HR Compliance: A Practical Guide
Ensuring HR compliance is crucial to keeping your business legitimate and your employees safe. A dedicated Human Resources Compliance team or an appointed HR employee is responsible for navigating various federal and state laws and regulations to mitigate the company’s legal risk. By doing so, HR helps avoid possible liabilities, fines, and scandals damaging the business’s reputation.
So, let’s dive into everything you need to know about navigating HR compliance.
What is HR compliance?
HR compliance is the process of building policies and procedures that ensure your organization follows up-to-date labor and employment laws and regulations. Not only does HR work to align workplace policies with the local and federal laws, but they also enforce the procedures to ensure all employees follow them.
HR compliance is vital to your business because all employers need to meet their legal responsibilities. Non-compliance will lead to fines, penalties, or even a lawsuit which can be detrimental to your business. In other words, HR leaders need to prioritize HR compliance to protect their organization.
There are many different types of compliance within HR. We’ll dive into four:
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- Statutory compliance: This compliance is about implementing and adhering to government legislation around employment and the workplace. For example, your company is legally required to follow laws concerning minimum wage, working age requirements, and anti-discrimination, to name a few.
- Regulatory compliance: Regulatory compliance periodically overlaps with statutory compliance, but the distinction is that your company must follow the rules of a specific regulatory body. Generally, these regulatory agencies fall into three classifications: independent regulatory commissions such as the Federal Trade Commission (FTC), executive agencies like the United States Environmental Protection Agency (EPA), and government corporations, The Centers for Disease Control and Prevention (CDC) being one of them.
- Contractual compliance: Contractual compliance is precisely what it sounds like it should be – the compliance with regulations and terms your organization is bound by. This can be a contract between your company and partner organizations or your employees.
- Union law compliance: Some companies may deal with union workers, such as The Screen Actors Guild, which represents over 100 thousand performers and technicians. In this case, your company must be aware of the rules set by these unions and adhere to them.
HR compliance issues examples
In organizations of any size, it is essential to know that you must follow labor laws and a variety of regulations. Otherwise, you risk fines, legal issues, and bad publicity. Let’s dive into more details about compliance challenges HR professionals face.
Wage and hour laws The United States has several laws that protect employees’ rights regarding wages and hours worked. There are laws on federal, state, and local levels. They also set requirements for how many hours someone can work per day, overtime pay, and weekend pay.
For example, the U.S. federal minimum wage is $7.25 per hour, but the minimum wage for the state of Oregon is $13.50 per hour, while the state’s most populous city, Portland, is $14.75 per hour (as of July 2022). Especially if your business operates across multiple cities and states or you have remote workers, you must understand and comply with these laws.
The Family and Medical Leave Act (FMLA) As the name suggests, FMLA permits eligible US employees to take job-protected unpaid leave for family and/or medical reasons. Simply put, your employee has the right to take unpaid leave without fear of getting let go for certain family or medical situations. Examples are the birth of a child, caring for a parent, child, or spouse who has a severe health condition, or when the employee is sick themselves and can no longer work. Workplace safety Workplace safety is considered regulatory compliance under the Occupational Safety and Health Administration (OSHA) agency. Depending on what your organization does for a business, you’ll have different industry standards to follow.
For example, construction workers are constantly exposed to dangerous environments where they can be hit by heavy construction equipment, unguarded machinery, or exposed to silica dust and asbestos. In contrast, healthcare workers have a completely different set of hazards, such as exposure to viruses and bacteria, possible chemical and drug poisoning, radioactive material, and X-ray dangers.
You can discover more about your company’s workplace safety requirements by searching in the North American Industry Classification System (NAICS).
Union laws As mentioned earlier, businesses must be aware of union laws when working with union members. Another example of a strong union is The Association of Flight Attendants – CWA (AFA-CWA). The organization helps its members obtain “fair compensation, job security, seniority protections, and improved quality of life through organizing, bargaining, and political action while serving as the leading voice for a safe, healthy and secure aircraft cabin for passengers and crew alike.”
Airline companies must adhere to the union’s rules regarding working hours, pay, and safety, among other things.
Immigration laws Both business and higher education must adhere to immigration regulations when hiring an employee or accepting a student from abroad. The law handling US immigration policy is the Immigration and Nationality Act (INA). This law allows the US to provide a certain amount of permanent visas per year in various visa categories.
The Department of Homeland Security (DHS) is the primary organization responsible for enforcing the United State’s immigration laws, but many other agencies support it.
Employee classification In order to deal with the current talent market, many companies opened their roles to a diverse range of workers, such as remote or hybrid employees, part-time staff, and independent contractors. In this case, your company needs to understand which employees are eligible for which benefits and what their wages should be based on hours worked and location.
Remember to check which state and local employment laws apply if you’re employing people across multiple locations.
Data security This type of compliance refers to how companies and government agencies keep data protected, confidential, and safe from breaches. Generally, this relates to consumer data but also covers employee data and financial records.
