Legal Compliance: The Importance of Legal Checking
14/09/2023
Non-IT Recruitment Skills in 2025
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A factory got all the necessary licenses, employed workers at the right ages, and even paid them on time and the right wage. However their processes did not conform to industry regulations, and it was not a month down that they were shut down because of lack of regulatory compliance.
In the above instance, the factory followed statutory compliance (laws formed by the Government) but did not have regulatory compliance (laws formed by government agencies). Compliance is a strong word in the corporate world and perhaps the reason why the corporate world does not go into chaos. How does it achieve this?
Understanding Regulatory Compliance
Compliance ensures that a business operates within the confines of laws and regulations. Compliance can be of many types and if an organization is to succeed, it must follow both statutory and regulatory compliance, apart from following corporate compliance.
But what do these terms mean? In this article, we will be looking at understanding why being free of regulatory compliance issues is so important.
What is Regulatory Compliance?
Regulatory compliance refers to the adherence to laws, regulations, guidelines, and specifications relevant to a particular industry or area of business. It involves ensuring that an organization operates within the legal and ethical boundaries set by governing bodies, such as government agencies or industry associations. Compliance efforts typically involve understanding applicable laws, implementing necessary policies and procedures, and regularly monitoring and reporting on activities to ensure adherence.
Why Regulatory Compliance Is Important?
Regulatory compliance ensures that your business does not need to pay any fines or compensations imposed by the government. This is the main importance of regulatory compliance. Money saved in this manner can be diverted towards CSR or other essential and strategic activities. These activities will also help boost the reputation of the company and ensure that the right talent is drawn towards the company.
What are the Other Benefits of HR Ensuring Regulatory Compliance?
Ensuring regulatory compliance not only saves you money spent, and name lost in settling compliance-related lawsuits or paying heavy fines. It has some other benefits as well.
1. Improved work culture and employee engagement
Employees in workplaces that adhere to regulatory and statutory compliance, and have their own corporate compliance policies too, are generally happier and more involved in the workplace than others.
2. Mitigating data risks
Ensuring compliance can help with drastically lowering the possibility of data loss or unapproved or unsecure access, all of which can help improve the state of data security within your company.
3. Lowered costs
When you recruit apprentices, you are not only contributing towards the vision of the government, to develop a stronger country, but you also receive stipends and other benefits from the government to manage apprentices better.
4. An agreed upon system of work
Ensuring regulatory compliance allows you to not only have greater visibility into business processes for the sake of compliance, it also establishes a way of working that everyone must adhere to.
5. Improved brand reputation
When you compulsorily recruit apprentices to work for you, you not only get a government stipend, but your reputation also improves with candidates and clients as they start seeing you as a brand that respects skills over experience alone.
How to Ensure Regulatory Compliance?
People turn away from compliance because it is difficult to manage, or they do not have the knowledge or capability to manage it. However, ensuring regulatory compliance is very important for any business. Here are six things HR can do to ensure regulatory compliance.
1. Shortlist the regulations your business needs to comply with
As a business, you must be aware of the regulations that will affect your business and its daily activities. Some of the factors that affect you are, for instance, the nature of the industry you find yourself in, the country of location, the kind of products or services you provide, and the clients you interact with.
For instance, a factory that operates in India must comply with the Factories Act of 1948, the Minimum Wages Act, and the Apprentices Act or the Apprenticeship Act of 2014 introduced by the Ministry of Labour, among several others.
2. Identify the specific requirements you need to comply with
Once you know the regulations that you must comply with, you must then see how your business can meet those specific requirements. To meet these requirements, you may need to modify certain internal policies you have and even develop documentation for each requirement.
For instance, if you are a factory discussed earlier needs to employ workers to handle hazardous chemicals, then as per the Apprenticeship Act of 2014, there needs to be a minimum age of 18 years else, they can start working at 14 years of age.
According to the Minimum Wages Act, you must also pay a certain amount as minimum wage, which varies from state to state.
3. Establish and document compliance policies and procedures
Documenting the compliance policies and procedures in your business will help you initiate and institute a single process to follow for compliance within your company.
The document will also get the buy-in from your employees who will have better knowledge of it and other stakeholders who will have a better visibility of compliance management within your organisation.
The document can be updated frequently to ensure that the compliance policies and procedures you have in your business are up to date and in line with the existing laws and regulations for your specific industry.
4. Conduct a regular regulatory compliance audit
Conducting an internal compliance audit can help identify issues with compliance within your organization very easily. Some of the ways that an internal compliance audit can help are:
- Understand if your employees are aware of the laws and regulations in effect at your workplace.
- Understand what rules and regulations are being complied with, to what extent, and if not, what can be done to improve the situation.
