By Andie Burjek
May. 25, 2020
Compliance is complicated and time-consuming, and employers don’t have the time to become experts in every rule or regulation that impacts their business. For any organization, addressing how to reduce compliance risk requires the right external and internal resources.
Failure to adhere to compliance requirements exposes an organization to lawsuits, costly fines and other penalties as well as negative publicity and harm to business reputation, noted XpertHR in its report “Top HR Compliance Challenges for 2020.” The organization surveyed 700 HR professionals, 28.3 percent of whom said recruiting and hiring was their top concern. Meanwhile, 16.2 percent said so about benefits and 10.1 percent about pay and scheduling issues.
Of those challenged by pay and scheduling issues, 13.3 percent said they are extremely challenged by the misclassification of exempt and non exempt employees, compared to only 6.6 percent in 2018. And 9.8 percent feel extremely challenged by state and local minimum wage increases, down from 12.9 percent in 2017.
In 2020, 21 states and many localities — including 20 in California alone — will be impacted by minimum wage increase, the report noted.
XpertHR Legal Editor Beth Zoller said that it’s also important for employers to be proactive about trending issues like harassment training, hairstyle discrimination, pregnancy accommodations and prohibiting pre-employment drug testing.
No matter what the compliance issue, there are many ways to efficiently address how to reduce compliance risk, ultimately benefiting both employees and employer.
In the XpertHR survey, 8.3 percent of respondents said workforce planning was their top compliance concern. Zoller defined “workforce planning” as “the continual process an employer uses to align the organization’s business needs and priorities with those of its workforce to make sure it can comply with legislative, regulatory, service and production requirements and organizational objectives.”
Among today’s global workforce, she said, employers must understand both the internal and external factors that impact workplace processes like recruiting, retention, training and performance management.
These internal and external factors include the rise of flexible working arrangements and remote workers, the use of independent contractors to replace traditional workers, and the use of technology to increase communication and productivity, Zoller said. All these are areas in which employers must be careful to be compliant with the various regulations, such as those regulating remote work, classifying employees correctly.
Benefits compliance was the second biggest compliance concern for employers, according to the XpertHR survey. Dorian Smith, national practice leader for Mercer’s Law & Policy Group, specializes in health and welfare benefits.
There are different trusted advisors HR or workforce management professionals can reach out to for different buckets of compliance, he said. For health benefits, representatives from the insurance carrier or third-party administrator can provide guidance. Attorneys specializing in ERISA can help answer retirement-related questions. Complying with a variety of regulations means partnering with a combination of different advisors that cover an employers’ bases.
Employee leave laws
Even before the COVID-19 pandemic introduced new employee leave requirements through legislation like the Families First Coronavirus Response Act, the paid leave landscape in the United States was a “hornet’s nest,” Smith said. COVID-19 rules simply added another layer to an already complicated paid leave environment, where employers often must pay attention to different state and local laws that could affect their business.
Whichever HR or workforce management professional deals with paid leave at an organization should maintain a relationship with the carrier that administers the leave program, and a major carrier should have an understanding of the paid leave environment, Smith said. Still, while they can provide support to navigate the organization through compliance, they generally don’t provide strategic support, he added.
He gave an example of an organization that is looking to shut down a location. They may have the right to do so compliance-wise, but strategically they should think about the make-up of the workforce in that location. Are they predominantly older or part of another protected class? That is a strategic way to look at this situation, since an organization does not want to be exposed to a discrimination lawsuit.
Many areas of compliance are “part compliance, part strategy,” he said. “You can’t do strategy without thinking about compliance.”
Smith also suggested that organizations should engage with their internal or external legal counsel before they make decisions regarding paid leave strategies. Smaller organizations will likely need more external help because they may not have internal resources. But it doesn’t stop there.
“This issue isn’t isolated to smaller firms. Even larger employers with ample internal resources will need outside help,” Smith said.
Mercer, for its part, began a toolkit during the COVID-19 pandemic that is updated every week to reflect what state and local paid leave laws have been amended or created. This is meant to help organizations stay current on changing laws.
On XpertHR’s survey, 5.7 percent of respondents said that “leaves of absence” was their No. 1 compliance concern. Of these people, 28.9 percent said they are extremely challenged by keeping up with rapidly changing leave laws, up from 11.2 percent in 2017 and 19.5 percent in 2018. And 16.1 percent said they feel challenged in determining which leave laws apply to their organization, up from 8.3 percent in 2017.
Depending on size and location, an employer may be required to comply with a variety of different leave laws, Zoller said. These leave laws include paid sick leave, paid family leave, bereavement leave, domestic violence leave, jury duty leave and military leave.
She suggested that employers invest in online compliance tools to help them stay up to date with changing laws and requirements on the federal, state and local level.
Considering how to reduce compliance risks may be daunting. But regardless of the type of compliance issues an organization has, there are resources available. These resources include:
Don’t get bogged down by weighty compliance responsibilities. Creating smart partnerships can help an organization stay compliant.
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