HR compliance is the set of procedures and policies that ensure you carry out fair practices according to laws and regulations. HR compliance plays a major part in making sure that a company is being fair in its HR practices. Therefore, compliance policies have an influence on employee development, retention, and hiring.
What is HR compliance?
It is the commitment of your business to follow the working standards set out by the country’s employment law. It also means your employees must receive all entitlements due to them as set out in their employment contract. One of the biggest challenges when taking on legal compliance in HR is staying compliant.
Three different types of compliance:
- Statutory compliance refers to the legal obligation of an organization to be compliant. So, if new legislation passes saying that you must tint all windows in an office so as to reduce employees’ exposure to natural light, it is a statutory obligation. Failure to abide by this law could result in criminal charges.
- Regulatory compliance refers to a legal obligation of regulating body issues. You could face criminal charges if you fail to adhere to it.
- Contractual compliance refers to an obligation made between yourself and the employee via an employment contract (or any other contract made between you and the other party). As a contract is a legally binding document, any commitment made within a contract that you fail to meet could result in criminal charges.
The evolution of labor laws paves the way for HR policy. There are a few points to keep in mind while determining your organization’s HR compliance model:
- Your business will be subject to audits from enforcing agencies. This brings about penalties and fines for non-compliance
- The workforce must adhere to all employment laws, including federal laws, state laws, and anti-discrimination laws
- Lack of knowledge of compliance obligations is not a legal defense
- Mitigating compliance risks can save your organization from lawsuits and subsequent bankruptcy
Who is responsible for ensuring HR compliance?
It is the role of HR to advise, strategize, and implement policies and procedures to meet compliance requirements. Typically the HR compliance responsibility lies with the owner, chief executive, or HR Director. HR compliance should involve everyone in the organization. Managers should be trained and equipped to know what policies and procedures are relevant to any situation and follow the correct process. Staff should be well informed about their expected responsibilities, behavior, and where they should go for support or raising concerns.
Checklist for HR compliance: 5 components
Achieving and maintaining compliance policies are mandatory for organizations. As part of organizational goals, develop an effective strategy to formulate an HR compliance checklist. The HR function must hire and retain individuals who are knowledgeable about HR specific laws. HR compliance model should be aligned with the organization’s overall business strategy. Also, it is for the leadership to ensure all employees understand the importance of HR compliance. Given this, here are 5 basic principles organizations should follow to help achieve these goals:
1. Hiring and interviewing process
This process should include the issuance of offer letters, new hire paperwork, and contracts. Hiring the right talent within the HR function’s area of responsibilities is one of the most important issues for organizations today. The checklist should also include details on the recruiting and interviewing process of new employees, along with information on the current job application and the job descriptions. Moreover, there should be an emphasis on compliance with the Fair Employment and Housing Act. Furthermore, adherence to the Americans with Disabilities Act (ADA) is equally important. It should also outline all interview procedures and questions, along with processes for checking references provided by potential hires.
2. Employee handbook
An organization’s employee handbook is one of its most important documents as it outlines all company-related guidelines. This is a communications tool that should clearly articulate the organization’s policies and procedures. Additionally, the handbook is required to answer all questions related to employee benefits, overtime pay, training programs, etc. Furthermore, it is a better practice to have legal counsel review the handbook and any new policies and procedures before distribution.
3. Scheduled HR compliance audits
Many HR functions are typically understaffed and overworked. As noted, non-compliance can be the basis for financial and reputational risks for organizations. Conducting scheduled HR compliance audits should be a part of an organization’s overall strategy to avoid legal liabilities.
4. Policy for Sexual Harassment, Drugs, and Workplace Bullying
This is a highly important component for developing an effective HR compliance model. There should also be regular sexual harassment awareness and training programs. Furthermore, you need to keep a check on workplace bullying. There should be measures to report and deal with such behavior. You should also try to implement a drug-free workplace program.
5. Effective communication
The HR function is a critical component of an organization. It is critical for HR leaders to keep other executives up to speed on potential HR compliance risks and recommendations.
Furthermore, other policies in any organization are framed in the context of education and learning, paid leave and working hours, management training, and employee assessment program. These steps will help the HR function take steps to achieve its goal of maintaining the HR compliance model. Staying up-to-date with the changing job industry standards is important, which is why HR compliance laws are updated and amended every year.