Human Resources – Mitigate the Financial Risk

• Tod Browndorf
• Oct, 15 2014

The goal of every company is to create value within the company. Much time is spent creating this value. However, the human resources area is often overlooked because it is not deemed to be an area of the business that increases the value of the company. Also let’s be honest, human resources is not always the most fun area of business either.

While human resources is not the most glamorous area, it does create value for the business through providing better equipped employees and also can reduce the company’s financial risk. For this article, we will focus on how human resources can reduce the company’s financial risk through increased compliance.

There are many regulatory areas companies must comply with in regards to employee management. If a company has just one employee, the company has 16 federal laws they must comply with. This does not include state and local laws. These regulations can oversee how you:

• Hire employees
• Terminate employees
• Provide employee leave
• Provide employee break times
• Require sick time for specific classes of employees
• And much more

Essentially most areas of your employee management have a regulation that must be followed. If they are not followed, there are financial consequences. Some examples are:

• Fines for incorrectly filling out I-9 forms range from $110 to $1,100 per I-9
• Equal Employment Opportunity Commission obtained a record $372 million in monetary relief for victims of private sector workplace discrimination in FY 2013
• Not performing E-verify in states required can have punishments from revocation of business licenses, fines and even imprisonment

These are just a few examples of the financial risk associated with not having a compliant human resource department.

So what do you do? Three simple steps can help you reduce your financial risk:

1. Perform an assessment of your HR department ‘s policies and procedures to build a sound base
2. Make sure you have a resource to provide adequate HR guidance
3. Be diligent in enforcing the company’s policies and procedures

Performing the Assessment

In order to ensure compliance going forward, you need to make sure you have a sound foundation. An assessment of your HR department’s policies and procedures can provide you a basis from which to start. It will outline your current policies and procedures and then provide a roadmap on how to improve them. Some of the areas to include in the review are:

• Is the company compliant with the Family Medical Leave Act, if applicable
• Has a review been performed to ensure proper classification between contractors and employees?
• What policies does the company have to combat discrimination and retaliation?
• How do we document employee separations to ensure the company is protected?
• How often are policies and procedures reviewed?
• Do we have the required forms in the new hire packet (i.e. I-9s, W4s, etc.)
• Does the company perform pre-employment background checks?
• Are I9s filled out, reverified and corrected in accordance with the law?

While the items above are obviously not all inclusive, they are some areas to ensure compliance. Once the assessment is complete, you should have a good idea of your strengths and weaknesses as they relate to HR compliance and can then create a plan to strengthen the weak areas.

Human Resource Guidance

It is extremely important that you have either an internal or external resource that can ensure (1) human resource processes and policies are maintained and (2) provide guidance as human resource issues arise. Any department is only as strong as its foundation. The foundation of a human resource department is its policies and procedures. It is important that the company has a resource to ensure the policies and procedures are kept up to date and abided by. In addition to the policies and procedures, it is also important the company has a resource that can provide human resource training when issues arise. Much of Human Resource is situational and relies on the interpretation of laws and policies. The resource needs to have the ability and experience to counsel management as these issues arise.

Diligence in Enforcing Policies and Procedures

It is extremely important to be diligent in enforcing policies and procedures. If a policy is enforced on one person, it should be enforced on all employees in similar circumstances consistently. Oftentimes we see a lack of consistency in the application of policies and procedures. A lack of consistency can lead to discrimination accusations and put the company at risk. Therefore it is very important to have buy-in from the top of the company on how policies and procedures should be enforced.

By establishing a strong foundation, having the right resources and being diligent in the enforcing of policies and procedures, you can significantly reduce the financial risk of non-compliance to your company.

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Contributing Author:

Chris Cooley is a seasoned Entrepreneur that seeks to provide a solution for needs within the business community. As a response to a perceived within the small and medium sized business community, Chris co-founded MyHRConcierge to provide Human Resource services to meet the needs of that community. MyHRConcierge currently provides Human Resource services to businesses and distribution partners throughout the United States. He can be reached at CCooley@MyHRConcierge.com.