HR compliance: the expert guide

No matter where you and your employees are based, complying with human resources (HR) regulations is pivotal. Failing to adhere can result in financial losses as well as reputational damage, impacting your business’s growth potential. 

But what does HR compliance actually entail? In this article, we’ll explain what HR compliance is, explore some of the most common compliance issues, and provide a step-by-step roadmap for staying within the rules. 

So let’s jump straight in. 

What is HR compliance?

HR compliance is about ensuring your organization’s HR practices and policies comply with all the relevant laws in your location. It is typically the responsibility of a designated HR officer or team, depending on your company’s size. 

To stay HR compliant, your organization must regularly review and update its HR policies and practices to make sure they align with current regulations. This can be especially challenging for companies with a global workforce, as they’re expected to stay on top of legislation changes in multiple countries. 

While HR compliance is a vast, complex topic, it can be categorized into different areas of focus, such as: 

Anti-discrimination 

Anti-discrimination regulations ensure that employees cannot be discriminated against based on their background, beliefs, or personal characteristics — at all stages of employment. 

In Canada, for example, the Canadian Human Rights Act and Employment Equity Act prohibit discrimination based on race, national or ethnic origin, sex, age, and disability. That means employers must ensure all employees and job applicants are given equal opportunities in areas such as training, promotion, and hiring.

Most countries have similar types of legislation in place, with failure to comply resulting in legal consequences and financial penalties. 

Workplace safety 

You’re responsible for making sure your employees are safe when working on your business premises or on behalf of your company. Workplace safety requirements protect all workers from physical or psychological harm and potential hazards. 

In the UK, for instance, the Health and Safety at Work Act dictates that employers must provide a safe working environment, assess risks, and provide training and protective equipment to all employees as needed. 

Workplace safety can look vastly different, depending on what industry you’re in. For a manufacturing plant, it might focus on machinery and equipment safety, whereas in a remote work setting, it might mainly refer to ergonomics and cybersecurity. 

To ensure workplace safety, it’s important to understand the risks of your specific industry and take appropriate steps to mitigate them. This includes issuing proper training, providing protective equipment (where relevant), and implementing safety protocols that are regularly reviewed and updated. 

Wage and hour laws 

Wage and hour laws regulate the payment of wages and the number of hours employees can work. They stipulate the minimum amount every employee must be paid, whether that rate increases after a certain number of hours, and how often they must be paid.

It’s important to note that these requirements can vary not just from country to country, but by region and, in some cases, even by city.

As a result, it’s crucial to be aware of and comply with local labor laws in the places you hire, as these laws often change. Violating work hours mandates or underpaying your employees can lead to serious consequences in fines and repayments, and damage your company’s reputation. 

Employee benefits 

In most countries, employees are entitled — by law — to certain statutory benefits.

In France, for example, employers must provide their workers with at least 25 days of PTO per year, 16 weeks of paid maternity leave (and paid parental leave for the other parent), and overtime pay or bonus time off for working more than 35 hours a week. This is vastly different to the US, where many states do not mandate any paid leave, and maternity leave is usually unpaid.

Why is HR compliance important? 

As mentioned, failing to comply with local HR regulations is illegal. But it’s not just about satisfying local laws — it’s about creating a workplace where people can thrive.

Here are some of the reasons why you should prioritize HR compliance:

Financial consequences

If your company is not HR compliant, you can be sued by your employees for discrimination, harassment, wrongful termination, or any other legally-mandated workplace violation. This can potentially lead to significant financial costs, with investment bank Goldman Sachs recently paying out $215 million to settle a gender discrimination lawsuit. 

Employee well-being

Employees in a non-compliant workplace are more likely to experience stress, anxiety, and burnout. Unsurprisingly, this can lead to health issues, absenteeism, and high turnover rates. 

By ensuring a safe and healthy workplace, businesses reduce the risk of accidents, injuries, and mental health issues, and improve employee morale and job satisfaction. 

Reputation management

A company with a history of HR violations is likely to develop a seriously tarnished reputation. This can dissuade potential customers or stakeholders, ward off potential investment, and make it difficult to attract and retain top talent.

Data security

Companies that collect and store employee data have a responsibility to protect that data from unauthorized access, with data protection laws and regulations tightening around the world.

How serious are the consequences of non-compliance? 

