HR Outsourcing and Compliance Support: A Cost-Effective Solution

The modern employment-related legal landscape is becoming increasingly complex. New employment-related laws are passed every year, and existing ones are often changed significantly. Employers must deal with a vast number of detailed federal, state and local rules and requirements. Mistakes in compliance can lead to serious challenges.

Small and medium-sized firms rarely have the in-house expertise to keep up with all these new and revised rules. HR outsourcing helps by providing SMBs with access to professional experts and sophisticated HR software.

The True Cost of Non-Compliance

Non-compliance can be more costly than many realize. There are the direct costs of penalties, interest, fines, and claim settlements or judgments. But there are also costs which are harder to quantify. What price can you place on your company's good reputation? Or on the time and stress involved in defending against a claim? How much is your peace of mind worth?

Financial risks

Financial risks are typically the first things that SMB owners and managers consider when thinking about the costs of non-compliance. These include:

• Penalties, interest, and fines from agencies. You could face notable financial impacts for non-compliance. For example, penalties for OSHA violations can be as high as $70,000 for each violation.
• Attorney fees and litigation costs. If an employee sues you, you may incur attorney fees and litigation costs to defend the case. In some situations, if you lose the case, you may also have to pay for the employee’s legal fees and costs. This could cost you even more than the damages for the alleged conduct itself.
• Back pay and damages awarded to employees. When employers violate anti-discrimination laws or wage-and-hour regulations, they may have to pay employees substantial amounts in back pay, back benefits and other damages.

Operational risks

Compliance violations not only expose your company to direct financial penalties and other costs but can also affect your day-to-day operations and your ability to meet your business goals.

• Work stoppages and productivity loss. Regulators may order work stoppages for workplace safety violations. Employees may lose trust in the company, become less productive, or could even consider collective action to express their concerns.
• Time diverted from core business activities. The time your leadership spends defending non-compliance claims is time taken away from strategic planning and other efforts to achieve company goals.
• Administrative burden of addressing violations. A claim filed against your business could generate considerable administrative work, such as fulfilling records requests.

Reputational risks

A company’s good reputation is one of its most important assets. Non-compliance may lead others to perceive the company as lacking transparency, integrity, or empathy. The damage is done in several ways:

• Damage to employer brand and public perception. Word spreads fast online, and the public’s opinion of a company can change overnight. For example, a food producer whose products are found to be contaminated, or who is under investigation for such concerns, can quickly lose a large percentage of its customers. Sometimes the damage is temporary, but sometimes it's permanent.
• Difficulty with talent acquisition and retention. Employees who are in demand often seek out companies they view as ethical. Non-compliance concerns could make it harder to retain or attract employees, potentially leading them to explore opportunities with a competitor.
• Potential impact on customer relationships. If you lose your customers’ trust, the relationships you have built with them may also be irreparably damaged.

Common Compliance Challenges

Employment-related laws can affect many aspects of your business operation. There’s a lot to keep track of, usually more than an SMB can comfortably manage on its own.

• Resource constraints. An SMB may have a limited HR staff, or none at all, to stay up to date with compliance and implement any required measures.
• Keeping pace with changing regulations across multiple jurisdictions. There are various levels of employment-related rules and requirement. To add to the complexity, these rules and requirements often change, and new ones are regularly introduced.
• Maintaining consistent policies and procedures. Inconsistency in workforce management can lead to employees being treated differently, leaving you vulnerable to discrimination claims.
• Documentation and record-keeping requirements. Failure to meet the many complex documentation and filing requirements could cause you to accidentally become non-compliant.
• Multi-state business operations. You must comply with the rules and requirements set by the locations where you have employees. If you have a multi-location workforce, your HR challenges can also multiply and become more complex.

HR Outsourcing and Compliance Support

An HR outsourcing firm that offers HR expertise can help SMBs with compliance and enhance their cost efficiency. HR outsourcing  providers often bring expertise and economies of scale, helping SMB's navigate compliance more easily. Consider the many types of support these firms can offer.

Dedicated expertise and specialization

It’s expensive for an SMB to try to develop and maintain the necessary expertise in-house to keep up with the specialized areas of compliance. An outsourcing firm could provide:

• Access to experts who can provide best practices to help address specific concerns.
• HR professionals with relevant experience, some of whom may hold certifications, so the people support you are well-informed and capable.
• Industry-specific knowledge and experience that apply to issues that tend to arise in your industry, such as technology, manufacturing or financial services.

Stay on top of updates

It’s better to prevent HR compliance problems than to deal with them after they occur. Outsourcing firms could help you stay on top of evolving rules and requirements so you can comply. Support can include :

• Updates of regulatory changes. No more last minute scrambling to respond to changes, knowing the information can help you comply.
• Support to help keep policy aligned. Resources and best practices are provided so you can align your policy with rules and requirements.
• Early notification tools for upcoming important deadlines. To keep you informed and aware of when it’s time to act before deadlines.

Comprehensive policy support

HR service providers may provide experience and expertise to help develop policies that will align your employees and your company.

• Standardized, compliant employee handbooks clearly outline expected behavior and serve as documented proof that employees were informed, which can be valuable in the event of a dispute.
• Consistent procedures established across all locations help ensure fairness, build trust and avoid discriminatory actions. HR compliance checklists and similar tools help employees and managers stay aware of their responsibilities.
• Regular policy reviews and updates support compliance by keeping your company aligned with current rules and requirements.

HR compliance

Unless you spend a great deal of time studying the complex subject of HR compliance, you can’t be certain that your company remains compliant. These are just some of the rules and requirements that the HR professional experts at outsourcing firms could help you stay on top of:

• Fair Labor Standards Act (FLSA) wage and hour requirements, which apply to minimum wage, overtime pay, child labor standards and recordkeeping.
• Equal Employment Opportunity (EEO) and anti-discrimination laws, which prohibit unlawful discriminatory actions based on protected characteristics, such as race, religion and sex.
• Family and Medical Leave Act (FMLA) administration, which requires employers to provide employees with unpaid leave and job protection for certain specified reasons, such as caring for a relative who is seriously ill.
• State- and city-specific laws, compliance with which may be just as tough as compliance with federal counterparts.

Payroll tax and benefits compliance

Getting your employees paid promptly and properly is a continual process. It’s easy to accidentally make a mistake that can lead to noncompliance with payroll tax and employee benefits-related requirements. Outsourcing firms could help you automate processes to enhance efficiency and help you navigate in areas such as:

• Payroll tax calculations and filings.
• Benefits administration and reporting requirements.
• COBRA compliance and administration.
• Affordable Care Act (ACA) reporting and compliance.

Workplace safety and standards

There are many detailed requirements that cover safety in the workplace. HR outsourcing solutions help SMBs with:

• OSHA compliance and safety program development. Services from a third-party provider could provide best practice guidance from risk management consultants and workplace safety programs.
• Workers' compensation administration. HR outsourcing services could include quality coverage from an A+ rated carrier, pay-as-you-go billing for cash flow optimization and no year-end audits.
• Industry-specific safety requirements. SMBs can get help so they can navigate the workplace safety standards that may apply to them.

Documentation and recordkeeping

When a small business uses a paper filing system or an electronic records system that is not properly optimized and organized, it can be hard to find documents. You can also miss filing deadlines if you don’t have a good reminder system. Outsourcing firms may be able to help with:

• Provide administrative support with systematic documentation processes and retention.

The HRO Advantage

Let’s look at the expertise and tools that human resources outsourcing firms (HROs) provide to help you navigate complex compliance landscapes.

Technology and systems

HRO firms may provide access to sophisticated HR technology platforms that automate many of your responsibilities, including:

• Integrated HRIS platforms with built-in features that focus on your company's needs.
• Automated alerts and reminders for critical deadlines so that you don’t miss important dates.
• Centralized location of your documents you input in the platform and reporting capabilities for efficiency, easy retrieval and data analysis.

Support and best practice guidance

Compliance is never “one and done.” HRO firms may provide help with:

• Regular reviews.
• Training for management and HR staff.
• Access to an hotlines to get additional support.

Risk mitigation

While compliance risks can’t be completely eliminated, they can be addressed. HRO firms may provide:

• Best practices guidance on HR and payroll compliance to help mitigate risks.
• Support and access to experts to help address complex concerns.

A  Solution

TriNet helps tens of thousands of small and medium-sized businesses navigate the complexities of employment-related compliance. We are here to support you and help mitigate risk, giving you a greater peace of mind.

Our cost-effective solutions can:

• Provide experts for specialized best practice guidance on employment-related rules and requirements.
• Give you the compliance support you need for filings related to payroll and benefits—and a host of other concerns.
• Help you stay on top of ever-changing employment-related rules and requirements.

To find out more about HR outsourcing and compliance support, download our free eGuide on Three ways to help mitigate HR compliance risk.