The importance of HR Compliance

HR Compliance

At the centre of any organisation is the human resources (HR) function. The HR department focuses on identifying, hiring and retaining people with the right skill sets and qualities to execute the organisation’s strategy and achieve its goals. Given the importance of HR compliance, it is an important player in the organisation’s compliance structure.

Organisations are governed by numerous laws and regulations spanning employment relationship. HR compliances, hence, becomes one of the most important aspects of an organisation where compliance control and compliance management is an absolute necessity. Compliance breaches can become very costly in terms of money, reputation and more.

To start with compliance management in HR practices, there are fair labour regulations in every country, state and sector that offer mandatory regulations and guidelines on minimum wages, working conditions, leave policies, maternity leave, employee rights, overtime pay, allowances, gratuity etc.

A breach in any of the stated aspects can be hazardous to the organisation. So, how does one go about creating and executing HR compliance? There should be a detailed process that defines both individual and group behaviour to ensure the organisation’s laws and policies are followed.  During the time of onboarding an employee, he or she should be given the walkthrough of these laws, policies, penalties and practices by the HR team. Merely writing and signing policies gets you nowhere. Established policies must be effectively communicated periodically.

To ensure this compliance is followed properly, periodic and stringent audits are necessary. Internal audits can unearth financial and reputational risks. All such audits can be incorporated with a pan-organisational tool/platform for compliance management. Effective handling of these practices will remove legal liabilities.

If we look at examples, it would be better to figure out HR functions. Let’s say there is a planned lay off in an organisation. There are strict regulations governing these actions. For example, someone who has applied for maternity leave cannot be terminated just like that. That would be an HR compliances breach. If an employee is eligible for overtime pay, it needs to be done then and there. There are many such common laws in place in regards to compliance. These payroll compliance issues are much more than requesting an employee to fill out an extra form in their intake packet or fixing an error with an employee’s time entry stamp.

HR compliances are associated with legal, safety and payroll processing as HR is one composite function. The state and the centre have their own set of rules. It should follow all the rules applicable to them and to the organisation. Very importantly, a dedicated compliance management tool that automates checks, alerts, regulatory processes and updates are very important. There needs to be a person educated in HR compliances who can act as the compliance point of contact in case of issues. Today, there are 3PL vendors who specialise in compliance management. These are experts who will take care of your compliance management with specialised tools to ensure you never have a breach in your organisation. Statutory Laws are quite rigid and they span every HR aspect from employee search, write-up, probation, and termination. And everything else in between.

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