering and timesheets are where the problems are, and so contemplate implementing a system-wide rostering product.

However, they may miss the point that mistakes don’t only occur in attendance records. As recent cases reveal, mistakes happen throughout the employment and payroll process. And on top of this, headaches don’t just arise with calculation of pay, but also with staff questions about their pay, holidays and so on.

Apart from this come a multitude of difficulties with any attempt at system wide implementation of software. We’ve seen that delays and difficulties inherent in these projects leave franchisees hanging as they wait for franchisors to show them the way.

All of which adds up to a need for franchisors to have a careful think about how best to tackle the payroll issue in their franchise.

And in particular to look through different lenses to see the issues from the perspective of all the stakeholders in this area – including the different categories of franchisee, their staff and their bookkeeper or accountant.

“What if we paid our staff right?”

The need to think carefully about payroll goes deeper than contemplating the legal and compliance aspects.

The 7-Eleven situation highlighted that some franchisees struggle to make money. And, with staff costs as the main controllable expense, there’s become a lot of pressure to cut costs in wages. Where is a business owner to turn when the youngest, cheapest staff are already doing the shifts?

The unfortunate reality is that a franchisee can be fully compliant with the law, yet struggling to pay themselves a reasonable amount for the hours they work. Technology won’t change that unless franchisors use it to help adapt their model and franchisees proactively manage their staffing.

So, if there’s no silver bullet, what’s the answer?

Solving the payroll puzzle is something I suspect no franchisor can do in a vacuum. To properly address the issues which are surfacing, franchisors need to look deeper into the problems franchisees face in the payroll and staffing side of their business.

A little thinking will reveal that any approach to this issue requires the involvement of franchisor team members, franchise lawyers, HR specialists and accountants with business process skills – as well as technology providers. It’s rare for these people to come together in franchising – but it should be possible.