As many as 84% of audited fast-food stores found to have underpaid at least one of its workers, but union says incidence ‘nowhere near’ as high

This article is more than 4 years old

This article is more than 4 years old

As many as 84% of fast-food outlets audited last year underpaid at least one of their workers, according to a study by an employment relations firm.

But the union representing fast-food workers poured cold water on the figures, suggesting the underpayment problem was nowhere near as severe at major fast-food outlets.

An audit of more than 70 nationally recognised fast-food stores was conducted by ER Strategies, which provides employment relations advice to fast-food franchisors.

It found 39% of outlets had incorrectly paid at least one worker’s base rate of pay, and 44% had failed to pay penalties or loadings. Another 68% failed to pay or incorrectly paid a laundry allowance of $1.25 a shift for casuals.

Other breaches of industrial conditions included giving shorter shifts than the minimum (30%) and failing to provide meal breaks for shifts over five hours (21%).



Some 73% of stores had no evidence of their employees’ right to work or had no recorded visa checks.

The audit was conducted from September to December last year, and 90% of stores audited were franchises. The report said all underpayment issues identified were caused by franchisees’ low level of understanding of the coverage and contents of industrial instruments.

“When they have a low level of understanding, they tend to rely heavily on any information provided by franchisors,” it said.

“Some franchisors provided information on minimum base rates of pay only; otherwise, incorrect rates were given.”

Underpayment was often caused by employers using the wrong industrial instrument after a transfer of business or failing to realise award minimum conditions applied to workers on salaries, such as managers.

Record-keeping practices were poor with rosters, time sheets and payroll reports not matching in 30% of stores. In 29% of stores, managers filled in employees’ time sheets, which the report said created a risk if employees disputed the hours worked.

ER Strategies’ managing director, Steve Champion, said the audit provided a one-week snapshot which could have been rectified soon after by employers who were “trying to do the right thing”.

“I don’t think franchising is any more likely to have underpayments than anywhere else, but there is a significant sector of the economy where people are not paid the appropriate rates,” he said.

The Shop Distributive and Allied Employees Association’s national secretary, Gerard Dwyer, said: “It is horrific to think that there are so many workers in Australia being exploited. It’s unacceptable that this underpayment is being allowed to continue.”

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But he said: “Whilst the SDA deals with underpayment claims, the incidence of these in the major firms is nowhere near the figures identified in this ER Strategies audit. Despite some very large fast-food operators, the fast-food industry in Australia is actually quite dispersed with over 25,000 fast-food businesses.”

Dwyer called for expanded rights of union entry to workplaces and resources for the Fair Work ombudsman.

He also suggested enforcing employment and immigration law should be separate, as workers in breach of their visas’ work conditions were too afraid to come forward to complain about underpayments.

The underpayment food fight follows revelations in July that the burger chain Grill’d employed workers on trainee rates and under an outdated 2005 workplace agreement to avoid paying overtime and penalty rates. The case shot to attention when a former Grill’d worker, Kahlani Pyrah, launched legal action, claiming she was sacked for questioning the Work Choices era deal.

On Thursday the Fair Work ombudsman, Natalie James, issued a statement committing the regulator to cracking down on big business which “either turns a blind eye to, or is willing to hide behind, complex supply chains and subcontracting arrangements which rely on exploitation of vulnerable workers to make a profit.

“If we find a business underpaying workers, and that business is part of a franchise or supply chain, we will look up to the business at the top, the franchisor, principal or purchaser, because they are the price-makers and they control the settings,” she said.

James made the statements after the regulator scored a series of wins in court cases prosecuting underpayments in the shopping trolley collection industry.

• On 11 March 2016 this article was amended. A previous version said 700 fast-food stores had been audited rather than 70.