The recent Federal Court judgment against Woolworths and Coles (Fair Work Ombudsman v Woolworths Group Limited & Coles Supermarkets Australia Pty Ltd FCA 1092) shows how even large corporations can be at risk due to payroll non-compliance.
The case gives us a number of lessons that are particularly relevant for franchises, given that these businesses often operate with multiple locations that need to stay compliant.
What went wrong with Woolworths and Coles?
The problem was that the supermarket chains had relied on an “all-in” salary system, which used overtime averages and penalty payments over extended time periods. This meant that staff were sometimes underpaid in one pay period, which was then reconciled at a later date. This was a method that the Court decisively rejected.
The ruling stated that minimum award entitlements had to be met every pay period without offsetting underpayments in other pay periods.
Why payroll compliance is crucial for franchises
Franchise operators have specific payroll challenges, which can include managing employees across multiple locations and complying with conditions that vary by role and hours worked.
Compliance is not simply a matter of annual payroll reconciliation; it is an ongoing obligation to correctly calculate and pay employee entitlements every pay cycle. Failure to do so exposes franchises to legal risks such as heavy fines, reputational damage, and operational interruptions.
Given that many franchises operate with lean margins and tight operational control, such risks can jeopardise business viability.
Precision payroll management
The Woolworths and Coles judgment shows how important it is to make sure that every pay cycle is managed correctly. Franchise payroll teams must ensure awards, penalty rates, overtime, and leave entitlements are correctly calculated and paid in real time.
Record keeping is mandatory
Another lesson from the judgment is the court’s firm stance on record-keeping. The court rejected the idea that rosters and clock-ins alone constitute sufficient payroll records.
Franchise businesses must keep detailed, transparent and readily accessible payroll records that clearly document hours worked, penalties, overtime, and leave taken. This level of detailed record-keeping is vital not only for statutory compliance but also for defending against underpayment claims and audits.
Under section 557C of the Fair Work Act 2009, when employers cannot provide adequate payroll records, the burden of proof shifts to them to disprove employee underpayment claims.
The importance of clear employee agreements
The case also highlights the need for explicit employee agreements when work patterns or award conditions vary, such as shortened breaks or different shift arrangements. Relying on informal work practices is insufficient. Franchise businesses must ensure all variations are clearly documented and agreed upon in writing.
The ideal payroll partner for franchise businesses
With deep expertise supporting retail and franchise businesses, iWS Australia understands the specific operational and compliance challenges franchises face. Our all-in-one workforce management solution integrates rostering, timesheets, payroll processing, and bookkeeping, tailored to meet award compliance precisely and efficiently.
Contact us today to learn how we offer operational efficiency tailored to your franchise network’s needs.
References
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 FCA 1092.”
https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2025/2025fca1092
