Some rules are meant to be broken.
Except when you consider the rules and regulations that go into making sure your company stays compliant.
There are numerous laws and stipulations that HR leaders must follow to ensure their company avoids hefty fines and other penalties, including the potential harm to its reputation. To keep tabs on these rules, your company needs a strategy centered around HR compliance.
What is HR compliance?
HR compliance is how a company defines its policies and procedures to ensure they’re carrying out fair practices in relation to applicable laws and regulations.
When an HR department can navigate the complexities of the requirements, HR compliance helps mitigate an organization’s risk and avoid penalties, fines, scandals, and more, all of which can eventually destroy consumer trust and damage reputations.
Typically, human resources compliance deals with employment laws as part of their benefits administration plan, such as medical leave, equal employment, and anti-discrimination, but there’s more to it than that, especially at larger corporations. Employment laws are constantly changing and evolving, so the process of staying up to date can be challenging.
What is HR’s role in compliance?
As an HR professional, it can be tricky to develop specific policies and procedures that ensure your organization is compliant.
It’s in your best interest to be well-versed regarding how your company expects to grow and what that’ll mean for hiring, retention, and employee development. Having the right balance between an effective strategy and the necessary understanding of compliance as you define these goals will better set your organization up for success.
Common HR compliance issues
When it comes to compliance issues the HR department faces, they typically fall within employee-related situations and encompass everything from recruitment to retirement.
Here are the most common issues your company may face.
HR leaders often have to understand the responsibilities of the company when offering compensation and benefits, like retirement plans and health insurance. The bigger the organization, and the more employee benefits you decide to offer, the more complex it is to manage compliance.
For instance, the Affordable Care Act (ACA) states that employers with 50 or more full-time employees must offer healthcare as part of their benefits package.
There are a long list of federal anti-discrimination laws that encompass color, race, sex, ethnic origin, disabilities, age, and veteran status. Essentially, these laws prohibit employers in all industries from taking negative employment actions based on these factors.
There are various laws that fall within this category. Some of these laws include:
When it comes to staying compliant within all of these acts, employers and HR professionals should consider the following:
- Are you up-to-date regarding local, state, and federal employment laws that prohibit discrimination in the recruitment and hiring process?
- Are hiring managers up-to-speed regarding these laws?
- What policies does my company have in place to communicate the efforts we put forth to comply with these laws?
Family and medical leave
The Family and Medical Leave Act (FMLA) is a federal law that provides certain employees with up to 12 weeks of unpaid, job-protected leave per year. It also requires that their group health benefits be maintained during the leave.
This leave is given to individuals for the birth and care of an employee’s newborn, bonding time with an adoptive child or with a child from foster care, to provide care of an immediate family member, or for the employee's own serious health condition.
It’s common for organizations to expand the amount of time given to employees beyond the 12 weeks, while also allowing a portion, or all of this time, to be paid.
Wage and hour laws
Wage and hour laws encompass all requirements regarding the minimum wage, overtime pay, hours worked, child labor laws, and meal and break time requirements.
The Fair Labor Standards Act (FLSA) is the federal law organizations need to be mindful of as it establishes minimum wage and overtime regulations. At the federal level, the minimum wage is $7.25 an hour as of 2020, but most states have their own minimum wage. In regards to overtime, it’s anything over the standard 40-hour workweek.
The U.S. Department of Labor (DOL) ensures that employees are paid in compliance with the federal wage and hour law. Under this law, employees are classified as either exempt or non-exempt from some or all of the provisions of the FLSA. Non-exempt employees must be paid at least minimum wage for all hours worked up to 40 in a single workweek along with the applicable overtime rate for hours worked over 40 in a workweek.
Many laws cover immigration to ensure employers only hire candidates who are eligible to work in the U.S.
These acts include:
Eligible candidates that are covered within these acts include citizens, noncitizen nationals, lawful permanent residents, and resident aliens that are authorized to work. It’s crucial that employers verify candidate eligibility through documentation, while also ensuring they don't run into any anti-discrimination laws in the process.
Within these laws, HR managers will have to take Form I-9 into consideration, which is used to verify both the identity of new employees and their authorization to work in the United States.
