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Human capital management is about making the most of your workforce through strategy and data. As a human resource professional, part of your role in this management process is making sure your company remains in compliance with the laws and regulations for employers in your industry. At times, this part of the job can be overwhelming.
If you are working within a growing business, your HR department will likely have long checklists of actions that are required to meet certain legal standards. While these may seem tedious, they are necessary to reduce the risk of incurring compliance-related fines. To automate this process, many HR departments will use an HCM software to manage important employee data, create necessary workflows, and submit compliance reports in different areas.
With a variety of choices on the market, it can be tough to know what features to look for in an HCM product. Many don’t offer all features together in one place. In this post, we’ll cover a list of important compliance workflows that can help your company find the best HCM solution for you.
Why is Compliance So Important?
First, let’s talk a little more about compliance in the workplace. When companies talk about HR compliance, they are usually referring to larger groups of legal policies that businesses are required to follow with regard to managing employees. These laws regulate business practices for things like payroll, benefits, employee relations, recruitment, jobsite safety, and more. All these have standards that companies must comply with.
Put simply, it’s important to comply with these regulations to avoid penalties and large fines. Depending on the type and severity of the violation, your company can face millions of dollars in fines or even legal ramifications due to noncompliance.
More importantly, many compliance laws have been put in place to protect the workforce from being polluted with things like racism, sexism, unfair hiring practices, underpayment, and otherwise toxic workplace habits.
What is Compliance Software?
In the past, much of the work required from human resource departments was completed by hand, requiring physical paperwork, meetings, observations, and a lot of filing cabinets. Over the years, Human Resources as a field has evolved to use technology as a more efficient way to manage people. HCM and compliance software automates the workflows, checklists, reporting, filing, and documentation required to help your business remain in compliance.
While many programs are specialized to one area of reporting, the best compliance software will also include HCM components like workforce analytics, timekeeping, and payroll features. They will also attempt to consolidate any separate data banks into one central hub.
Not only does this make accessing employee data much simpler, but it can also help you understand and manage your workforce from multiple angles by combining data sets. For instance, we created Data Grid as part of our HCM package. This feature allows you to gather a wide variety of data and reconfigure it in ways that helps your HR department gain valuable insight and spot trends in employee performance, attendance, and more.
By using an HCM or compliance software, companies are notified of compliance risks and requirements automatically. With this, they can issue tasks to certain departments or employees so they can take the required steps. Since workplace laws can also change very rapidly, compliance software can keep your company updated on new requirements for safety, training, and other areas. This helps avoid many of the common errors and omissions that occur with manual processing.
The Most Essential Workflows for Compliance
Many compliance programs are only specialized in one area of reporting, and companies often have to use multiple programs to automate all necessary workflows. On the other hand, Criterion’s base HCM software package automates reporting for multiple areas of compliance with room to customize and add new features.
That said, there is a lot of legislation to comply with in the workplace, and it can be overwhelming to make sure your business is covered. No matter how you choose to implement technology in your HR department, you will want to be sure your HCM solution covers payroll, benefits, employee relations/recruitment, and health/safety.
Payroll
Payroll laws are serious. While it may seem obvious that this is one area that requires a lot of attention, the process of running payroll may be more involved than you think. To start, the Fair Labor Standards Act (FLSA) places criteria on employee status, payday frequency, paid leave, and overtime pay. To avoid fines (and angering your employees) you will want to make sure you run payroll in accordance with federal, state, and local laws.
This also means paying taxes as an employer, such as the FICA tax that covers things like social security and Medicare. You will also be responsible for unemployment tax (FUTA). Since there are depositing and reporting schedules for both of these, a good program will send you notifications or even make the deposits on your behalf when the time comes.
You may also have to account for union rules for employees in certain trades. This means that you may need to pay them differently based on local union rates or fringe benefits. These employees must also pay union dues on each paycheck, and you will be responsible (like taxes) to deduct this from their pay each period.
