The Essential Checklist for HR Compliance

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In the ever-evolving world of employer regulations, maintaining legal compliance is crucial for organizations of all sizes. Human resources compliance refers to the adherence to the various laws, regulations, and best practices that govern human resources management. 

Ensuring compliance not only safeguards employees’ rights but also helps create a fair and safe work environment while minimizing legal risks for the organization. In this article, we will explore the key components, duties, and metrics related to HR compliance, providing valuable insights for HR professionals striving to maintain a compliant workplace.

What is an HR Compliance Checklist?

A Human Resources compliance checklist is a tool to help HR professionals ensure adherence to laws, regulations, and best practices. A compliance checklist should outline the necessary steps for HR professionals to follow to ensure their organization’s human resources management is in-line with applicable laws and regulations. It serves as a practical tool for HR departments to maintain compliance with various employment laws, avoid costly fines or legal actions, and create a fair and equitable workplace for all employees. 

As with any checklist, it may not be comprehensive for every situation and location, and individual HR departments need to do their own due diligence to meet both their organization’s needs and local laws and regulations.  

What are the Components of HR Compliance?

While we cannot cover every possible compliance topic, the core components of human resource compliance include the following critical themes: 

Employment Laws and Regulations

HR professionals must be well-versed in federal, state, and local employment laws, such as the Fair Labor Standards Act (FLSA), Title VII of the Civil Rights Act, and the Family and Medical Leave Act (FMLA). Staying up-to-date with changes in legislation is crucial to maintaining compliance. Unfortunately, this area of knowledge is constantly evolving as new laws are passed and old ones amended. When necessary, engage legal counsel to clarify any gaps in your knowledge. 

Hiring and Recruitment 

Ensuring Equal Employment Opportunity (EEO) compliance is both vital and ethical during the hiring process. This includes creating non-discriminatory job postings, tracking applicants fairly, conducting background checks and drug testing in accordance with the law, and adhering to immigration regulations. 

This may also mean taking a hard look at “the way it’s always been done around here” and ensuring your organization is not, however unintentionally, perpetuating any undesirable hiring practices.  

Employee Classification 

Proper employee classification sets the tone for company-employee relations and expectations. Careful classification of employees as exempt or non-exempt according to the requirements of the Fair Labor Standards Act is crucial to avoid wage and hour disputes. Additionally, accurately distinguishing between employees and independent contractors is essential for compliance with tax and employment laws.

Wage and Hour Compliance

Minimum wage and fair compensation are frequently in the news and are often a source of contention for organizations when this area is not managed carefully.  HR professionals must ensure compliance with minimum wage laws, correctly calculate overtime pay, adhere to meal and rest break requirements, and maintain accurate time and payroll records. Clearly defining expectations around wages, overtime, and breaks creates a clear expectation for both employers and employees and helps prevent abuse in either direction. 

Employee Benefits

Employment perks or fringe benefits, as employee benefits are sometimes called, are services provided to employees over and above their salaries and wages. These benefits may include medical insurance, overtime compensation, paid vacation time, retirement plans and contributions, profit sharing or bonus programs, and other benefits. Within these types of programs are a number of federal and state regulatory requirements that employers must carefully adhere to. These include compliance with the Affordable Care Act (ACA), administration of retirement plans under the Employee Retirement Income Security Act (ERISA), adherence to the Consolidated Omnibus Budget Reconciliation Act (COBRA), and proper management of Family and Medical Leave Act (FMLA) and others. 

Workplace Safety and Health

The importance of implementing a safety and health management system in the workplace cannot be overstated. Employers are responsible for creating a safe and healthy environment for their employees. Workplace safety policies and systems should be tailored to the specific needs and hazards of the business, involving managers and employees in its implementation. 

The key components of implementing a successful safety system include: commitment from management, employee involvement, hazard identification and control, compliance with regulations, training, fostering a culture of safety, and continuous improvement. 

At times, engaging an external consulting source or product to help implement a safety system effectively may be the most effective pathway for organizations that are looking to improve their workplace safety.

