Fraudulent Payroll Management

This report examines fraudulent payroll management practices within organizations, using the 7-Eleven case study as a prime example. The report details the significant wage underpayment scandal at 7-Eleven, highlighting the scale of the issue and its impact on employees and the company's reputation. It explores the roles of both the franchisees and the head office in perpetuating the fraud, questioning the effectiveness of regulatory bodies like Fair Work in addressing such issues. The report also analyzes the financial implications of the fraud, considering the profit-sharing model between 7-Eleven's head office and its franchisees. Furthermore, it discusses the importance of thorough due diligence in selecting franchisees and the need for improved transparency and accountability within the payroll system. The report concludes by emphasizing the need for preventative measures, including stricter regulatory oversight, improved franchisee selection processes, and enhanced internal controls to prevent similar fraudulent activities in the future. The report draws on various news articles and academic sources to support its analysis.

Running head: FRAUDULENT PAYROLL MANAGEMENT IN AN ORGANISATION
Fraudulent Payroll Management in an Organisation
Name of the student
Name of the University
Author note

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No1: Australian Financial Review
The store chain 7-Eleven was witness to the largest case of wage abuse in the history of
the corporation. Four Corners and Fairfax media has exposed the issue on international forum
and it revealed the dark side of the labour market of Australia (Afr.com, 2017). This case of
economic exploitation carries along with it the threat to the Australian Taxation Office. Wage
fraud accounting to million dollars in a year has thrown a dark light on the labour force of
Australia.
The effectiveness of Fair Work as a regulator is being questioned and enquiry is being
made into the issue of wage abuse. The structure of the regulator is being monitored closely and
its powers and budget is being increased so that it’s surveillance process is improved. They are
making an enquiry regarding the fact whether the head office or franchise is responsible for the
fraudulent act (Sivaraman & Turner, 2016). The reviews that were made dated back to previous
September and revealed payroll compliance issues. A grim reality was brought out in a review
that revealed that pay summary showed evidence of payment to a small number of four people
by the franchise. For engaging in fraudulent acts, they should pay their employees back was the
verdict.
7 Eleven was distraught at the breach of trust and was worried about the dismal act of the
franchises. The repercussions on the employees were great and the prestige of the franchises was
at stake. It would result in the loss of trust of people towards these employees. Appropriate
action was promised by the head office however, the efforts were not good enough. The results
of the underpayment of wages have not been viewed strictly by the head office and lack of
stringent action on their part has forced the problem to continue (Fraser, 2016). A notice

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specifying breach should have been charged on the franchise in order to prevent any such thing
in future. 7 Eleven should have reported about this illegal behaviour to the police or to the
regulator instead of taking things lightly. The overall reputation of the company would be at
stake and proper steps taken could save the name and reputation of the company. They have been
secretly covering this issue adding to the problem.
7 Eleven has a huge amount of earnings and it earns more revenue as compared to other
companies. In accordance to the franchise agreement, the main office earns around 57 percent of
net profit and the rest of the profit goes to the franchisee. The head office is responsible for
payment of the rent, equipment supply, fittings as well as for the services that are related to the
back office. The franchise is responsible for payment of running costs that includes that of the
staff wages. The average earnings of 7 Eleven franchise will be between $300,000-$1.7 million
(Terry-Armstrong, 2016). This will depend on the location and size of the franchise. A final
income of $40,000 is earned by them after payment to the employees. After the payment of
interest, it would be found that the earning would be even less than that. After the payment of all
these dues, there will hardly be any room left for payment of the freight salaries.
The head office should have been more careful before selecting a franchise. The head
office should not be moved by vague statistics but rather carry out thorough research before
getting into any agreement (Spector, 2017). Press clippings with positive feedback is not always
reliable and their accolades may be of hardly any merit. A great deal of research on the part of
the head office and proper steps taken in the right direction will add more credibility to the
company.