The penalties for non-compliance with HR laws and regulations vary by region, but they can have significant consequences for your business, including: 

• Fines and penalties

• Ongoing audits 

• Reputational damage 

• Restrictions on, or loss of, business licenses or permits 

• Imprisonment

HR compliance in practice

Now that we’ve looked at what HR compliance is and why it’s important, how does it relate to an employee’s lifecycle?

Hiring and onboarding

HR compliance requires businesses to have a clear and concise hiring process in place that doesn’t discriminate against candidates based on their personal attributes.

This means having a clear and transparent hiring process, including non-discriminatory job descriptions on job boards, static interview questions, and consistent selection criteria for each candidate.

Companies should also have a clear onboarding process in place, where all new employees know their rights and responsibilities, and are aware of the company’s policies and procedures. In many cases, employees must also complete mandatory training in areas such as DEI, unconscious bias, fraud, and other regulatory areas.

Performance management 

Businesses must have a fair and objective performance management system in place. To ensure fairness and objectivity, companies should use a standardized approach to assess employee performance and provide feedback. 

This could be a survey or worksheets that help managers identify areas for improvement and promote employee development in a consistent manner.

Leave management

Businesses must comply with local laws regarding employee leave requirements, such as sick leave, parental leave, and paid time off. 

Employees should be made aware of the amount of leave they have when onboarding and have a system in place to track time off. Having a clear procedure for leave management can also ensure each employee is taking time off to help avoid burnout.

Termination

Businesses need to have a clear policy in place for employee termination to avoid wrongful termination lawsuits. While this is usually at the discretion of the company’s own internal policies, these policies must comply with the law. In many US states, for instance, it’s illegal to terminate someone’s employment because they are pregnant, or because they have military service obligations.

Note, too, that these laws differ vastly across countries. Most US states are “at will”, meaning employees can be dismissed without notice (provided the reason for termination is not illegal). However, in the European Union (EU), employers must provide a reasonable cause for the termination.

HR compliance examples

As mentioned, the laws and regulations impacting HR compliance vary by location. Here are some examples of how different areas of HR are governed in different countries.

Minimum wage: the US and France

In the US, the federal Fair Labor Standards Act (FLSA) outlines minimum wage, overtime pay, and recordkeeping requirements for businesses. It also provides guidelines for the classifications of employees as exempt or non-exempt from overtime pay. Note that, in many instances, state law supersedes this act. For example, many states implement a higher minimum wage than the federal minimum, which is currently set at $7.25 per hour.

In France, meanwhile, the minimum wage (salaire minimum de croissance, or SMIC) is set by the government and reviewed annually. It increased by 2% in 2023, bringing it to around €1,360 per month.

A failure to meet France’s SMIC can cost your company €1,500 in penalties (per employee), while, in 2021, a former Amazon employee sued the company in California for not providing mandatory 30-minute lunch breaks.

Equal employment opportunity: the US and Australia 

In the US, anti-discrimination laws are enforced through the Civil Rights Center, the Office of Federal Contract Compliance Programs, and the Equal Employment Opportunity Commission (EEOC). 

Similarly, in Australia, there are a number of statutes protecting workers from discrimination in the workplace, such as the Disability Discrimination Act, the Racial Discrimination Act, and the Sex Discrimination Act. 

In the US, Tesla was ordered to pay a former employee $3.2 million for severe racial harassment under these laws. However, it’s important to remember that, in both countries, discrimination can occur at any stage of the employment cycle — even as early as the recruiting process.

Employee data protection: European Union 

The General Data Protection Regulation (GDPR) is an EU legislation that helps protect the personal data of EU citizens. It applies to all organizations that process the personal data of EU-based employees, regardless of where the company is headquartered or physically based.

Failure to comply with GDPR can result in significant fines and reputational damage for businesses. In 2023, for instance, the tech giant Meta was fined a whopping $1.3 billion for violating the act.

HR compliance trends

As with all areas of HR and employment, various societal and technological shifts are having a significant impact. As a business, it’s important to be aware of these developments, and manage them accordingly.

Here are three of the most sizeable HR compliance trends right now:

Artificial intelligence (AI) and machine learning

AI and machine learning are revolutionizing key areas of HR, such as talent acquisition and performance management.

As a result, there will inevitably be new laws and regulations introduced in different locations, especially as reliance on its use grows. In particular, there are data security concerns related to many AI applications, and this is a contentious topic in many industry circles.

