3 Common HR Compliance Mistakes (and How to Avoid Them)

In a normal year, many HR pros struggle to keep up with changing federal, state, and local laws, not to mention industry-specific regulations. But as you know, it has not been a normal year. The COVID pandemic has prompted even more changes than usual—some temporary, some not—that small to midsize employers must understand and act upon in order to stay compliant.

Of course, ignorance is no excuse for noncompliance, and the penalties can be plenty. So, how can you avoid the most common types of compliance mistakes?

What’s HR’s Role in Compliance?

Simply put, compliance is the process of making sure an organization and its employees follow all federal, state, and local laws, regulations, and standards that apply to their specific industry or to all businesses within that jurisdiction. 

HR is on the frontlines of compliance—especially in small to midsize businesses—ensuring employees are treated fairly and legally as well as helping the organization avoid exposure to legal risk. HR pros often spend a significant amount of time maintaining compliance. This includes managing, distributing, and documenting notices, defining practices that ensure workplace safety, and implementing policies that adhere to the law.

There are many responsibilities HR must prioritize, but the stakes are highest when it comes to compliance. Primarily, HR’s role is to:

• maintain compliance, no matter what.
• keep up with changing regulations.
• ensure employee participation in compliance efforts.
• document, report, and retain for record-keeping.

Your organization can’t afford for HR to be reactive. If you’re facing a complaint or citation for a compliance mistake, it may already be too late.

3 Common Types of Compliance Mistakes (and How to Avoid Them)

We can’t explore every regulatory requirement and potential penalty in scope of this article, but we will cover broader areas of compliance to guide you in making preparations unique to your employer. To help you be proactive in staying compliant, here are three of the most common types of mistakes and how you can avoid them:

1. Record-Keeping Compliance Mistakes

When HR pros think of compliance, the seemingly endless march of documentation, reporting, records, and notices may cross their minds. 

It’s easy to overlook the paperwork that keeps your organization compliant when so many things are competing for your attention. Employees will often let you know when they have a need, but paperwork sits quietly on your desk or in your inbox, not really minding if it gets noticed.

Of course, missing an important IRS filing deadline—such as the quarterly Form 941 or the annual 1094-C and 1095-C—can cost your company per item, which adds up quickly for larger employers. 

It’s helpful to have compliance deadlines in one place, such as this 2021 HR Calendar. Even more useful is an all-in-one human resources information system (HRIS) like BerniePortal, which can, among many other things, streamline your ACA compliance. 

But don’t forget that legal compliance also involves retaining records like I-9s for one year and W-4s for four years following separation. Record-keeping requirements include posted and signed notices as well as clear and concise documentation. 

Whereas noncompliance regarding notices could result in a citation or fine, failure to document employee incidents—especially if any lead to termination—can have serious legal consequences. 

Again, an HRIS can help you avoid these costly mistakes. For example, BerniePortal has a Compliance feature that helps you distribute notices, collect signatures, and send reminders. The software solution also includes a Performance Management feature to keep track of ongoing interactions between managers and employees.

2. Personnel Compliance Mistakes

Regarding employees, HR’s responsibility to comply with federal labor law begins as early as the recruitment process. HR oversees this process, either from a high-level strategic perspective or (in some cases) by actually recruiting and hiring employees. 

Several federal laws and regulations—such as those under the Americans with Disabilities Act and the Equal Employment Opportunity Commission—protect job-seekers from discriminatory hiring practices, and employers have to report demographic workforce data annually. Remember, too, when onboarding a new hire, their I-9 form and supporting documentation must be completed and on file within three days of their start date. 

You can better protect your organization by seeking out recruitment training opportunities for yourself and coaching your hiring managers, who can inadvertently set policy and precedent during the hiring process that could hurt the company later on.

It’s also important to correctly classify employees under the Fair Labor and Standards Act (FLSA) guidelines. Besides part-/full-time or independent contractor, perhaps the most important classification distinction is between exempt and non-exempt. Whether an employee will be hourly or salaried is not left entirely to an employer’s discretion, and the distinction is not as simple as “blue-collar or white-collar.”

Protected under the FLSA, non-exempt employees qualify for the federal minimum wage and overtime pay, which is calculated as one-and-a-half times their hourly rate beyond a standard 40-hour work week. Currently, the overtime income threshold stands at $35,568/year or $684/week. Exempt employees, however, are not covered under the FLSA and are not eligible for overtime pay.

Misclassification can be costly on its own, but it also has implications that can lead to further noncompliance issues regarding attendance, timesheets, payroll, and benefits. To avoid this mistake, familiarize yourself with the FLSA, and refer to the North American Industry Classification System (NAICS) for a breakdown of how to classify most jobs by industry. Also, if you do have nonexempt employees, BerniePortal offers a Time & Attendance feature to help HR keep track of hourly workers.

3. Policy Compliance Mistakes

So far, we’ve only covered government policies, which can be a handful to comply with all their own. But one of the biggest mistakes employers and HR can make is not having their own internal policies clearly and specifically laid out in an employee handbook or Culture Guide. 

If you don’t have one, it may seem at first as if you’re just making more work for yourself, but a Culture Guide can actually make your job much easier in the long run. From a compliance perspective, a Culture Guide can protect your organization from unnecessary risk by communicating external policies—like anti-harassment and anti-discrimination—and establishing internal policies—like PTO and compensation practices.

But a Culture Guide should go beyond the whats and hows of an organization and really dig into the whys as well. That’s why it’s called a Culture Guide. It should explain your history, vision, and mission, set norms and expectations, and address daily office needs, such as how to connect to the printer. 

Employees are likely more willing to comply when they know why it matters.

What Else Can HR Do to Avoid Compliance Mistakes?

Given the complexity of compliance and the changing nature of regulation, it’s not possible to cover every compliance issue in a single article. (This handy HR compliance checklist does, however, cover quite a lot of them.) But you can stay informed, educated, and up-to-date with BerniePortal’s comprehensive resources:

• BerniePortal Blog—a one-stop-shop for HR industry news
• HR Glossary—featuring the most common HR terms, acronyms, and compliance
• HR Guides—essential pillars, covering an extensive list of comprehensive HR topics
• BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
• HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics