Over 20 Pizza Hut franchises have been underpaying their delivery drivers, with three quarters of outlets recently audited failing to comply with workplace laws.

Of the 26 completed audits, 24 franchisees (92 per cent) were found to be non-compliant with only two franchisees found to be meeting all of their legal obligations, according to the Fair Work Ombudsman.

Of the 24 non-compliant franchisees, the Ombudsman found seven had misclassified delivery drivers as independent contractors rather than as employees, with a total of $12,086 in underpayments owed to workers, mainly for underpayment of minimum hourly rates and allowances such as laundry.

“Thirty-two per cent of the 170 workers we dealt with as part of this activity report were under the age of 24,” said Natalie James, Fair Work Ombudsman.

“We know that younger people, who have less experience in the workplace are more likely to be unaware of their rights.

“Through the course of our activity, we found a number of outlets engaging drivers as independent contractors rather than employees.

“In some instances, drivers were paid as little as $5.70 per delivery while also being made to cover fuel and vehicle operating costs.”

Pizza Pan Group, which became the master franchisee of Pizza Hut Australia in September, issued a statement on Friday saying it’s working with all its franchisees to improve workplace standards.

Chief executive Lisa Ransom, a former McDonalds executive, said the group takes its responsibilities as the new franchisor very seriously.

She said the ombudsman’s report, completed in 2015 and released on Friday, audited 26 out of more than 270 stores and identified three franchisees with workplace breaches regarding driver pay.

“One of these, Romaro Holdings, is no longer a franchisee and Pizza Hut has taken over management of the store,” she said.

“Since acquiring the business we have worked directly and proactively with all franchisees and the Fair Work Ombudsman and engaged the services of experts in the area of industrial awards.”

Fair Work said some underpayments were a consequence of franchisees applying the wrong award or failing to increase rates in line with minimum wage decisions.

The Ombudsman has so far issued 11 compliance notices to franchisees for underpaying employees and 11 infringement notices the record keeping contraventions, representing a total of $6300 in fines.

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