How Do You Create an HR Compliance Program?

How do you maintain HR compliance?

Staying on top of HR compliance can be especially challenging for small and mid-sized businesses – due to limited resources, time constraints, and a lack of awareness about changing laws. Meeting all legal and regulatory mandates, however, is still required.

“There are three main steps to compliance,” says Kelley Zanfardino, G&A Partners’ compliance manager. “The first step is awareness. Then you must ask, ‘How does it impact my business?’ Finally, you partner with someone who understands the process and can manage it for you or can train you to do it.”

HR compliance roles and responsibilities play a critical role in ensuring your company meets all legal obligations. These duties include staying updated on regulations, maintaining proper employee documentation, enforcing workplace safety standards, addressing fair wages and harassment prevention, and more. But for many small businesses, dedicating a resource or resources to manage these tasks can be challenging, and staying on top of it all with limited compliance expertise can become difficult, if not impossible.

Here are some reasons small to mid-sized businesses may struggle with compliance:

• Lack of awareness: Many business owners aren’t fully aware of their employment-related obligations at the federal, state, or local level.
• Limited resources: Without a dedicated HR team, it’s hard to keep up with evolving regulations, get reliable updates, or access expert advice.
• Time constraints: Owners are often too busy managing daily operations and lack the time necessary to do their due diligence and fully research labor laws and regulations.
• Resistance to change: Some may resist implementing changes required based on new or updated regulations, not realizing the potential legal and financial risks involved.

Why does compliance matter?

• Avoid fines and lawsuits: While penalties and fines vary, the cost of noncompliance can quickly add up. For example, failing to display or update an OSHA-mandated poster can result in fines of nearly $16,000.
• Protect company reputation: Noncompliance can harm your business’s reputation through negative reviews, word-of-mouth from former employees, or even negative media coverage.
• Improve retention and culture: When employees feel that their employer cares for and supports them, they are more likely to stay and be happier at work. However, if they don't trust that their employer is following laws—like properly paying overtime—they are more likely to seek other job opportunities or become disgruntled in their current role.
• Ensure a safe, inclusive environment: Many workplace requirements are aimed at fostering a harassment-free, safe workplace, essential for retaining talent and building a positive culture.

What is an HR compliance program?

An effective HR compliance program is multifaceted and involves all employees, not just the HR team or business owner.

Here are eight essential steps for a successful HR compliance program:

1. Track regulations and laws that apply to your organization: In addition to federal laws and regulations, you should be aware of other applicable regulations related to your industry, location, company size, unions, and government contracts. For instance, restaurant owners must understand tipping compliance, while healthcare organizations need to know training requirements.
2. Designate individuals or a team that will manage compliance: You can designate an existing employee, hire an HR expert, or outsource to a Professional Employer Organization (PEO) or employment lawyer. Outsourcing to a PEO gives you access to valuable expertise and knowledge; however, it’s important to note that you are still responsible for being compliant.
3. Stay updated: Compliance laws and regulations are constantly changing, so regular monitoring is critical. You can get updates on changing or new laws through your HR outsourcing provider, through an employment law attorney, or you can subscribe to employment law newsletters for timely updates. Assess how these new or updated laws impact your business. Again, this is where a PEO can be valuable, as their experts can help you determine what actions you need to take.
4. Establish a handbook and relevant policies and procedures: Create a handbook and relevant policies. Ensure they are routinely audited and updated to reflect current laws. If policies aren't consistently enforced or legally required, consider removing them to reduce liability. It’s best to obtain employee acknowledgment of receipt and understanding. And in some states, acknowledgement is required on certain policies.
5. Provide training, tools, and resources for all employees and managers: Some states have specific training requirements – like harassment prevention for managers or human trafficking awareness for workers in the hotel industry. In addition to meeting these legal requirements, it's a good idea to offer training on other important topics, such as how to conduct interviews. This helps keep key policies fresh in employees' minds. After training sessions, provide employees with easy-to-reference materials or takeaways, so they can review the information later.
6. Enforce policies consistently: Consistently enforcing workplace policies helps create a culture of compliance and protects your organization in case of employee claims or lawsuits. If a policy is not followed, your company could be found at fault. While the first infraction may be a learning opportunity, repeated violations can be considered a willful violation (meaning the employee knew it was wrong) and can lead to severe financial penalties and legal consequences.
7. Document everything: Thoroughly document all employee-related issues, including policy violations and any conversations you had with the employee. Stick to the facts, noting dates and times to create a clear record.
8. Establish an investigation process: Develop a clear process for investigating workplace issues. Determine who will conduct investigations—internally or through a third party—and outline the steps to follow.

By implementing these steps, you can enhance your HR compliance program, protect your business, and create a positive workplace environment for your employees.

How do you create an HR compliance program?

To create an effective HR compliance program, it’s best to first decide whether you want to handle it in-house or bring in outside help, such as an employment law attorney, HR consultant, or a PEO. If you go for the internal option, it’s important to pick a compliance officer or team to take charge.

Next, it’s important to do an assessment of any current policies to spot any gaps related to federal, state, and local laws. You can research a good compliance program example (or your outside partner can provide one) to help you develop clear guidelines on important topics like equal employment opportunity, anti-harassment, wage laws, and workplace safety.

Don’t forget to roll out training programs on these key areas and set up effective ways for employees to report issues. Regularly check in on your compliance program through audits and employee feedback, and stay updated on regulatory changes to help protect your business and foster a positive workplace culture.