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What is HR Compliance? – Definition, Guide, and 2022 Checklist

Key Takeaways

1. HR departments are responsible for overseeing and ensuring compliance with relevant laws and regulations relating to employment and workplace practices within their organization. Non-compliance can lead to substantial fines and criminal charges.

2. HR compliance involves adhering to a wide range of mandates ranging from statutory and regulatory compliance to country-specific compliance.

3. To avoid penalties for non-compliance, companies ought to develop best practices to help them manage the complexity in this area.

4. An HR compliance checklist can help organizations stay compliant in the various areas required of them.

What is HR Compliance? 

HR compliance is the development of workplace policies and procedures to ensure they are in alignment with required laws and regulations as well as taking a proactive stance in maintaining such compliance. 

This applies to all companies regardless of their size or scale and the risk of paying a hefty fine or penalty for non-compliance is ever-present. The frequency of governmental audits means organizations must keep abreast of continual legal and regulatory developments within HR compliance or else face the consequences of non-compliance.

Video: The Value of Understanding HR Compliance

What is HR’s Role in Compliance?

HR departments are tasked with the critical function of ensuring their organization is compliant with its legal obligations. This entails meeting the requirements of a range of laws, regulations, and restrictions at international, federal, state, and local levels.

HR compliance covers everything from recruitment, payroll, and benefits to the treatment of employees. Although the requirements within this area are constantly evolving, there are a few fundamental mandates that all employers and HR departments are expected to adhere to.

1.  Statutory compliance

This is the legal framework within which a company must operate and entails compliance with local, state, and federal laws.

Statutory compliance is a legal requirement and employers who are not fully compliant could face criminal charges. Examples of statutory compliance include legislation regarding the minimum working age, anti-discrimination, and the minimum wage. 

2. Regulatory compliance 

Regulatory compliance may vary from country to country as it entails compliance with specific mandates laid out by a regulatory body. An example is the Health and Safety Executive (HSE) in the UK, which is a regulating body that has the authority to issue legal compliance in relation to health and safety. 

As with statutory compliance, an organization could face criminal charges if it fails to maintain compliance. 

 3. Contractual compliance

Contractual compliance requires both parties to the contractual agreement to adhere to the terms they agreed to. This could pertain to clauses such as employee benefits, severance package, and notice period.

Although non-compliance will not result in criminal charges an employer who breaches the terms of the contract could face a civil claim against them. 

4. Union law compliance

The National Labor Relations Act of 1935 governs union activities across many states in the U.S. These labor relations laws protect employee rights and are aimed at addressing issues that federal law does not cover. 

5. HR technology compliance

Technology platforms are required to be compliant with an ever-increasing number of regulations regarding matters such as data privacy which is governed by GDPR, and requires that employee data be stored and managed compliantly.  

6. Internal compliance

This pertains to internal policies within a company that align with statutory and regulatory laws, ensuring they are met in practice. For example, a company operating in a country that stipulates a 35-hour working week may formulate a policy that requires employees to leave the office by a specific time each day. 

7. Training compliance

Some jobs require mandatory employee training such as in healthcare and manufacturing and employers are expected to be compliant with such training requirements. 

8. International labor law

International labor law is a set of rules set out by the International Labour Organization (ILO). These rules and regulations govern many areas relating to labor such as rights at work, working conditions, and freedom from discrimination. These labor laws apply whether a county is an ILO member state or not. 

9. Country-specific HR compliance

Companies that operate globally must comply with in-country policies which a country may form such as rules relating to the age of retirement or minimum working age. Having country-specific HR guidelines in place can help organizations stay compliant and avoid the risk of penalties.

10. Workplace compliance 

This covers internal HR policies which commonly relate to statutory and regulatory rules, ensuring these are being proactively adhered to. For example, workplace compliance may include rules around working hours, mandatory breaks, non-discrimination in the workplace, and other such policies.  

Key HR Compliance Issues 

HR compliance is a highly regulated area that is becoming increasingly complicated to navigate. However, the cost of non-compliance also makes managing this complexity imperative. To stay compliant, a proactive stance is required where organizations foresee issues and address them head-on. 

Below are some key compliance issues every HR department should be aware of: 

Keeping up with legal requirements

Statutory and regulatory requirements are constantly evolving and keeping up with current compliance in these areas can be strenuous for any business. This is especially so for larger organizations which operate in multiple states or jurisdictions. 

To ease this burden, it is advisable to outsource HR compliance responsibilities to a third-party provider who can oversee all necessary requirements. 

Lack of clarity around technology

HR technology such as a Human Resource Information System (HRIS) is necessary for most large organizations, however, many platforms do not make their compliance policies clear when it comes to matters such as security, privacy, and the collection of data potentially causing them to fall foul of regulations such as GDPR.

To overcome this issue, companies should prioritize compliance issues when selecting a new vendor by asking them questions regarding their data compliance policy. HR technology should only be purchased from vendors who adhere to the law and regularly update their software accordingly. 

Bridging the gap 

Certain companies or industries may have been non-compliant with certain laws for a number of years. This could be anything from gender pay inequality to sex discrimination. Bridging the gap in such organizations can be a challenge and may take some time to be fully accepted and integrated into their culture. 

Regular training, education, and internal efforts to reinforce such laws are all steps in the right direction. 

What Is HR Compliance Training? 

HR compliance training is the practice of educating employees across all levels of an organization on the laws and policies regarding their roles in the workplace. In doing so, organizations can avoid penalties for non-compliance with the law and successfully meet the requirements needed to pass an HR compliance audit.

HR compliance training can help employees become compliant in several workplace areas including diversity and inclusion, discrimination and harassment, and workplace safety. 

How to Master an HR Compliance Audit 

Below are three best practices that can help an organization master an HR compliance audit. 

  1. Set up local HR compliance: Each country or region will have its own rules relating to statutory and regulatory compliance. This can also be city or state-specific, therefore, a compliance function in each location can help to ensure all parts of an organization are following the applicable laws. 
  2. Update policies and handbooks: All compliance literature should be regularly updated to ensure it is in line with current laws and regulations. An annual review of all compliance material should be undertaken to ensure it is kept up-to-date and is reflective of any legislative changes and developments. Employee handbooks should be kept current and workplace policies should be communicated to all staff members helping to create a culture of compliance within the organization.
  3. Make use of HR tools: HR technology can help organizations ease the burden of compliance and track the ever-changing rules and regulations in this area. The right HR software can help businesses free up resources by navigating the complexity and ensuring all applicable requirements are correctly met. 

HR compliance checklist 

An HR compliance checklist can help organizations stay compliant in all of the different areas required of them. 

Below is a list of areas to review to ensure HR compliance within your organization:

  • Recruiting and interviewing
  • Hiring procedures
  • Health and Safety
  • Policies and procedures
  • Employee handbook
  • Employee and management training
  • Sexual harassment, bullying, and drugs
  • Working time
  • Conflict resolution
  • Discipline and termination

Conclusion

If you’re looking to grow your business internationally, our Global PEO service can help you recruit and hire employees internationally and ensure you build a compliant local presence without the need to establish a local entity, leaving you to focus on growing your business in a new market. Contact us today to find out more. 

Frequently Asked Questions (FAQ):

Common metrics used to measure HR compliance include the following:

  • Salary competitiveness ratio
  • Percentage of employees trained in HR policies
  • Diversity ratio
  • Gender pay gap
  • Training effectiveness

HR is responsible for managing the human capital resources within an organization through the entire employee lifecycle. Compliance is one of the functions within HR and involves responsibility for ensuring the organization is compliant with all laws and regulations relating to employment and workplace practices.

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