Organizations will have different requirements based on their particular industry. However, nearly all employers must adhere to the Occupational Safety and Health Administration (OSHA) regulations. 

Additionally, each state or territory has additional workplace safety regulations and standards that must be followed by employers and employees. It is important that employers implement and maintain a regular training and review process to ensure these standards are met. 

Anti-discrimination and Harassment Policies

Workplace safety extends to more than just physical safety and OSHA guidelines. Setting the right tone in terms of workplace culture, tolerance, and the value of the individual is an important part of creating and maintaining a compliant and productive workplace. 

Implementing and enforcing anti-discrimination and harassment policies are an essential part of that process, and help maintain a respectful work environment. Setting the bar high via leadership behavior, communicating expectations and corrective measures clearly, and establishing procedures for reporting and investigating complaints are crucial components of this process. 

While anti-discrimination training programs are often resisted or not taken seriously,  providing employees with regular sensitivity training can have a major impact in creating a safe workplace and will help your organization avoid larger harassment-related challenges down the road.  If you do not have an inhouse harassment prevention training curriculum already, we recommend perusing the various free and paid packages offered by WiseDaily.

Employee Privacy and Data Protection

Privacy in the context of employee-employer relationships can be a murky gray area. Organizations have to walk the fine line of protecting intellectual property and ensuring employees are undertaking the work they are hired to do, all while respecting employee privacy and being good stewards of sensitive PII employee data.   

Employers have considerable legal latitude in monitoring employee activity while on the job, including digital communications (phone, internet, and email) and, in some cases, physical location. This sort of monitoring is not without its risks, however. In addition to engendering a low-trust environment, employers may stray into challenging legal territory if monitoring crosses out of the workplace and into so-called “lifestyle discrimination”. Various states have adopted more rigorous protections with North Dakota, California, New York, and Colorado implementing the broadest regulatory protection of employee privacy. 

Employers must comply with laws and regulations related to the collection, storage, and use of employee data. This involves protecting employees’ personal information and respecting their privacy rights. 

Compliance with applicable privacy laws and regulations, implementing clear policies for handling personal and sensitive employee information, transparent communication to employees regarding monitoring, and regularly reviewing current privacy policies are all critical steps in ensuring a balanced employee privacy policy. 

Recordkeeping and Reporting

Maintaining complete and accurate employee records is vital for HR compliance. Organizations must also adhere to reporting requirements and conduct regular audits to ensure the accuracy and compliance of their records. 

Employers covered by the Fair Labor Standards Act (FLSA) must keep certain records for each nonexempt worker. While there is no required format for the records, they are required to include accurate identifying employee information and data about the hours worked and the wages earned. 

Below is a general guideline for information that should be maintained about employees by the employer, though employers should check with their state and local regulations for the most complete requirements:

• Employee’s full name
• Social security number
• Full address
• Birth date
• Sex 
• Occupation/Role the employee is employed under
• Time and day of week when employee’s work week begins along with the hours worked each day and total hours worked each week
• Employee’s wage basis
• Regular hourly pay rate
• Total daily or weekly straight-time pay
• Total weekly overtime earnings 
• All employee pay additions to or deductions 
• Total wages paid per pay period
• Date of payment and the dates of the corresponding pay period 

Additional items that are wise to track are: 

• Paid or unpaid time off during the pay period 
• Employee trainings, on-site or off-site 
• Records of any disciplinary actions 
• Records of any complaints submitted by the employee and responses from the employer to those complaints

A minimum retention period of at least three years is required for many payroll-related records. However, longer retention may be advised, and employers will typically follow a ‘7-year rule’ for retaining employee records after employee termination.  Some record classes, such as OSHA toxic substance exposure records and OSHA-related medical records, require a retention period of 30 years. 

In the age of digitization, cheap digital storage, and easy data encryption, retaining records is relatively frictionless and inexpensive. As a result, employers should err on the side of retention when determining which records to discard. 

