Compliance fears plague HR managers

At least half of all HR managers at small and mid-sized companies are lying awake at night, unable to sleep as thoughts of noncompliance keep them tossing and turning.

That’s the picture painted by the results of an ADP survey of HR managers. When the questions turned to compliance, their palms definitely got sweaty.

“Since HR compliance lies at the heart of effective human resource management, it is alarming to discover that most HR managers surveyed express concern about their ability to comply with HR laws and employment laws today and into the future,” the study intoned. “Roughly half of our survey respondents indicate having only moderate or slight levels of confidence — or even no confidence at all — in their ability to comply with important HR and employment laws, rules and regulations.”

The anxiety over compliance was higher among small businesses, with 57 percent of HR types at small companies reporting that they lacked confidence in their ability to comply with mounting rules and regulations.

At mid-sized businesses, the response was better but not great. Forty-four percent admitted they had “little or no confidence they can keep up” with compliance issues.

There were some areas where respondents had more confidence in their ability to get their companies in compliance: payroll and benefits laws and regulations.

But they said they were less confident with regard to compliance in key areas of hiring, employee relations, and risk and safety.

Managing employee relations compliance laws is by far the largest concern of mid-sized companies; 49 percent cited it as a major concern, followed by benefit plan offerings/admin (36 percent) and workers comp/claims admin (35 percent).

Small companies listed payroll taxes as their chief concern at 40 percent, followed closely by recruiting and hiring good people at 39 percent and pay requirements at 28 percent.

“With employee litigation — and compensatory awards — on the rise, companies face major potential legal liabilities if they fail to comply with HR and employment laws, rules and regulations,” the study authors said. “Statistics compiled by Jury Verdict Research show that employment lawsuits have risen 400 percent in the last 20 years, with the average compensatory reward in federal employment cases now exceeding $490,000.”

So, given the risks of noncompliance, what are these companies doing? They are increasingly turning to HR consultants and services for help. According to the survey, more than 90 percent of companies rely on outside advice for compliance issues.

Payroll, benefits and risk and safety are the big three areas for small and mid-sized businesses for outsourcing compliance, with payroll by far the major area where small businesses were willing to spend on outside help.

Benefits management is No. 1 for mid-sized firms — 70 percent have used outside help there. Risk and safety, hiring, employee relations and terminations show a descending, but still substantial, use pattern.

That outsourcing trend will likely grow, given that fewer than 10 percent of HR managers surveyed believe that the overall compliance burden will decrease in the future. 

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