HR: 5 Human Resources Compliance Mistakes You Don’t Want to Make

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It’s easy for small and mid-sized organizations to focus so much attention on day-to-day business issues that they forget to keep tabs on an area that could be a serious and costly liability – human resources compliance. Small business owners may not have the resources to properly dedicate to all of the issues involved with human resources compliance, but it doesn’t mean they’re any less liable for them. Let’s have a look at some of the top compliance-related issues companies may face.

  1. Employment discrimination/sexual harassment training. A recent survey by Chubb Group of Insurance Companies of 300 privately-held businesses showed that only 23% of small businesses provide training in these areas of workplace harassment. Yet employee turnover can lead to potential wrongful termination lawsuits when harassment is present in the workplace. Studies have shown that winning plaintiffs receive, on average, judgments of $500,000. Even if the defending company wins the lawsuit, it could still cost them up to $85,000 in legal fees.
  2. Staying current with regulations/law. New and existing companies need to keep up with the constantly changing and varying layers of regulation at the federal, state, and local level.  Size matters, industry requirements change, keeping up with the multi-faceted regulations and new laws can be overwhelming  and costly.   Not complying can be even worse.
  3. Lack of qualified guidance. Many smaller companies have an Office Manager or HR Administrator that tackles every human resource issue under the sun. These issues may include compensation, benefits, legal issues, staffing, HRIS, training, and more. While it’s possible to know a little about all of these areas, it’s virtually impossible to be the needed expert in all of them. Lack of knowledge is never a defense when failing to meet the standards of an audit with the Internal Revenue Service or the Department of Labor. If the company human resource radministrator makes one wrong move regarding important employee issues (particularly compensation, benefits, workers compensation and the like), it can bring tremendous consequences on the business and its owners.
  4. Piles of paperwork. Employees equal tons of paperwork. Hire someone new? Enroll someone into the benefits program? Is there a change in an employee’s compensation, benefits, or performance? All of it requires the right paperwork and thorough follow-through to ensure everything is filed properly and within the legally-required timeframe. As these documents move from department to department within the organization, the chance of mistakes grows. And the more employees a company has, the more opportunities for the mistakes to compound. Not only can this affect a company’s bottom-line, but it can also take a toll on employee morale. (If you don’t think so, try taking out incorrect deductions on their next paychecks, and take note of their responses.)
  5. Lack of coordination. Small business owners often use different vendors to handle payroll, benefits, and human resources. The data from benefits and HR is essential for payroll to make the proper deductions, so what happens when communications don’t run smoothly? The small business owner has to play the middleman to get things back in line, costing him or her valuable time. Even if the owner uses a payroll software system, it still doesn’t address the need to integrate the payroll , benefit, and HR functions.

Do you have strategic business development related or State of California Human Resources questions? Options4Growth is a world-class team of San Francisco Bay Area based HR professionals with the specialized skills and breadth of expertise to develop and lead your Human Resource compliance and strategic growth initiatives. To learn more about how we can save you time, money and resources, email us today.