What Is HR Compliance? Definition, Checklist, Best Practices, Key Issues

HR Compliance is as important as it sounds. It is one of the most crucial tasks of the HR function. The HR Compliance involves a set of statutory rules and regulations set by the government that must be followed in order to ensure employee wellbeing as well as company well-being facilitating 100% compliance.

What is HR Compliance?

HR Compliance is a legal framework that involves rules and regulations that an organization must adhere to protect the interests of employees and maintain a healthy employer-employee relationship.

The HR compliance includes policies and procedures that ensure that your employment follows the rules and regulations as imposed by the government. Naturally, failure to comply with this policy leads non-compliance resulting in hefty fines and penalties for the organization.

What are the Main Components of HR Compliance?

The HR Compliance is present in every step of the recruitment cycle, from when the candidate joins the company, his tenure there to the date he exits the organization. In India, there are three crucial stages involved-

1. Onboarding of new employees

The process of onboarding new employees comes with a set of rules and quite a bit of paperwork. This paperwork is mostly overlooked by the HR onboarding team to meet the compliance standards. The employee must abide by the policies of the company and the employer on the other hand must ensure that that documentation regarding to background checks, anti-discrimination and the employment of the candidate is in place.

2. Management of Employees

During the tenure of the employee in the organization, there are compliance laws related to working hours, wages, overtime, leave, compensation, and benefits that must be honoured by the employer and must abide by.

3. Employment termination

When an employee is exiting an organization, there are again certain compliance laws to follow related to notice period, severance pay and non-compete agreements.

There are a few types of compliances that HR teams must abide by-

4. Statutory compliance

This is a set of policies set by the government, to protect employees and the organization alike. For example, every employee in an organization must undergo POSH training (a training that brings awareness in matters like sexual harassment in the workplace). Similarly, there are some mandated tax cuts that employees are liable to pay like TDS and PF, both of which go into a form of savings account to be used later when in need.

5. Regulatory compliance

Apart from the rules provided by the government bodies, companies must also certain rules provided by the regulatory bodies that their industry falls under. For example, EPFO (employee provident fund organization) has their own set of rules and standard deductions of PF and VPF from salaries.

6. Contractual Compliance

It’s a part of the employment process for all employees to sign a contract with an organization, whether they are freelancers, independent contractors, or regular employees. As part of HR compliance, you must adhere to every rule and regulations as mentioned in the contracts.

Why is HR Compliance Important?

As an organization if you are hoping to stay on top of the game, preserve your brand reputation, operate smoothly, reduce attrition, and hold a good employee-employer relationship, HR Compliance is necessary.

1. Legal liabilities are kept at bay

Employers are required to abide by certain HR laws and regulations. Failing to do so will result in heavy fines and other penalties.

2. Protection of employees

There are a set of regulations put in place by the HR team as well as some that are dictated by the government bodies itself to protect employees from discrimination, harassment, and other forms of ill treatment in the workplace. Compliance with these rules is necessary for all employers and employees alike, failing which profound consequences are to be faced.

3. Creates a positive environment in the workplace

When there are a set of HR rules and regulations followed by everyone at the workplace, employers included, employees feel safe, secure, and valued. This boosts their productivity, reduces attrition and is a winning situation for the company.

4. Upholding brand reputation

As a business you must always make sure that you win the trust of your clients, customers, employees, and stakeholders. And to do that you must ensure that your business operations and practices fall well within the HR rules and regulations and that you abide by it at any cost.

What Comes Under the HR Compliance Checklist?

Human resource specialists use a HR compliance checklist in order to not miss out on anything important and to prepare for HR audits. These HR audits are beneficial for the organization as they help keep them in compliance.

Here is the HR Compliance Checklist every organization swears by:

1. Recruiting and interviewing

Compliance begins with recruiting. The first and foremost thing that a compliance checklist must include is information regarding the recruiting and interviewing process. Everything in the process must align with the job application and job description.

2. Hiring Procedures

The hiring process must be a well-rounded process ensuring that the right candidate has been selected for the position. The process must be executed step by step with the provision of offer letter, contracts, and the orientation program. During this process, the employee must be clearly conveyed about the compensation, benefits, legal requirements etc. this will promote a positive work environment.

3. Policies and procedures

A company follows a rulebook that has set policies and procedures that are defined to facilitate best work practices and smooth business operations. These policies and procedures are to be assessed from time to time and needs to be updated as required.