- Can resolve weaknesses in processes which could lead to future risks and compliance issues.
5. Provide regular compliance training
If your employees do not know the rules, they may unknowingly be non-compliant with the regulations for the industry. To avoid this, you must provide your employees with regular compliance training.
Compliance training must involve all aspects of compliance management at the workplace, including how to stay vigilant and how to report and tackle non-compliance, if need be. Compliance training must begin right at the onboarding stage and must continue throughout an employee’s time at the workplace.
6. Leverage tech tools and entrust the right software providers
Tech tools help get past the problems with paper-based transactions at the workplace. Immediate benefits are greater accuracy, faster turnaround time, and much better security. The same is true for the use of other tech tools for regulatory compliance management at the workplace.
With the coming of the data privacy law in 2023, in India, it has become imperative for companies to ensure that if a client wants their data deleted, it happens as soon as possible and as seamlessly as possible.
In a paper-based system, you would have to manually locate each record and delete it, even if you have organised them very well in a way that allows locating them a very easy process. In a document management system, you can locate the documents much faster and get them deleted as quickly as possible.
When looking for IT tools that simplify HR regulatory compliance, make sure you pick the right ones, those that have not just compliance rules built in, but also are easy to manage and have robust security policies ensuring that any data they use remains safe.
What are the Challenges for HR That Come with Regulatory Compliance?
Managing and maintaining regulatory compliance can be a major task for any company, irrespective of size. Here are some of the challenges when it comes to regulatory compliance.
Setting up a compliance management system in a smaller company
For larger institutions, especially 1000+ employee companies, compliance is something they have been managing for quite a while. But for smaller companies, it is a question of sustainability. Do they have the necessary resources to make sure that there is compliance documentation, audits happening regularly, and the capability to buy the software and setup the infrastructure to be fully compliant?
This is the challenge. An HR Consulting company can help you meet this challenge. It can help with compliance documentation and managing tech tools (some of them have their own) to ensure that you stay legally compliant.
Managing existing compliance system in a larger company
In a larger company, with several business processes, such as some of the bigger consulting companies of the world, managing compliance involves updating several processes to meet the laws and regulations and making sure that every employee working in that specific industry process is aware of compliance, if not then they must be trained on it.
Such training has got its own associated higher cost too. Even for a company with well-defined processes, an HR consulting company that has been working with such partners for a long time as a global compliance partner can make a great difference.
Setting up a company branch in a new country or location
The maze of laws can get frustrating to navigate when you move to a new country or location. This is true for companies that have been managing compliance for a while. In some countries, it may be mandatory to hire a counsel or compliance consultant to ensure that the company is following regulatory and statutory compliance.
Here again, if you know an HR partner who has experience managing the regulatory compliance landscape in a new country or location, partner with them to manage your compliance requirements.
What Are Regulatory Compliance Requirements?
The requirements that a company must meet to ensure regulatory compliance are many. Some of these requirements are easy to meet and others will require a modification of existing processes or onboarding or assigning new stakeholders to them as well.
How to Implement an Effective Regulatory Compliance Plan?
Before you move ahead with implementing effective regulatory compliance you must strategize. Some of the questions you will need to ask are: What are the new laws in place, how do we accommodate them, how it will affect current processes, and who will be managing the regulatory compliance?
But you also need the right answers to these questions. This is where partnering with an HR consulting company can prove very invaluable. Alp Consulting, an HR consulting company with over 25 years of experience, can help with managing regulatory compliance for you.
We are a global recruitment, staffing, payroll, and compliance partner for several companies, that are leaders in their respective industries. Let us know how we can help you with your regulatory compliance requirements.
FAQs
What is legal and regulatory compliance?
Sometimes these terms are interchangeable. But generally, legal compliance ensures that the documentation and processes in a company are in line with legal requirements, or those in line with central and state laws in a country. Regulatory compliance on the other hand ensures that your business processes work in such a way that the customers receive the products and services that are assured or promised to them as per government guidelines.
What is Regulatory Compliance Management?
Regulatory compliance management is about managing a company’s business processes so that they are in line with the laws and regulations laid down by regulatory bodies governing the industry of the business. There is software that aids with regulatory compliance management.
Who is a regulatory compliance manager?
A person who manages the regulatory compliance of an organization is referred to as a regulatory compliance manager. They generally compile observational findings, conduct audits on policies, and act for disciplinary violations.
What is the intent of regulatory compliance?
The intent of regulatory compliance is to build a culture of compliance within an organization, building better workspaces, with greater employee engagement, reducing risks at the workplace, and improving the quality of life for every employee and for everyone in the country too.