A good HCM software will include features such as time tracking, pay rate tables, and automatic depositing, all of which facilitate payroll compliance. Custom programs could also help companies file the proper forms for new employees, such as IRS forms W-4 and W-2 and direct deposit authorization forms.
Benefits
Closely related to payroll laws, benefits can also be tricky. Not only do you have to comply with some other parts of the FLSA, but you also have to know when certain employees are eligible for benefits as part of the FMLA (Family and Medical Leave Act). While you are not required to provide paid leave under this act, it does require job protection during things like the birth of a child, the adoption of a child, or recovery from a serious injury or illness.
In addition, the Affordable Care Act (ACA) mandates that all employers offer an affordable health insurance benefit for full time employees. You will need to have documentation for each employee stating whether they chose to accept or waive the benefit. If they choose to waive it, this record will also need to provide a reason why. HR technology can help automate this documentation and keep it stored securely in a database for employee files.
There are also laws that determine the maximum pre-tax contributions for Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). To save yourself the headache of catching this on each paycheck, you could have a program that notifies you when an employee exceeds this amount.
Aside from these, there are things like the Employee Retirement Income Security Act (ERISA), the Children’s Health Insurance Program Reauthorization Act (CHIPRA), and the Mental Health Parity and Addiction Equity Act (MHPAEA). You will need to comply with these regulations as well as any other new workforce laws that come into place.
Employee Relations and Recruitment
Employers must also have records demonstrating an ethical recruiting process and healthy conduct among employees. This type of compliance helps fight discrimination in the workplace and illegal hiring practices.
The EEOC (Equal Employment Opportunity Commission) requires that employers show a certain level of diversity and effort toward minority groups during the hiring process. This applies especially to contractors (both federal and state) under the OFCCP (Office of Federal Contract Compliance Programs).
Affirmative Action Plans (AAPs) will also benefit from checklists and formal documentation of steps taken to make the required opportunities. To make things easier, you will likely want an HCM program with workflows that help prepare for audits in these areas.
When an employee is starting at a company, the onboarding process usually includes a packet of standard employment forms. Your HCM software can file and keep track of important documents such as the W-4, direct deposit authorizations, and I-9 documents that need to be filed within three days of the employee’s start date.
During onboarding, you will also need to provide diversity and sexual harassment training. A custom HCM solution can help you train your employees with engaging curriculum while documenting their formal completion of the required modules.
In addition, you will likely want to have performance metrics and other workforce analytics that help empower you to suggest promotions for merited employees and track talent in certain departments. Many of these things have regulations, such as in the examples listed above.
Health and Safety
One of the biggest concerns for many industries is in health and safety compliance. HR departments play a huge role in areas like workers’ compensation and OSHA regulations that are designed to help ensure a safe work environment.
An ideal solution is to create workflows that ensure all safety guidelines for the industry are being followed and that all equipment is up to code. Documentation of safety measures is essential here. There should also be a ticketing system that helps your company record accident reports. Depending on the level of severity, you will need to report these incidents in different ways and take certain actions to prevent them in the future.
Onboarding, safety training, improved equipment, and proper signage are all areas that employers need to consider when creating a safe work environment. While some of these regulations will vary by state and industry, an HCM solution will help by creating checklists to ensure that nothing is overlooked.
Conclusion
As legislation for the workplace evolves at a rapid pace, companies will need to put in more effort than ever before to remain in compliance with the current standards. With so much on the schedule for HR departments already, things can often be overlooked or completed incorrectly.
In today’s world, the penalties for these mistakes aren’t cheap. That’s why you want to have well-trained and educated HR professionals on your team to make sure everything is running well. However, manual reporting can be impractical and time-consuming.
While many HCM programs can help you handle part of your compliance requirements, few offer as many types of reporting as Criterion. With tedious work out of the way, you can spend more effort building a more powerful workforce. HCM software is a must for unlocking this potential, but a custom solution is always better. There are a lot of great features built into our program, and there are even more waiting for companies that want a solution tailored to their needs.
Request a demo of our solution today to see what we can help you accomplish for your company.
