15 Apr HR Compliance: A breakdown for your small business
What Is HR Compliance And Why Is It Important?
HR compliance denotes an organization’s adherence to laws, regulations, policies, and procedures governing employment practices, workplace dynamics, and employee treatment. This encompasses diverse areas like hiring protocols, employee categorizations, compensation frameworks, workplace safety standards, discrimination policies, employee records administration, and labor relationships.
While legal adherence remains paramount, HR compliance carries broader implications. Let’s delve into some of these facets.
Employee Welfare
Compliance ensures equitable treatment of employees, fostering a positive work environment conducive to retention. It encompasses upholding labor rights, maintaining non-discriminatory practices, and ensuring safe working conditions.
Reputation And Trust
Organizations prioritizing HR compliance signal their dedication to ethical business conduct, enhancing their standing among stakeholders. This, in turn, can attract and retain top talent, thereby bolstering performance and competitiveness.
Common Compliance Challenges
HR compliance extends across every facet of employment, spanning from job postings to terminations. The landscape of labor laws is intricate, encompassing a spectrum from federal statutes to local ordinances and regulations. Now, let’s delve into some prevalent compliance challenges that HR professionals encounter.
Workplace discrimination
Failing to prevent or address workplace harassment or discrimination, which stems from protected characteristics, is a significant issue in HR compliance and unfortunately a common occurrence.
In 2021, the Equal Employment Opportunity Commission (EEOC) resolved 140 discrimination lawsuits, resulting in a monetary benefit of $39.7 million. It takes less than 10 minutes for an employee to file a complaint and can take the company hours to compile a response. Plus, if the EEOC believes there is merit, they will investigate and prosecute on behalf of the employee.
Security and data privacy
Another frequent concern in compliance for companies is the inadequate protection of employee records, mishandling sensitive employee data, or non-compliance with data privacy regulations, which can vary by state. Therefore, it’s imperative to opt for HR software with proven security features and to have processes in place. One example is requiring employees to update their direct deposit and tax information directly in the system themselves and not do it based on an email, phone or text.
Incomplete documentation of eligibility to work
Compliance with the Form I-9 can be intricate and is another common challenge faced by HR professionals. Fortunately, there are clear guidelines on maintaining compliance. The USCIS publishes a handbook for employers on verifying a new hire’s eligibility to work in the US.
Discriminatory hiring practices
Discrimination in hiring based on protected characteristics like race, gender, age, or disability is another area of compliance that can be complex during the interview process.
Recently, several states have introduced pay transparency laws mandating job listings to display a salary range for the position.
Worker misclassification
Navigating FLSA rules and the misclassification of employees as independent contractors can pose significant challenges in HR compliance for companies. In addition to minimum wage adjustments, overtime rules can present their own hurdles. This also includes paying employees incorrectly – exempt/non-exempt as well as the 1099 classification’s defined by the states IRS. As of March 15, 2024 the DOL now is involved as well.
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Leave entitlements and disability accommodations
Failing to comply with leave entitlements such as the Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA) is a common misstep for employers, especially with the increasing number of states and municipalities enacting their own leave entitlements. To further complicate things, many states are now coming up with their own ‘mini’ laws to supplement these.
Employee benefits
Employee benefits like health insurance, cafeteria plans, and other perks are valuable offerings for employees. However, they are accompanied by their own set of regulations, such as COBRA notices and ERISA rules for specific healthcare coverages.
Health and safety
Employers must adhere to relevant health and safety laws and regulations, including OSHA rules and incident reporting, among other industry-specific regulations. These laws outline requirements and standards that businesses must meet to ensure workplace safety.
Union interference
Balancing union prevention and interference is crucial. According to the National Labor Relations Act (NLRA), it is imperative not to interfere with employees’ rights to organize and collectively bargain for terms and conditions of employment. In August 2023, the NLRB found that employers found interfering with a union election to immediately recognize the union WITHOUT a new election National Labor Relations Board slams union-busting tactics by employers | Courthouse News Service
Understanding the laws and regulations relevant to HR is essential
Legal requirements differ based on your geographical area, underscoring the need to stay informed about any changes in your region.
In the United States, notable legislations include:
- Fair Labor Standards Act (FLSA)
- Americans with Disabilities Act (ADA)
- Affordable Care Act (ACA)
- Family and Medical Leave Act (FMLA)
- National Labor Relations Act (NLRA)
- Title VII of the Civil Rights Act
- Occupational Safety and Health Act (OSHA)
- Equal Pay Act (EPA)
These are just the tip of regulations that can impact an employer and many states and localities have even stricter regulations. For international operations, an employer of record can simplify the process of staying updated on foreign employment regulations, alleviating administrative burdens.
Various Forms of HR Compliance
- Statutory compliance: Upholding government statutes like the FLSA and FMLA.
- Regulatory Compliance: Adhering to the regulations set by specific governing bodies such as the Federal Trade Commission (FTC) or the US Environmental Protection Agency (EPA). This may occasionally overlap with legislative compliance.
- Contractual Compliance: Ensuring that all employment contracts and agreements align with legal statutes and company policies within the HR context.
- Union Law Compliance: In scenarios involving unionized workers like those in the Screen Actors Guild, HR must observe and comply with relevant federal, state, and local laws pertaining to labor relations and union operations.
Try to be Proactive Rather Than Reactive About Compliace
By embracing best practices and maintaining vigilance in keeping up with regulations, HR teams can adeptly handle compliance duties, mitigate risks, and foster a positive and compliant workplace.
Utilizing fractional HR support can offer a strategic advantage, keeping your organization well-prepared and informed about the most recent compliance standards.
Have an HR compliance question?
We are here to help. Book a free 30-minute consultation with one of our team members and we will do our best to answer any questions you have.