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Every company has a duty to keep their employees safe. The HR compliance process is an important part of that duty.
As an employer, you have to comply with different laws and regulations depending on where you operate. Noncompliance leads to consequences like fines, a loss of trust, and even litigation—which means navigating compliance should be on every HR team’s list.
Here’s a guide to HR compliance and how to implement it across your company.
What is HR compliance?
HR compliance refers to the process of following applicable labor laws and regulations. Typically, HR handles compliance, though legal teams and compliance-specific consultants sometimes fulfill this role. The goal is to create effective workplace safety strategies and stay up to date with regulations as they evolve to avoid legal risks, fines, and damage to your company’s reputation.
Biggest HR compliance issues
Here are some of the most common compliance challenges HR teams encounter:
Employee misclassification
There’s a difference between employees and independent contractors, and getting it wrong—also known as misclassification—can lead to a slew of repercussions. For example, a full-time employee who isn’t properly classified as full-time might miss out on certain benefits and protections, and their employer could face fines and back taxes.
Discriminatory hiring practices
HR teams need to adhere to anti-discrimination laws such as the Civil Rights Act and the Americans with Disabilities Act. That means job descriptions have to be non-discriminatory and free of unbiased language. Focus on the applicant’s skills and experience and avoid asking personal or irrelevant questions.
Inaccurate payroll and tax payments
Incorrect wage calculations, improper tax withholdings, or other payroll processing errors can go against the Fair Labor Standards Act (FLSA) and certain state wage laws, leading to fines and other consequences. Make sure your payroll system is accurate and reliable, and flag issues as soon as they arise.
Unsecured documents and processes
When they get hired, employees hand over sensitive personal information, and it’s HR’s job to keep that information safe. Implement strict processes and use HR management software to secure physical and digital records and make sure only relevant parties have access.
Improper onboarding or orientation
The onboarding process can get complicated, but make sure it’s organized, clear, and fair. U.S. employers need to make sure new hires provide the right documentation, including Form I-9. Onboarding is also the perfect opportunity to educate employees on the systems you have in place to comply with laws and regulations.
Illegal background checks
Background checks are important, but you have to approach them the right way. Make sure they adhere to federal and state regulations. Get proper consent, provide necessary disclosures, and use background information fairly. It’s also a good idea to familiarize your HR team with the Fair Credit Reporting Act (FCRA) and other relevant laws.
Why is HR compliance important?
Business always carries risk, and that risk grows with every employee you hire. You have to adhere to regulations like Occupational Safety and Health Act (OSHA) standards, remote worker laws, and international tax standards, which gets complicated.
Create a robust HR compliance policy to avoid costly legal penalties and build a safe workplace. Here are the benefits:
- Mitigates legal risks: A robust HR policy protects your business from fines and lawsuits by adhering to employment laws.
- Promotes safety: An HR-compliant business promotes workplace safety by following all applicable safety regulations.
- Supports fair practices: HR policies foster a healthy workplace when they comply with anti-discrimination and labor laws.
- Enhances risk management: HR has a duty to manage risks related to workers’ compensation and other liabilities.
- Avoids financial penalties: A carefully managed policy prevents costly penalties that burden your business.
- Maintains a business’s reputation: Compliance in HR helps your company build a reputation for treating employees fairly and following the law.
💡 Check out this webinar on global hiring and compliance with Oyster's HR and legal experts.
HR compliance best practices
Here are some best practices every employer should follow for a safe and productive workplace:
Conduct a compliance audit
HR policies and procedures always have gaps. Audit your compliance efforts whenever you can to make sure you’re still following laws and regulations and avoid problems before they escalate.
Stay current with new regulations
At the federal, state, and local level, labor regulations change. Make sure your HR team knows to look out for adjustments through trusted resources like government websites, industry publications, and legal advisories. When possible, encourage team members to attend seminars and training sessions to stay up to date.
Practice policy documentation
Document all HR policies and practices and make sure every employee has access to them—especially new hires. That way, they know their rights and responsibilities from the start and are less likely to misunderstand. HR compliance services can help you with this step and keep your documentation thorough and up to date.
6 HR compliance laws employers should know
If you’re hiring employees in the U.S., here are some of the fundamental HR laws and regulations you need to know:
1. Fair Labor Standards Act (FLSA)
The FLSA defines crucial labor laws like minimum wage, overtime pay, and employee classification (full-time vs. part-time and exempt vs. non-exempt). To comply, keep accurate records regarding payroll, working hours, and other regular processes.
2. Family and Medical Leave Act (FMLA)
Under the FMLA, eligible employees get up to 12 weeks of unpaid leave for specific family and medical reasons without losing their jobs. This regulation should be clearly outlined in your documentation so employees understand who’s eligible and when.
3. Occupational Safety and Health Act (OSHA)
Every employer needs to follow OSHA’s workplace safety and health standards to provide a safe work environment. Report workplace injuries and illnesses accurately and promptly.
4. Title VII of the Civil Rights Act
Employers can never discriminate based on race, color, religion, sex, or national origin. Implement fair hiring practices and maintain a safe workplace for all.
5. Affordable Care Act (ACA)
Under the ACA, employers have to provide health insurance to certain employees and report coverage details to the IRS.
6. Americans with Disabilities Act (ADA)
Similar to the Title VII of the Civil Rights Act, the ADA prohibits discrimination against individuals. It also asks that employers provide reasonable accommodations when applicable.
HR compliance checklist
Here are some of the essential parts of a robust HR compliance policy:
- Onboarding: A comprehensive onboarding process involves the completion of all necessary documentation, orientation on company policies, and training on compliance requirements.
- Employee handbook: Develop a detailed employee handbook outlining company policies, procedures, employee rights, and responsibilities. Make it easily accessible to all employees.
- Benefits: Clearly define and communicate employees’ total compensation. Benefits may include health insurance, retirement plans, and leave policies. Ensure compliance with applicable laws, such as the Affordable Care Act (ACA).
- Compensation: Establish fair and compliant compensation practices, including accurate classification of employees, adherence to minimum wage laws, and proper overtime pay calculations.
- HIPAA and OSHA Regulations: Implement policies to comply with the Health Insurance Portability and Accountability Act (HIPAA) for protecting health information and the Occupational Safety and Health Administration (OSHA) standards for workplace safety.
- Contracts: Draft and maintain compliant employment contracts, including terms for fixed-term, permanent, and contractor agreements. Regularly review and update all contracts to comply with changing laws.
Ensure compliance across 180+ countries
From hiring to offboarding, you need to encourage HR compliance throughout the employment lifecycle—especially when you’re hiring international workers.
Oyster handles HR compliance and provides localized benefits in over 180 countries so you can hire from anywhere. Oyster’s intelligent, automated service streamlines HR tasks and provides locally and globally compliant payroll so you and your employees can rest assured everything’s in order.
Explore how Oyster boosts global compliance.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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