An example is The California Consumer Privacy Act (CCPA) which specifically applies to companies with a revenue of $25 million or higher. Under this law, Californian residents have the legal right to know which data a company has saved about them and what information was shared with third parties.
Why is HR compliance important?
- Avoiding fines and legal problems – Your organization can be subject to an external audit at any given moment. The goal of an external compliance audit is to review how your organization adheres to regulatory guidelines during an audit. Compliance with different laws and regulations that apply to your business helps you avoid legal trouble and save your business money.
- Maintaining company reputation – Cases of non-compliance are often discussed in the media, such as misclassification of employees or the lack of workplace safety, which can damage your reputation as an employer, and as a company. That further impacts your hiring, retention efforts, and consumer trust.
- Building a great workplace – HR compliance is key to building a workplace where your employees feel safe and can see you as a dependable employer.
How do you ensure HR compliance?
Following HR compliance best practices will help you make sure that your organization is set up for long-term success.
1. Keep track of the compliance obligations that apply to you
The rules and regulations you need to comply with depend on factors like your location, where you operate, your industry, and the size of your business.
Make an easily accessible list of the compliance obligations and applicable laws. Keep in mind the different types of compliance issues we’ve outlined above, such as wage laws and workplace safety regulations.
2. Divide compliance responsibilities within the HR department
Your HR team members must clearly understand their role in ensuring HR compliance. In order to organize your time, think of the following questions: Is this a shared responsibility among multiple team members, or do you appoint one person who will be in charge of compliance? If so, does this person have the necessary knowledge and skills? If not, how can they develop them?
Depending on your needs, you might even decide to hire a dedicated HR compliance officer/manager/team in large businesses or get help from a consulting firm. It is also possible that you’ll need legal support. Therefore, you might have to create a cross-functional team to support compliance in your organization.
3. Stay up-to-date with legal changes
Watch out for the changes in laws and regulations that apply to your business. The modifications often happen at the beginning of the year.
Subscribing to the HR Dive’s Compliance newsletter or following the HR section of Corporate Compliance Insights are excellent places to start. This is helpful for HR professionals in general, but especially for those in charge of compliance at their organization.
4. Regularly audit your HR policies
Conduct HR audits regularly to see if your HR policies like leave policy, non-discrimination policy, and compensation policy are compliant. Make time for updating your policies.
Furthermore, you can also educate your employees with HR compliance training. Examples include Fair Labor Standards ACT (FLSA) training, interview compliance training for hiring managers and new interviewers, and affirmative action plans training.
5. Be consistent in applying your policies
You need to be consistent in conducting HR investigations, applying your disciplinary action policy, accessing FMLA, and other processes. Otherwise, it might open up opportunities for non-compliance and legal issues.
You can achieve consistency by outlining steps in processes in writing, keeping proper documentation, and educating managers on how these processes work.
6. Utilize HR technology
First of all, check if your HR technology is compliant, for instance, with privacy laws or GDPR if you operate in Europe. Moreover, many HR tools have compliance modules to help make ensuring compliance easier. Examples of such platforms are BerniePortal Compliance, SAI 360, and IntelliHR.
7. Create an HR compliance checklist
The HR compliance checklist helps ensure you don’t forget anything. You can create a compliance checklist for hiring new employees and a more general checklist for organizational compliance. Below you can find a generic checklist – make sure to adapt yours to your business:
Recruiting and interviewing
- Make sure that you are compliant with legal laws around recruiting and interviewing. This means knowing the laws around the Americans with Disabilities Act and the Fair Employment and Housing Act. Remember, you need to follow state and local laws.
- For example, New York City now requires you to add the salary to the job advertisement. You are also not allowed to ask specific questions in an interview that may lead to bias. Make sure your team is trained on this to prevent discrimination and legal issues.
- When you have a new hire, make sure to have a checklist dedicated to reviewing offer letters, contracts, and new hire onboarding documentation. Also, ensure that the tools you use to save employee files and information comply with your area’s relevant data protection laws.
- Laws change quickly, and your team needs to be aware when changes happen. Your company policy checklist should include your organization’s compensation and employee benefits policies, family and medical leave, health insurance benefits, parental leave, disability benefits, as well as COBRA and unemployment benefits.
- Your employee handbook is a valuable tool for both the employer and the employee. In the handbook, you can provide guidance and information about the business’s policies, procedures, and benefits. Regarding compliance, sections you should add include:
- You should review and update your employee handbook on a regular basis.
Your managers are one of your most significant assets when it concerns compliance. Make sure you offer management Human Resources compliance training focusing on the following areas:
- Performance reviews
- Managing difficult employees
- Employee dismissal
- Training in diversity, anti-discrimination laws, and anti-harassment
Without going into more detail, some other checklists to create specifically for your team in the US are Affirmative Action, Equal Employment Opportunity Commission, a Veterans Checklist, and I-9 forms.
Over to you
HR compliance is not just an administrative matter. Instead, it helps you maintain a good company reputation as a solid business and build a transparent, fair, and safe environment for your workers. In addition, creating an HR compliance checklist can help simplify the process and prevent the company from facing lawsuits.