Why is it important for a company to be HR Compliance?
Updated: Jun 25, 2021
There’s increasing pressure on businesses to comply with the evolving and challenging regulatory landscape. As scrutiny continues to escalate from multiple stakeholders including regulators in a crisis environment, compliance expectations exponentially intensifies. New rules are introduced and existing ones tightened, businesses are faced with countless of challenges in keeping compliant of these changes and managing regulatory risks.
What is HR Compliance?
HR compliance is a process of defining policies and procedures to ensure your employment and work practices demonstrate a thorough understanding of applicable laws and regulations, while also being aware of the company's larger human capital resources objectives. The HR function must hire and retain individuals that are knowledgeable about HR-specific laws and can create policies and procedures in relation to these laws. Just writing policies and procedures and placing them in a repository is not enough. Once established, they must be effectively communicated throughout the organization.
This is most likely to happen in cases where HR compliance has been integrated with the organization’s overall business strategy, and the organization’s leadership has taken steps to ensure all employees understand the importance of HR compliance. Here are five basic principles organizations should follow to help achieve these goals:
Recruitment – Attracting and Hiring the right talent within the HR function’s area of responsibilities (compensation, employee benefits, legal requirements, talent management) is one of the most important issues for organizations today. The HR function must have the knowledge, skills and experience, or be able to access it through third-party relationships.
Education, Experience, and Training – The talent in the HR function must be well versed in employment law and the regulatory/legal requirements that can affect an organization at anytime. These laws and requirements are changing all the time and it's imperative for the HR function to stay apprised of the latest information available.
Developing an Employee Handbook and Update it Regularly – An organization’s Employee Handbook is one of its most important documents. The Employee Handbook is a communications tool that should clearly articulate the organization’s policies and procedures and how business should be conducted. It is a best practice to have legal counsel review the handbook and any new policies and procedures before distribution.
Conducting 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 any legal liabilities.
Communicate – The HR function is a critical component of an organization. Whether there are compliance issues or not, it is critical for the HR function leaders (CHRO, HR Director, VP of HR, HRBP, etc) to keep other executives up to speed on potential HR compliance risks and recommended remediation.
Many businesses choose to outsource certain HR functions to help mitigate these potentially costly HR pitfalls. Doing so can mean having access to experienced professionals who serve as HR compliance resources and can provide in-depth, up-to-date knowledge of local laws and regulations. These steps will help the HR function take a large step to achieve its goal of maintaining HR compliance for the overall organization.