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References:
Afr.com. (2017). 7-Eleven: Wage abuse claims puts scrutiny on Fair Work response. Financial
Review.
Fraser, M. (2016). Investigating 7-Eleven: Who are the real bad guys?. Griffith Journal of Law &
Human Dignity, 4(2).
Sivaraman, G., & Turner, P. (2016). The 7-Eleven wages scandal: The need for law
reform. Precedent (Sydney, NSW), (135), 53.
Spector, M. (2017). Constructing social problems. Routledge.
Terry-Armstrong, N. (2016). 7-Eleven: A case study of a flawed franchise
model. Busidate, 24(2), 8.

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No2: The Australian Newspaper
Chairmen of 7 Eleven has admitted the issue of underpayment of staff that occurred
under the auspices of head office along with management. ABC and Fairfax media has slammed
charges against the 7-Eleven store chain that prompted the chairman Russ Withers to promise
that he would pay balance in relation to underpaid bill (Baxendale & Baxendale, 2017). In the
wake of public relations disaster, the chairman has risen to the challenge and has taken
responsibility for the wage fraud scam.
Mr Ross Withers is not shirking away from his responsibility rather he is holding himself
accountable by saying that it occurred under his watch and so he was responsible. According to
Ross Withers, adjustments will be made and due payment would be offered to those who have
been underpaid. Mr Withers has denied the claim of the chairman of ACCC Alan Fel who said
that the franchise model of the company has rendered it impossible to go on with their business
without harming the workers. Mr Withers has refuted the words of Alan Fel by saying that they
have been operating for the last 38 years and the manner in which the company has progressed
from 0 to 620 stores would not have been possible if they had walked along a fraudulent path. In
his opinion, the underpayment did not involve a large sum and that there was no concealment on
the part of the head office. Mr Withers considered it an unfortunate incident that will severely
damage the reputation of the company (Arora & Chakrabarti, 2013)
An independent panel would be called for headed by a famous Australian who would
resolve the case. The employees of the office would also voice their opinions and claims without
the fear of being recognized as this might be against the regulations of the visa regulation. Ernst
and Young, an accounting firm will introspect into the case and provide valuable advice that

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would increase transparency of payroll system (Zaika & Smolentsev, 2013). Mr Withers has
commented that they share good business relationship goals with their franchise and that they
accept the information that is provided to them by face value. He considered himself responsible
for the gross violation of the policies and norms of the office. An owner of Melbourne store has
admitted to the Fair Work Ombudsman that workers had been deprived of a considerable amount
of money and employment records have been tampered with in order to do cost cutting
(Youngblood, 2016).
It can be concluded that acute caution on the part of the main office can prevent such
fraudulent dealings. A lawyer should be consulted before buying a franchise who would explain
the contracts of the agreement. Commissioned sales people who have very little franchise
experience should be avoided at the very outset (Altinay et al.,2014). Franchise marketing
strategy should be reviewed and evaluating them correctly is extremely important to nurture a
healthy relationship between that of the main office and the franchise.

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References:
Altinay, L., Brookes, M., Yeung, R., & Aktas, G. (2014). Franchisees’ perceptions of
relationship development in franchise partnerships. Journal of Services Marketing, 28(6),
509-519.
Arora, M., & Chakrabarti, D. (2013, August). Application of Business Intelligence: A Case on
Payroll Management. In Computational and Business Intelligence (ISCBI), 2013
International Symposium on (pp. 73-76). IEEE.
Baxendale, R., & Baxendale, R. (2017). The buck stops with us: 7-Eleven. Theaustralian.com.au.
Youngblood, J. R. (2016). Business Theft and Fraud: Detection and Prevention. CRC Press.
Zaika, I. T., & Smolentsev, V. M. (2013). PROBLEMS OF DEVELOPMENT AND
ENSURING QUALITY OF FRANCHISE PROGRAMS. Polythematic Online Scientific
Journal of Kuban State Agrarian University.