Highlights
- HR compliance protects your business from legal trouble, creates a positive work environment, and strengthens your organization.
- To avoid costly mistakes, you need to stay proactive, communicate clearly with your employees, and make sure to review compliance rules regularly.
- At EmPower HR, we offer risk management and compliance services to keep your business up-to-date and minimize risks. Contact us to get started!
HR compliance is one of the most challenging aspects of running a business. Business owners want to do the right thing for their employees, but they often don’t know where to start.
Navigating the murky waters of HR compliance, with its ever-changing laws and regulations, is not an easy feat. This guide is packed with the essentials you need to know: What HR compliance is, why it matters, and best practices to ensure your business operates smoothly and avoids costly legal troubles.
Let’s dive in!
What Is HR Compliance?
HR compliance is the process of ensuring that your company’s practices, policies, and procedures conform to federal, state, and local laws. Being compliant requires learning which laws apply to your organization and understanding what they require you to do.
That’s easier said than done.
Staying compliant requires knowledge, skill, and cooperation.
Some employment laws are simple; They take the form of “do this” or “don’t do that.” The requirements may be easy, like minimum wage, or complex, like the Family and Medical Leave Act. However, not all compliance laws are as clear in the details, which is what makes HR compliance an art to be mastered.
Why HR Compliance is Crucial to Your Business
HR compliance goes beyond following a series of rules: It’s the support beams holding your business infrastructure together. No matter your company size or industry, staying compliant protects your business’s assets and growth.
The cost of non-compliance can affect all areas of your business. Here are just a few common costs associated with being out of compliance:
- Penalty fees
- PR costs associated with repairing brand image after a scandal
- Repairing brand reputation or the cost of rebranding
- Lawsuit settlement fees
- Fees to recover funds after a financial crime, scam, or a data breach
Why Is Failing Compliance So Expensive?
Compliance failure can include hefty legal fees, compliance audit costs, and loss of revenue due to client mistrust.
Here’s just a few common HR penalties and their costs:
- Health Insurance Portability and Accountability Act (HIPAA): Violating HIPAA includes fines up to $50,000. If it is discovered that the violation occurred due to a lack of training, the employer is penalized. When healthcare professionals violate HIPAA, it’s usually their employer that receives the penalty.
- Affordable Care Act (ACA): A penalty of $2,970 (for 2024) per full-time employee (minus the first 30) will be incurred if the employer fails to offer minimum essential coverage to 95 percent of its full-time employees and their dependents, and any full-time employee obtains coverage on the exchange.
- Wrong Information on I-9s or W-2s: For 1-9 paperwork violations in 2023, the penalties range from $252 to $2,507 for the first offense for substantive violations or uncorrected technical errors. Failure to verify Social Security numbers or federal employer identification numbers (FEIN) on tax documents adds up. At the end of the year, missing or incorrect numbers on W-2s could result in a penalty by the IRS of up to $270 for each return.
- Occupation Health and Safety Administration (OSHA): Fines can add up to $16,131 per violation.
Common HR Compliance Issues
While compliance requirements are always changing, there are several regulations that you’re most likely to run into, such as:
Benefits Compliance
Most companies provide employee benefits: dental insurance, retirement plans and health insurance, just to name a few. But few companies truly understand the requirements for each. For example, your company health coverage may need to adhere to the Affordable Care Act (ACA) and retirement plans are bound to the The Employee Retirement Income Security Act of 1974 (ERISA.)
Business owners should be aware of their responsibilities when it comes to offering employee benefits. Lean on your HR team to pay attention to compliance rules and help you determine the best way forward.
Non-Discriminatory Hiring Practices
Every company needs employees, but the hiring process can be tricky. For one, you need to be mindful about how you narrow down your candidate list and be sure that you don’t turn down candidates based on illegal factors. When going through your compliance checklist, be sure that you don’t do anything that could violate Equal Opportunity Commission laws (meaning that you can’t deny candidates based on disabilities, color, ancestry, and gender.)
Updating your Employee Handbook
Let’s be honest, employee handbooks probably aren’t top of your employees’ most-anticipated reading list — in fact, only about 40% of employees read it. But don’t underestimate the power of a well-crafted handbook!
Keeping your handbook up to date protects your business from potential discrimination or unfair treatment claims. It also empowers employees, by providing a clear roadmap of your company’s values and policies.
HR Compliance Best Practices
When outlining your compliance playbook, there are a few best practices you need to know. Follow these top tips to tackle compliance issues head-on and stay ahead of the game:
Review Your Rules Regularly
Compliance work is never really done. Compliance rules need to be enforced consistently. Regularly checking your company practices allows you to identify risks and diagnose compliance issues before they turn into problems.
On the surface, it might seem like HR compliance is only about protocol and blindly following the rules. But dig deeper and you’ll see that your HR compliance function shapes employee experiences and the workplace. For example, team diversity and inclusion training makes your workplace culture more inclusive and engaging.
Create a Culture of Accountability
Company compliance starts with effective communication.
Let HR regularly communicate with your employees and train them on the critical compliance issues — like keeping company data secure, verifying employee information for W-2s and sending out updated employee handbooks.
HR plays a crucial role in creating a culture of accountability, but all your employees must work together to reach compliance goals and solve problems.
Use a HR Compliance Checklist
Keeping up with tax deadlines (W-2s are due to the IRS in January,) 1094-C and 1095-C forms (due to the IRS in March) can feel overwhelming.
Using an HR compliance checklist helps you stay organized and ensures that you won’t miss any important steps in the compliance process.
Keep Your Business Safe with EmPower HR
HR compliance is a crucial aspect of your business that requires a proactive approach. Don’t wait for a crisis to hit! Ensure your business is ahead of the curve, avoiding costly legal battles and cultivating a positive work environment that attracts and retains top talent.
At EmPower HR, we provide risk management and compliance services to keep your business up to date with the latest HR regulations and minimize risk. From filling payroll taxes to workers’ compensation administration, we help you navigate HR compliance with ease.
We got you covered, so you can go back to driving your business’ success. Contact us today to get started!