Businesses have to follow labor and employment laws to ensure HR compliance. Failing to do so exposes the business to serious penalties.
But managing people according to these laws can be extremely challenging.
All business owners and HR employees must clearly understand what HR compliance is and how to avoid violations. You must know the nature of compliance and how to manage it throughout the company.
A systematic approach is necessary for every HR team, whether they’re a growing startup or established business.
Top Rated HR Software Solutions to Improve HR Compliance
If you want to improve HR compliance, you’ll need an HR software solution. Here’s the best options.
- Gusto – Best for your first 50 hires
- Namely – Best for businesses that have outgrown basic HR solutions
- BambooHR – Best support for a small in-house team
- Zenefits – Best for hands-on HR administrators
- Freshteam – Best for shortening your time to hire
You can read our full reviews of each HR software solution here.
What Is HR Compliance?
HR compliance involves defining policies and procedures to establish employment and work practices that demonstrate a thorough understanding of applicable laws and regulations.
Given the rise in the number of employment laws and regulations, the risk of facing costly fees and penalties for non-compliance has never been higher. Companies of all sizes face increasing HR complexities, which is why businesses and business owners should know certain things when developing HR policies and procedures, such as:
- Whether they’re subject to an audit from an enforcing agency, one that is capable of levying fines and penalties for non-compliance
- Knowing that not understanding compliance obligations isn’t an acceptable legal defense
- Being aware that a lawsuit settlement can lead to bankruptcy
- Recognizing employment laws that must be followed, including applicable federal, state, and local regulations
To put things into perspective, timely and proactive compliance with all applicable employment regulations is critical, no matter the size and scale of your company.
You should take an active interest in complying with the ever-changing regulatory mandate, especially because of government agency audits’ increasing frequency and scope. Otherwise, you’ll find yourself dealing with adverse consequences resulting from non-compliance.
The Basics of HR Compliance
Employment laws have seven general categories, and to create and execute HR compliance, you’ll need an HR process for each type. Of course, as your workforce grows, new laws will apply, which is why you must adapt your policies over time to stay compliant.
Federal HR laws protect all employees from discrimination and include the Equal Pay Act (EPA) and the Immigration and Nationality Act (INA). The Equal Pay Act protects you from wage discrimination based on sex/gender. The Immigration and Nationality Act, also known as the Hart-Celler Act, protects employees from being discriminated against based on citizenship or national origin.
Employers with over 14 employees must comply with the Title VII of the Civil Rights Act, the Genetic Information Nondiscrimination Act (GINA), the Pregnancy Discrimination Act (PDA), and the Americans With Disabilities Act (ADA). If your business has 20 or more employees, you’ll also subject to the Age Discrimination requirements in Employment Act (ADEA).
The whole point of these laws is to make it illegal for employers to discriminate based on their race, color, religion, sex, nationality, genetic information, disabilities, or age. Anti-discrimination laws also protect employees who file discrimination complaints from being fired or punished for complaining, known as retaliation.
These laws cast a wide net and affect overall HR operations, such as recruiting, screening, hiring, promotions, benefits, pay, retirement, and leave. And since they affect several HR functions, you must understand the rights and duties under anti-discrimination laws and ensure managers obey them.
Wages and Working Hours
Federal laws protect employees from working in unreasonable conditions. These laws are mostly encompassed by the Fair Labor Standards Act (FLSA) that lays out the minimum wage and rules for overtime pay, recordkeeping, and more. The FLSA is enforced by the U.S. Department of Labor (DOL) and applies to employees working in every business.
At the same time, certain states and municipalities have local wage and hour laws, too. For instance, the District of Columbia and 29 states have higher minimum wages than the federal minimum wage of $7.25 per hour.
Wages and hourly rates affect HR activities, like scheduling, payroll, and hiring independent contractors. I highly recommend using sophisticated HR software to simplify HR activities and make them more effective and less time-consuming.
The Immigration Reform and Control Act (IRCA) and the INA outline that employers can only hire eligible workers, including U.S. citizens, nationals, and any others who can legally work in the U.S. It’s also crucial for employers to complete and retain I-9 forms for all employees, which verify employment eligibility.
All employers must comply with the Uniformed Services Employment and Reemployment Rights Act (USERRA), designed to protect employee jobs returning from military service.
Employers with more than 50 employees are also subject to the FMLA that allows workers to take leave of up to 12 weeks due to the birth or adoption of a child, illness, or illness of a child, parent, or spouse. The law also provides up to 26 weeks of military caregiver leave, during which the company must continue group health insurance coverage as if the employee hadn’t taken leave.
The USERRA and FMLA haven’t made paid leave mandatory, but the employer must allow any employee to return to the same job or its equivalent upon returning from leave. They must also refrain from discriminating or retaliating against them.
Under the Health Insurance Portability and Accountability Act (HIPAA) and GINA, employers must protect confidential employee health information and employees’ genetic information, respectively.
GINA also lays down guidelines prohibiting health insurers from discriminating based on genetic information. For instance, an insurer cannot require employees to undergo genetic testing to qualify for their healthcare plans.
