Subway has said it could terminate franchisees that fail to meet their financial responsibilities amid an investigation launched by the Fair Work Ombudsman into the underpayment of its workers.

The sandwich retailer said franchisees are required to meet regulatory, financial, workplace and employment requirements, and failure to do so could lead to disciplinary action.

“Failing in their commitment to uphold these will result in enforcement action and continued non-compliance may lead to termination,” a Subway spokesperson told Sydney Morning Herald and The Age, which reported the underpayment investigation on Monday.

“All Subway restaurant employees are entitled to payment for hours worked, including for training. Any employee who believes they have been paid incorrectly by a franchise owner is encouraged to report this to Subway for investigation, through a dedicated employee hotline.”

The Sydney Morning Herald spoke to several Subway employees, who had seen thousands of dollars paid incorrectly over the years, as well as mentioning a general laissez-faire attitude adopted by the Subway head office.

“The only things [Subway head office] care about is your name badge, your uniform, it is all about the image,” one employee said. 

A Subway spokesperson told Inside Retail these statements have not been reported to it, and that it takes matters such as these very seriously.

“More than 10,000 employees are hired by franchise operators and work at the 1353 individually-owned Subway restaurants across Australia,” the spokesperson said.

“While restaurant employees are hired by franchise owners, any concerns raised by employees are investigated by Subway immediately.”

Subway is not the only retailer grappling with underpayment issues. Wage theft has been uncovered at Michael Hill, Domino’s, Super Retail Group and Chatime over the past year, though most said it was a result of the complexity of modern awards.

However, an informal poll conducted by Inside Retail revealed almost 60 per cent of more than 200 respondents believe underpayment is mostly intentional, due to businesses trying to cut costs.

A recent report by the Australian Payroll Association found that almost a third of payroll managers admitted to making employee payment or entitlement mistakes at least once a month, and claimed that the larger the business, the more likely mistakes are to occur.

However, the report claimed only 16 per cent of businesses with fewer than 50 staff said they made such mistakes each month – a position most franchisees likely fall into. 

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