Labor Relations

Labor relations are a crucial component of HR compliance, especially for organizations with unionized workers. The management of labor relations involves understanding and complying with various regulations, particularly those outlined in the National Labor Relations Act (NLRA). Enacted in 1935, the NLRA is a key piece of legislation that governs the relationship between employers and labor unions in the United States.

The NLRA is primarily concerned with the rights of employees to organize into trade unions, engage in collective bargaining to negotiate for better terms and conditions at work, and take collective action including strike, if necessary. It also defines and prohibits certain conduct by employers (and unions) known as “unfair labor practices.” These include actions such as interfering with employees’ rights to organize, refusing to engage in good faith bargaining, or discriminating against employees because of their union membership.

Compliance with the NLRA can be a minefield for careless employers and requires that employers respect the rights and abide by the rules set out in the Act. This involves providing union representatives access to workplaces, providing relevant information for bargaining processes, refraining from anti-union activities or sentiments, and more. Violations of the NLRA can result in penalties, including fines, orders for remedial action, and in severe cases, criminal charges.

It’s important for HR professionals to stay abreast of their obligations under the NLRA, especially as labor law can change and evolve. Regular training, comprehensive policies, and proactive communication can help organizations ensure compliance, foster positive labor relations, and maintain a harmonious workplace environment.

Immigration and Work Authorization for Employers

Employers play a vital role in upholding immigration laws in the context of employment, as outlined by the Immigration Reform and Control Act (IRCA) of 1986. One of the key aspects of the IRCA is that employers are required to verify the identity and employment eligibility of all individuals they hire, ensuring that their workforce is authorized to work in the United States.

To comply with these requirements, employers must complete a Form I-9, Employment Eligibility Verification, for every employee hired after November 6, 1986, regardless of the employee’s citizenship status. The Form I-9 requires that the employer and the employee provide specific information and documents to prove the employee’s identity and work authorization.

In addition, employers must retain these forms for a specified period, either for three years after the date of hire or for one year after employment is terminated, whichever is later. Frequently, employers may opt to maintain these records longer, as a precaution. 

It’s important to note that employers can face civil and criminal penalties for knowingly hiring or continuing to employ individuals who are not authorized to work in the United States.

It is an important part of HR management to comply with immigration and work authorization requirements, and HR professionals should be familiar with the IRCA regulations and ensure that the proper documentation and record-keeping processes are in place. Regularly scheduled audits of I-9 forms and a documented onboarding process can help catch and correct any errors or omissions, ensuring compliance and mitigating the risk of penalties.

Performance Management

While not regulated by specific laws, performance management processes must be fair and non-discriminatory. There is a great deal of latitude afforded to employees where performance management and reviews are concerned. 

To optimize this portion of human resource management, the performance review process should be clearly defined, communicated and fairly applied to all employees. Having a clear process in place helps ensure organizations comply with best practices and avoid discrimination or unfair practices.

Compliance Strategy for HR 

The role of the HR department extends far beyond merely hiring and firing. It plays a critical role in ensuring compliance to protect both the organization and employees. 

A robust compliance program requires several key strategies that work together to ensure that an organization meets its legal and ethical responsibilities, and does so in a way that improves the workplace and protects all employees. 

Leadership Commitment

The first element, leadership commitment, sets the tone for the entire compliance program. Attitudes within the organization will be a reflection of attitudes among leadership. The key to a successful safety and compliance-minded culture is the degree to which an organization’s leadership genuinely embraces a commitment to compliance. 

Genuineness here is critical. Both lack of enthusiasm and a false sense of disingenuous enthusiasm will be equally undermining to compliance efforts. 

Leaders who set clear expectations, provide the necessary resources for the compliance program, and lead by example will find their efforts most rewarded.

Risk Assessment

Risk assessment is the process of identifying and analyzing potential issues that could impact the organization’s ability to comply with its legal and ethical obligations. 

Assessing risk involves understanding the laws and regulations that apply to the organization, assessing the organization’s exposure to risk, and determining the measures needed to mitigate these risks.

Engaging outside resources, including risk management experts who can provide industry and insurance guidance, is a worthwhile effort for most businesses. 