If you offer group health plans or qualified retirement plans, you must ensure they meet the minimum standards established under the Employee Retirement Insurance Security Act (ERISA). Typically, a qualified plan allows employees to defer income taxes, such as a 401(k).
ERISA also covers crucial things like benefit accrual and funding, vesting, and fiduciary responsibilities of plan managers.
Businesses should also meet the Affordable Care Act (ECA) requirements and report all necessary information to the Internal Revenue Service (IRS). The ACA requires companies with at least 50 employees to either offer health insurance or make an employer shared responsibility payment to the IRS.
Those with at least 20 employees have to comply with the Consolidated Omnibus Budget Reconciliation Act (COBRA) that allows employees who are leaving their jobs to continue health insurance coverage for a specified time.
Employers with 50 employees must ensure that mental health and substance abuse treatment services are treated equitably under their healthcare plans, according to the Mental Health Parity and Addiction Equity Act (MHPAEA).
Employees should be safe and healthy at work. Occupational Safety and Health Administration (OSHA)’s Small Business Handbook contains a template to help employers launch safety programs in the workplace. These regulations are specifically designed to keep everyone safe and uninjured.
Having protocols and protections in place keeps minor incidents from becoming something worse. It also prepares you for more significant risks like fires, tornados, and violent acts.
The final area of HR compliance is to consider union rights protected under the National Labor Relations Act (NLRA) that grants employees the right to form or join or decline to join unions. It also guarantees employees the right to meet and discuss working conditions, including on public forums like Facebook or Twitter.
4 Tools to Improve HR Compliance
Using the right tools is an important part of an effective HR compliance strategy. Below, I’ve compiled a list of some of the best types of tools to improve compliance.
HR Compliance Software
This software works by assisting companies, managers, and HR leaders by keeping them up-to-date with business regulations and relevant compliance laws.
HR compliance software tools make it easy for businesses to understand the latest local, state, and federal compliance legislations and rules. Also, they assist in communication and enforce company policies to new and existing employees.
BambooHR is one example of an HR software with compliance features like robust reporting, payroll, onboarding, benefits, an easy-to-use interface, and more. It is ideal for small and medium-sized businesses, and you can contact them now for a free price quote.
Onboarding software tools simplify the onboarding process of new hires.
They help cut down any unnecessary administrative work when hiring managers and HR professionals. Furthermore, both the employee and hiring manager can keep better track of onboarding material and paperwork to ensure compliance.
Benefits Administration Software
Benefits administration software tools allow organizations to plan and administer employee benefits packages while ensuring compliance with government regulations. They help organizations of all sizes remain compliant with local, state, and federal laws, such as the ACA and HIPAA.
Time and Attendance Software
HR departments use time and attendance software to make time tracking easier. These tools are designed to manage company time and attendance data while keeping tabs on vacation time, holidays, overtime, and sick days.
4 Tips for HR Compliance
Let’s look at some HR compliance best practices that keep errors to a minimum and improve results.
Hire the Right HR People
Every business is unique, which is why it’s vital to have a tailored HR support team. There is no one-size-fits-all solution when it comes to building your HR team.
Your HR team should be efficient and knowledgeable. You have several options to build one depending on your business size, HR needs, and budget. For instance, you can either hire an internal HR manager or outsource or HR functions to a professional employer organization (PEO).
Regardless of your choice, make sure your HR is in competent hands.
Document All Policies and Procedures Properly
If there is anything you consider essential to success, make sure it’s documented in your employee handbook.
The idea is to have an employee handbook that thoroughly addresses policies and procedures that employees must follow. Documenting policies may sound overwhelming, but it can significantly enhance your daily operations. Once you establish procedures and policies in writing, you can continually tweak them over time to ensure the best results.
Remember, you are creating a living document. Whatever procedures and policies you make should be regularly reviewed and updated as business circumstances change.
Train Employees on HR Compliance
Although effective, establishing a set of compliance policies and procedures isn’t enough. You have to facilitate open communication with your employees and train them on your policies to ensure team compliance.
The type of employee training you offer will depend on your team and the topic. It can be done in-person or online and facilitated by your internal HR team or an external party. For example, it’s better to have external parties conduct anti-harassment and anti-discrimination training than an internal HR team.
Enforce Disciplinary Actions Across the Board
Whenever an employee makes a complaint or is found guilty of non-compliance, you must investigate the matter thoroughly and with an even hand.
Once the investigation is complete and you‘ve determined that an employee has violated a company policy, you must take the appropriate remedial action as outlined in your employee handbook. The fair and equal treatment of all employees is an essential element of HR compliance. No employee should get special treatment or be “let off the hook“ because of their position or favoritism.
Enforcing fair disciplinary action will also protect your company from potential litigation.
What to Do Next
Once you have a system to ensure HR compliance, you need to work on staying compliant.
Organizations have to continuously anticipate and tackle issues proactively while keeping up with the ever-evolving laws and regulations. On the surface, it may seem like HR compliance only involves protocols and following rules blindly. However, as you dig deeper, you’ll find they shape employee experiences and the workplace as a whole.
To help you ensure HR compliance, here are a few additional guides to set you up for success: