The Role of HR in Compliance

To keep your business operating successfully, small business owners everywhere are responsible for remaining compliant with a host of rules and requirements on the local, state, federal, and industry levels. No easy feat! These responsibilities usually fall to HR, and cover everything from employment-related laws to worker safety to mandated business filings.

What is HR compliance?

HR is responsible for making sure the company meets its legal obligations when it comes to HR compliance, and sometimes outside of what is strictly considered HR.

HR compliance can cover:

• Payroll

• Risk and workplace safety

• Hiring

• Accommodations

• Termination

What is HR’s role in compliance?

HR functions as the people center of a business but is also key to the compliance architecture of the company. While HR departments must remain compliant with all the rules and requirements pertaining to HR operations — like fair hiring practices — the department may also ensure compliance with other specific requirements that fall outside of traditional HR. Some of these requirements are:

• Workplace safety requirements as defined by the Occupational Safety and Health Association (OSHA) and keeping up with the various worker safety legislative changes.

• Data privacy and security laws and regulations, as applicable, like the General Data Protection Regulation (GDPR), the California Consumer Protection Act (CCPA), and HIPAA. HR is one of the functions that typically handles the most sensitive employee data.

• General business compliance like Affordable Care Act reporting and quarterly and accurate payroll tax filings.

Like we said earlier, this is no easy feat — especially for small business owners. SBOs often lack the resources needed to hire a full HR department, but also don’t have the time to become experts themselves. Yet being out of compliance means your business may be at risk for hefty fines, liability, and damage to your reputation, which is all far more costly than investing in the resources to stay on top of HR compliance.

Being out of compliance means your business may be at risk for hefty fines, liability, and damage to your reputation, which is all far more costly than investing in the resources to stay on top of compliance.

Common HR compliance issues HR departments face

HR compliance is tricky because some requirements are easy to confidently meet, like paying state and federal minimum wage. Others are much more complex, like accurate employee classification. This makes it hard for small businesses to make sure they’re compliant with all the boxes they have to tick. Some of the most common issues that cause businesses to be out of compliance fall under the following laws, acts, and requirements.

Fair Labor Standards Act

Federal law establishes minimum wage, overtime pay, record keeping, and child labor standards for employees. HR is responsible for differentiating between exempt and nonexempt employees and tracking overtime pay. Class action lawsuits are commonly brought against businesses for violating FLSA.

Data security

Some laws such as the GDPR and CCPA may apply to employee data as well. Under the scope of those laws, HR may need to adapt its practices to be transparent about how employee data is collected, used and disclosed, and may be required to obtain permission to use employee data and have processes in place should employees withdraw permission.

Discrimination

Companies are legally barred from discrimination on the basis of race, color, religion, sex and national origin under Title VII of the Civil Rights Act. Other federal laws prohibit discrimination on the basis of age and disability. But beyond avoiding discrimination, smart businesses today are making diversity a major emphasis of their hiring processes and reaping impressive benefits. Also, it’s just the right thing to do.

Affordable Care Act

The ACA has a number of mandates that affect small businesses. Of note is providing a Summary of Benefits Coverage to all employees or risking facing a penalty for noncompliance.

Harassment

Harassment comes in a few forms, and they are all bad. Whether overt sexual harassment or jokes based on one’s religion, it’s HR’s responsibility to take an employee’s complaint seriously — or risk lawsuits, damage to the company’s standing, and employee morale.