Policies and Procedures

As part of the compliance program, the organization should develop and implement clear internal policies and procedures. 

These should cover all areas of compliance, providing guidelines for employees to reference and follow. Policies and procedures should be easily accessible to all employees and regularly updated to reflect changes in laws and regulations.

Training and Communication

Policies and compliance requirements without adequate training are like an airplane without wings. Training and clear internal communication are vital to ensuring employees uphold compliance and safety initiatives. Anything less is a waste of company resources and employee time. 

HR is typically responsible for providing or facilitating training on various compliance topics such as sexual harassment prevention, diversity and inclusion, workplace safety, and data privacy. Training helps to ensure that employees understand the organization’s policies and their responsibilities. Additionally, HR should provide resources to support employees in understanding and complying with these policies. This could be through handbooks, intranet resources, posters, or regular communication.

Training should be tailored to the employees’ roles and should be engaging and practical. Boring or poorly executed training is nearly as bad as no training at all. Managers should always sit through the training first, whenever possible, to improve and hone the message before it is presented to employees.  

Any additional training required for employees to safely and effectively perform their jobs should be prioritized and documented in employees’ individual files. 

Monitoring and Auditing

Monitoring and auditing ensure that the organization’s policies and procedures are actually being followed and that the compliance program is effective. Like any business initiative, without regular audits an organization will have no idea if their goals are being met. 

Monitoring strategy should include an annual review of current policies including quarterly review by leadership to ensure policies, risk management, and compliance efforts are being maintained.  

Response and Prevention

Compliance policies and programs are pointless if actual compliance violations are not addressed, and a critical part of any compliance program is responding to compliance issues and preventing future violations. 

HR professionals are typically responsible for developing, implementing, and enforcing the organization’s policies and procedures. These policies and procedures should be clearly documented, communicated to all employees, and applied consistently to prevent any form of discrimination. 

This includes having a well-published channel for reporting compliance problems, as well as documented processes to address compliance issues. 

At times this process will need to include adjusting policies, providing additional training around problem areas, and taking disciplinary action where necessary.

Protecting Employee Rights

While the human resources team is often focused on maintaining organizational efficiency and policy, another critical duty under the HR umbrella is to ensure that employee rights are protected. HR and organization leadership should understand and apply laws related to equal employment opportunity, wage and hour standards, family and medical leave, and others. HR should also ensure that there are safe, confidential means to report and address complaints from employees. Additionally, protecting employees from retaliation when issues are reported is a critical safeguard that an organization must maintain. 

Staying Up-to-Date with Changes in Laws and Regulations

Laws and regulations related to employment are dynamic and can change frequently. It’s HR’s responsibility to stay abreast of these changes at the federal, state, and local levels and ensure that the organization adjusts its practices accordingly. This might involve subscribing to legal updates, attending relevant training or workshops, or consulting with legal experts.

These elements form the comprehensive compliance program pillars that help an organization uphold its legal and ethical obligations, minimizing risk and promoting a culture of safety and integrity.

What are KPIs for HR Compliance?

Key Performance Indicators (KPIs) are measurable values that demonstrate how effectively a company is achieving key business objectives. In the context of HR compliance, KPIs are used to measure and monitor the effectiveness of the organization’s human resources and compliance efforts.

Key Performance Indicators (KPIs) for HR Compliance

Effective KPIs for HR compliance could include metrics such as the number of audit findings, the percentage of employees who have completed mandatory compliance training, and the average time taken to resolve compliance-related complaints.

For instance, audit findings provide insights into areas of non-compliance, helping to identify areas for improvement. Fewer audit findings generally indicate a higher level of compliance. On the other hand, training completion rates indicate how well an organization is ensuring its employees are informed about compliance requirements. A high completion rate suggests the organization is effectively disseminating critical compliance information to its employees.

Another valuable KPI is the time taken to resolve compliance-related complaints. A shorter resolution time typically indicates that the organization has efficient processes in place to address compliance issues.

Using such KPIs, HR departments can gauge their performance in different areas of compliance and identify where adjustments or improvements are needed. Regular monitoring of these KPIs can help organizations stay on top of their compliance obligations and mitigate the risks of non-compliance.