To stay compliant, HR teams must stay up to date on:
- How to store necessary documents
- How to complete a Form I-9 and the deadlines for completion
- The understanding that companies cannot mandate what specific documents a new hire presents
- The impacts of any errors that may come from the form being completely incorrectly
Companies need to ensure that Forms I-9 are completed in a timely manner and in compliance with the regulations and guidance provided. They also must be properly retained on file. It’s considered a best practice to retain a Form I-9 in consolidated, secure folders for active and terminated employees, outside of the general personnel file.
When it comes to employee safety, it all comes down to The Occupational Safety and Health Act (OSHA). This act was created to ensure that all employees had safe working conditions by setting and enforcing standards and by providing training, outreach, education, and assistance to everyone within an organization.
If you think your business can ignore The National Labor Relations Act because you’re not unionized, you’re wrong. This is because the act covers the right of employees working together to improve their working conditions.
This includes an employee’s right to turn to social media to share any resentment or unhappiness against the employer as well as any training, policies, or behaviors that permit negativity in the workplace.
The tricky element that HR professionals need to know about the NLRA is that The National Labor Relations Board is made up of members chosen and appointed by the president, so decisions regarding these laws can shift dramatically depending on who is in office.
How to keep up with HR compliance
HR professionals have a lot on their plate, so keeping up with the acts and laws to remain compliant isn’t easy. Thankfully there are some best practices to follow that make it all a little easier.
Utilize the right software
An effective HR compliance strategy starts with utilizing the right tools. Here are some examples of software applications that will give your HR department a leg up:
HR compliance: HR compliance software works by assisting companies, managers, and HR leaders keep up to date with business regulations and relevant compliant laws. Tools within this category make it easy for businesses to understand state and federal compliance legislation and rules as they change. They also assist in communication and enforce company policies to new and existing employees.
Benefits administration: Benefits administration software makes it possible for organizations to plan and administer employee benefits packages while ensuring compliance with government regulations. These tools are used to help organizations of all sizes remain compliant with state, federal, and local regulations, including the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act (HIPAA).
Onboarding software: Onboarding software simplifies the onboarding process of new hires by cutting down the necessary administrative work for hiring managers and HR professionals. Additionally, both the employee and hiring manager can better keep track of onboarding material and paperwork needed to stay compliant.
Time and attendance software: Time and attendance software is used by HR departments to make time tracking easier. They manage company time and attendance data while also keeping tabs on vacation time, holidays, overtime, and sick days.
Including these tools within your companies tech stack will help ensure nothing goes missed and all necessary laws and regulations are followed.
Hire the right talent
As your company looks for new candidates and goes through the hiring process, the HR department must follow various laws and regulations. From minimum wage regulations to labor laws, and even overtime restrictions, there’s a lot to keep in mind.
To not overlook anything regarding who you can and cannot turn away, having a solid hiring process that follows compliance standards is one of the most important functions of an HR compliance strategy. It’s crucial that human resources leaders manage all staffing needs of their organization while keeping federal regulations and fair treatment front and center.
Being sure to align how you recruit, hire, and onboard candidates is vital for setting the tone of the company and the expectations regarding compliance that need to be set.
Educate and train staff
The HR department needs to consistently be educated and trained on all legal and regulatory requirements that can change, as they directly affect whether or not the organization is compliant.
Since some rules and regulations are subject to change, making sure HR leaders have access to up-to-date information is crucial.
Create and update the employee handbook
Your company’s employee handbook should be the go-to place for a variety of information regarding policies and procedures. Just remember that the employee handbook shouldn’t sit stagnant too long, as it should be a living document that grows and adapts as your company does.
While the core policy elements will mostly likely stay the same, details regarding how your company maintains compliance will need to be up to date.
Conduct HR compliance audits
To avoid a fine or penalty, it’s a good idea for your company to conduct its own HR compliance audit. Scheduling these audits should be part of your organization’s compliance strategy so you can avoid any legal liabilities before it’s too late.
Whether you’re the HR manager or the CHRO, it’s imperative that you communicate with other leaders and get everyone up to speed regarding potential HR compliance risks and recommend ways to remedy the situation.
If everyone within an organization is on the same page regarding HR policies and with what is needed to remain compliant, it’s easier to avoid penalties and fines.
Law and order is the best policy
When it comes to employment law, follow the rules to avoid a hefty fine and offer the best working environment for your employees. With the right software in place, navigating the ins and outs of HR compliance becomes less stressful for everyone involved.
Is your employee handbook in need of a refresh? Make sure it has these nine things so you can be sure your organization stays compliant.