4. Safety

In the HR compliance checklist, it’s important to map out measures and implement protocols that protect employees from any workplace hazards. This creates and promotes a safe working environment for all employees as it helps avoid accidents, illnesses, and injuries. This will ensure more attendance of employees and higher productivity.

5. Employee handbook

As an organization, in the best interests of your organization as well as employees, there must be a proper code of conduct that everybody follows. Not only does this ensure a formal workplace environment where everyone is treated alike but can avoid unnecessary hassles and issues. An employee handbook must have dressing code policies that define what is allowed and what is not allowed for both genders, and other mandatory rules that employees must follow when in the workplace.

6. Training

There are certain things that your management should be aware of and must be trained to implement.

• Counselling and letting go of employees.
• Performance appraisals.
• Managing problematic employees.
• Trained in protecting employees against diversity issues and harassment.

7. Unemployment benefits

As an organization you must provide certain relief and benefits to employees that are terminated in case of low job performance. This excludes those employees who serve their notice period, availing all the benefits they are liable for and leave on their own accord. This is important not only on humanitarian grounds but also in terms of boosting your company morale and demonstrating commitment towards your employees which will drastically reduce attrition rates and boost productivity.

What are the Best HR Compliance Practices?

To help run your organization smoothly throughout you must make sure that you incorporate some essential HR Compliance practices. Some of them are-

1. Keep yourself updated of laws and regulations

When you curate your policy, make sure that you are updated of any changes in the rules and regulations and then craft the policy carefully. For example, every year there maybe changes made to the tax slabs by the federal union government. Keeping yourself updated manually can get difficult which is why it’s best to outsource your compliance services to an expert compliance services provider who understands exactly what your company needs to stay competitive and compliant.

2. Ensure that your HR policy aligns with compliance requirements

The HR policies and procedures crafted in your company does not only have the purpose of smooth running of operations but also must be developed in line with the compliance requirements.

3. Provide necessary HR compliance training to your staff

While you may have the perfect handbook of HR policies and procedures crafted and ready to go, don’t forget that the success of this implementation depends on how well your staff are aware, understand and follow the same. To make this happen, its essential to set up appropriate training sessions and seminars to help get your staff on board with the rules and regulations.

4. Automate HR processes

There are many repetitive and time-consuming tasks that a HR must see through in their day-to-day operations other that can otherwise easily be done with the help of the right software. And this automation of processes is essential as it frees up HR time to focus on other important tasks that can directly contribute to the productivity of the organization.

Key Issues Around HR Compliance and How to Overcome Them?

Compliance is difficult as the rules are constantly changing but it still must be done with accuracy. Some of the major challenges that surround HR compliance are-

1. Lack of Automation

If you are still going about manual compliance processes, then you are on the wrong path. Keeping up to date with the changes, filing and submitting tax returns manually is tedious and is prone to errors.

Solution: Automating your compliance by allowing a software to take over the calculations, filing and submissions through various government portals will give you access to challans all in one place. And all the above processes need very minimum intervention but give accurate, error free results.

2. Complex laws

Every country has its own set of rules and regulations. In India there are more than 100 such laws and regulations that employers must comply with. Sounds tedious, isn’t it? It really is, especially because India is made up of so many different states, with each state having different rules. For example, according to the minimum wages act, 1948, there is a minimum wage set for employees, But this changes from state to state.

Solution: The Indian government must reduce the number of compliances after careful reviewing and ease up on the stringent laws and regulations where reasonable.

3. Lack of awareness

Being aware of the constantly changing laws and regulations, although is the work of the HR team, isn’t all that easy. Even if one update is missed it may lead to non-compliance. For example, the maternity benefit act, 1961, was amended to increase the paid leave from 12 weeks to 26 weeks, which most employers weren’t aware of. This led to unrest and unpleasantness from the employees as well as led to non-compliance.

Solution: An Automated payroll system must be in place which can give you regular updates about any changes along with notifications no matter how important or not they are to help you always stay in compliance. Or another popular option is to outsource it to an expert third party compliance services provider such as Alp Consulting who have the means and resources to help you stay compliant.

Looking to outsource your HR Compliance services to an expert?

HR Compliance is one of the most essential functions of an organization. Not only does it help improve employer-employee relationships, boosts your brand reputation, but also instils a trust in people who do business with your organization. It sure isn’t easy to handle compliance in- house, which is where we come in.

Alp Consulting, with its vast experience in the industry has positioned itself as an industry leader knows to provide top notch HR compliance services to clients of all industries. No matter your nature of industry, if you are looking for an ideal HR Compliance partner, then contact us today. We’ll help you find the right solution that aligns with the likes of your organization.