What are HR Compliance Reports?

HR compliance reports provide an internal tool for documenting and monitoring an organization’s compliance to laws, regulations, and best practices. These reports provide an overview of an organization’s compliance activities, highlighting both the strengths and potential areas of improvement within their HR program.

Typically, these reports include information from audits, investigations, training, and corrective efforts. They often track numerous metrics, such as the number of employees who have completed required training, the results of wage and hour audits, the number of workplace incidents and how they were resolved, or the status of any ongoing investigations related to harassment or discrimination.

These reports not only serve as documentation of compliance for regulatory purposes but also provide valuable insights for the organization leadership. By analyzing HR compliance reports, organizations can identify patterns, gauge the effectiveness of their compliance program, and make data-driven decisions to improve their HR policies and procedures.

HR compliance reports also play a critical role in promoting transparency and accountability within an organization. By maintaining and reviewing these reports, HR teams can help their organizations stay ahead of potential compliance issues and foster a more inclusive, fair, and safe work environment.

What are the Core Compliance Rules and Regulations?

HR compliance involves adhering to a variety of rules and regulations that govern human resources management. Here, we touch upon a few key ones:

Fair Labor Standards Act (FLSA)

The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Key elements of this act include stipulating that non-exempt workers are entitled to time-and-a-half pay when they work over 40 hours in a workweek and setting the federal minimum wage.

Title VII of the Civil Rights Act

Title VII prohibits employers from discriminating against employees based on sex, race, color, national origin, and religion. It applies to employers with 15 or more employees, including federal, state, and local governments. Title VII also prohibits sexual harassment and sets forth guidelines for handling and preventing such incidents in the workplace.

Family and Medical Leave Act (FMLA)

FMLA requires employers of 50 or more employees to give up to 12 weeks of unpaid, job-protected leave to eligible employees for the birth or adoption of a child, to care for a spouse, child, or parent with a serious health condition, or to take medical leave when the employee is unable to work because of a serious health condition. It also provides certain military family leave entitlements.

Americans with Disabilities Act (ADA)

The ADA prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public. In the context of employment, employers are required to provide reasonable accommodations to qualified employees with disabilities unless doing so would cause significant hardship.

Occupational Safety and Health Act (OSHA)

OSHA ensures employee safety and health in the United States by working with employers and employees to create better working environments. It sets and enforces standards and provides training, outreach, education, and assistance.

Beyond these rules and regulations, HR professionals must also be aware of and follow state-specific laws that may impose additional or more stringent requirements. HR should also implement best practices for fairness, equal opportunity, and positive work environments, which may go above and beyond what is strictly required by law. HR compliance is a complex field, but by staying informed and proactive, HR can help organizations maintain a lawful, ethical, and positive workplace.

Having a Plan and Staying Informed

The importance of staying informed about HR compliance cannot be overstated. With ever-changing laws and regulations, staying current is a constant, ongoing effort that is essential for maintaining a strong and effective compliance program. This not only involves keeping abreast of new laws and changes to existing ones, but also understanding emerging best practices and trends in the industry.

Staying informed enables organizations to adapt and respond quickly when changes occur. It ensures that policies, procedures, and training programs remain relevant and effective. It also allows organizations to be proactive rather than reactive, helping to prevent compliance issues before they arise.

However, staying informed is only part of the equation. Regular review of the organization’s compliance program is equally critical. This involves conducting internal audits to assess compliance, reviewing policies and procedures to ensure they are up to date and effective, and evaluating training programs to ensure they are comprehensive and engaging.

Regular reviews provide an opportunity to identify potential areas of risk and take corrective action before problems escalate. They also offer insights into how the compliance program can be improved and evolved to better meet the needs of the organization.

In the world of HR compliance, the only constant is change. Staying informed and regularly reviewing your compliance program are critical steps in navigating this dynamic landscape. By doing so, organizations can ensure they remain compliant, protect their reputation, and create a safe, fair, and inclusive workplace for all employees.