By Garry Kranz
Jul. 11, 2011
To human resources professionals, regulatory compliance is akin to having a crazy uncle locked in the basement. It’s an obvious issue, but discussing it can be uncomfortable. In an era of stepped-up government enforcement, though, companies have no choice but to tackle compliance head-on. And they are tapping software tools to help them stay on the right side of the law as well as boost the bottom line.
By implementing software-as-a-service tools to manage its human resources processes, for example, the National Aquarium in Baltimore is trying to do more than simply comply with federal wage-and-hour regulations. The 550-employee organization thus far has also saved about $60,000 in overtime expenses since 2009 by implementing UltiPro, a human capital management suite from Weston, Florida-based Ultimate Software Group Inc.
That may not seem like much money to larger organizations, but to the not-for-profit National Aquarium, which already is facing tighter operating margins and dwindling contributions, $60,000 is a nice chunk of change, says HR executive Candace Osunsade.
The Web-based software platform replaces an antiquated process for timekeeping that placed the National Aquarium in jeopardy of violating the federal Fair Labor Standard Act, or FLSA. Until 2009, employees were responsible for manually recording their own hours worked on outmoded carbon time sheets. Managers then would tally up the data on the time sheets and forward it to the organization’s payroll outsourcer.
Although that ensured that employees were paid fairly and on time, the approach was too casual to rigorously track compliance with federal wage laws in the event of an audit, Osunsade says. The practice stemmed from the “mom and pop culture” that still prevails at the National Aquarium, in which people take ownership of projects and “do what needs to be done.”
Since implementing the UltiPro platform, the Aquarium has moved many HR processes online, thus eliminating paperwork in line with its mission of environmental stewardship. Automation also provides a record of compliance should federal regulators come knocking. Equally important is the system’s ability to produce analytical reports on how to efficiently allocate staff when launching new exhibits. That formed the crux of Osunsade’s pitch to persuade the aquarium’s executive team to invest in the new technologies.
“The first thing I talked about was the benefit of leveraging data in our systems for predictive decision-making. As a byproduct of doing that, we also are able to close significant compliance gaps,” Osunsade says.
The National Aquarium joins a growing list of organizations whose HR teams are concerned about tougher regulatory enforcement and the threat of lawsuits, according to experts. Topping the list of worries are disputes over wages and hours, often revolving around the proper classification of workers. Ensuring correct worker classification by employers has been a priority of the Obama administration.
Complying with federal guidelines on pay for hourly employees sounds simple, but can be quite complex, says Reid Bowman, the Baltimore-based general counsel with ELT Inc., a San Francisco company that provides online legal and compliance training to corporations.
Bowman says frontline managers generally have a poor conception of their company’s pay practices. As a result, managers make “deals” with employees on how and when work gets done, possibly offering them extra time off in exchange for working late or even answering work email during off-hours. “The problem with that arrangement is it may violate the law,” Bowman says.
Wage-and-hour disputes constitute the single-biggest compliance worry for HR executives, Bowman says. Of the 4,152 employment-related class-action lawsuits filed in 2010, wage-and-hour disputes accounted for 91 percent (3,785). “This is the 800-pound gorilla in the room. Finally, organizations are starting to pay attention and put together strategies to make sure this issue doesn’t darken their door.”
ELT enables organization to use its internal learning management system, or LMS, for mandatory compliance training. ELT has seen demand for its LMS-based compliance training pick up in recent years as more and more companies awaken to the risks of noncompliance, especially amid a heightened regulatory environment at the federal, state and local levels, Bowman says.
Other technologies are emerging to help companies dot their I’s and cross their T’s. According to a report by Aberdeen Group, a Boston research and consulting firm, more and more organizations are beginning to implement software for automating workforce schedules. Of the 200 organizations surveyed for the report, titled Workforce Scheduling 2011, nearly 25 percent cite adherence to collective-bargaining agreements and federal regulations as key drivers for using the technology.
In addition to complying with wage regulations, contractors doing work for federal, state and local governments face a different set of regulatory hurdles, especially pertaining to workforce diversity. The Office of Federal Contract Compliance Programs, part of the Labor Department, last year intensified its scrutiny of contractors. It initiated more on-site investigations and hired more than 200 compliance officers “to conduct more comprehensive compliance evaluations and increase enforcement efforts” regarding affirmative action-based hiring of women, “underutilized minorities,” and the disabled, as well as pay equity, according to the agency’s 2012 budget request.
State agencies across the country are following the Fed’s lead, imposing new requirements on contracting businesses. The aggressive regulation has contractors on the alert. “The industry as a whole is seeing closer, more stringent oversight,” says Jason Zins, the HR director for Minneapolis-based Shafer Contracting Co., a heavy-construction firm.
Zins’ company is an early adopter of a new Web-enabled recruiting application, Diversity Outreach, aimed at construction, mechanical and engineering firms. The software is part of a broader candidate acquisition and management system provided by Des Moines, Iowa-based BirdDog and is designed to help contractors meet Equal Employment Opportunity and Affirmative Action mandates.
Like the National Aquarium, Shafer Contracting is trying to wring business value from compliance. The BirdDog application helps Shafer cast a wider net for diversity candidates. “We’re getting more qualified candidates than we have in the past,” Zins says.
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