By Louise Missen | Head of Member Services, Australian Payroll Association
An audit found the problem in 2019. The underpayments kept going for another 18 months. Here's what "reasonable steps" actually needs to look like and why payroll training and membership support are now part of the answer.
One apprentice baker at a Hobart Bakers Delight was underpaid $106,281. They weren't the only one; 142 employees across three stores, mostly young workers, were short a combined $1.25 million in wages, penalty rates, overtime and leave entitlements between 2017 and 2020. What makes this case different from the usual underpayment story and why it should be required reading for anyone managing payroll across a franchise network, is what the franchisor knew and when.
Bakers Delight Holdings had commissioned its own audit of the franchisee back in February 2019. That audit found the underpayments. It was shared with the franchisee, corrective action was requested; and then, on the Fair Work Ombudsman's case, nothing was checked again. The underpayments continued for another year and a half. In 2025, the Full Federal Court confirmed the franchisor could be held liable under section 558B of the Fair Work Act for the $642,162 in underpayments that occurred after that audit landed on its desk.
An audit that nobody follows up on is legally indistinguishable from not auditing at all.
That's the line worth sitting with, because it reframes the whole conversation. Since 7-Eleven's franchisees were found to have back-paid over $176 million to more than 4,000 workers, the law has made clear that a "responsible franchisor entity" can be liable for what happens in stores it doesn't directly run. Bakers Delight is the case that shows exactly where the line sits: control, knowledge and no follow through.
Three things and none of them are optional extras.
A closed loop remediation process is the first. An audit finding needs a deadline, a re-check against real payroll data at that deadline and an escalation path if the re-check fails, not a report that sits in an inbox.
Centralised, standardised payroll systems are the second. Franchisee run timesheets and pay runs are where manipulation and simple error both hide. A common platform with head office visibility into hours, rates and award classifications catches problems while they're still small.
Training and membership support, not a one off induction, is the third and it's the gap most franchisors still get wrong. Someone processing pay against a modern award, junior rates, penalty rates, allowances, classification changes, needs more than a session on the rostering software. Building payroll training and professional membership, with a body like the Australian Payroll Association, into the franchise agreement gives franchisee payroll staff ongoing access to award updates, technical support and CPD and gives the franchisor a documented, credible answer to "what steps did you take" the exact question Bakers Delight couldn't satisfactorily answer in court.
Payday Super has been in effect since 1 July 2026 and franchise networks are now living with it. Super has to move on the same cycle as wages, not quarterly. That's a lot more pay cycles where something can go wrong across a network and a lot less room to catch it after the fact. Networks that haven't centralised payroll oversight and invested in franchisee payroll capability are carrying that exposure right now, every pay run with the same gap that cost Bakers Delight in court.
The lesson isn't that audits are pointless. It's that an audit finding is the start of a compliance obligation, not the end of one and that payroll, wherever it sits in a franchise structure is the function actually equipped to make sure that obligation gets discharged.
Payroll professionals working across franchise or multi-entity structures who want to build this capability into their organisation, through training, accreditation or ongoing payroll support, can find out more about how the Australian Payroll Association can assist: https://austpayroll.com.au/membership