The rise of remote work

While the trend towards remote work has grown steadily over the last decade, the COVID-19 pandemic has undeniably accelerated the shift.

This has created a wide number of implications for HR compliance regarding relocation and mobility, taxation, benefits, IP protection, and data security. 

Data privacy

Data privacy regulations that outline the rules for the commercialization of data — such as GDPR — have gained prominence worldwide. 

As a result, organizations must enhance their data protection measures and adopt stricter compliance practices. While non-compliance might have been met with a slap on the wrist in the past, it’s now imperative for HR departments to remain vigilant and proactive in safeguarding sensitive employee information.

Common HR compliance mistakes 

Most companies continue to make the same HR compliance mistakes because they don’t have a system in place for staying abreast of law changes, or a way to reflect changes in their own business, such as growth or expansion into new markets. 

Here are some of the most common HR compliance mistakes: 

Employee misclassification

Misclassification occurs when a company incorrectly classifies an employee as an independent contractor. This can have serious legal and financial consequences for businesses, as employees are entitled to certain benefits and protections that independent contractors are not. 

There are a number of reasons why companies might misclassify employees as independent contractors. One common reason is to save money on taxes and benefits, as independent contractors aren’t usually subject to payroll taxes or benefits such as health insurance and paid time off. 

However, misclassifying employees as independent contractors can end up being a costly mistake in the long run. For example, Nike has recently been accused of misclassifying temporary office workers as contractors to avoid paying benefits and overtime rates in the US, with a potential penalty of $530 million if found liable.

If you’re working with independent contractors, it’s crucial to regularly assess and reassess the nature of the relationship, with many government authorities aggressively pursuing potential misclassification cases.

Use our Contractor Compliance Checklist to avoid misclassification

Work through this checklist to help determine if a new hire should have a contractor or employee relationship.

Download

International wage laws

Non-compliance with wage laws is more common than you might think — especially for companies with workers across the globe. 

In particular, many companies fall foul in areas such as: 

• Overtime pay

• Minimum wage

• Equal pay rates

• Breaks and meal periods 

• Paid time off 

• Maternal leave pay 

To avoid these issues, it’s advisable to partner with a global HR provider that has local, on-the-ground expertise in the countries you’re hiring in, and which constantly monitors for changes and developments in local labor and tax laws.

How to comply with HR regulations

Unfortunately, HR compliance isn’t a “set it and forget it” process. You need to regularly monitor legislation to stay compliant, especially if you’re operating in more than one country. 

Here’s a nine-point checklist to help you stay on top of your responsibilities.

1. Regularly check on changing laws and regulations by:

• Subscribing to email alerts from governmental agencies and industry groups 

• Reviewing government websites regularly

• Following industry publications and blogs

• Attending industry events to learn about new and updated laws

• Assigning responsibility for monitoring changes to a specific team

2. Develop and implement HR policies and procedures by:

• Using language that’s clear and straightforward so all employees can understand

• Maintaining consistency in policy drafting to promote fairness and equity

• Identifying and prioritizing areas for policy development

• Involving key stakeholders, such as managers and legal counsel, to develop policies

3. Effectively train managers and employees on HR policies by:

• Tailoring the training for each group of employees you train

• Using a variety of training methods (such as reading, workshops, case studies, and simulations)

• Making the training interactive through role-playing exercises, group discussions, and quizzes

• Providing participants with a chance to practice what they’ve learned

4. Maintain accurate and complete records by:

• Using a secure, centralized recordkeeping system

• Developing a clear record disposal policy, such as shredding or electronic destruction

• Setting up access controls to restrict who can view, edit, or delete records

• Creating standardized templates and formats for various types of records

5. Conduct regular audits of HR policies by:

• Assigning responsibility for the audit to a third-party expert, like Remote

• Using objective criteria to assess compliance with HR policies 

• Reviewing documentation relating to HR policies and procedures, such as employee handbooks and training materials

• Identifying areas where compliance may be lacking and draft a roadmap of necessary updates

• Keeping a detailed document of the audit itself

6. Ensure all employees are properly classified by:

• Reviewing the relevant country’s classification criteria

• Using forms like IRS form SS-8 (or your country’s equivalent) to determine if you should be paying tax for your workers

7. Develop and implement workplace safety policies and procedures by:

• Ensuring any necessary safety equipment is provided and properly maintained

• Scheduling regular psychological safety check-ins

• Developing a comprehensive emergency response plan that covers various types of emergencies

• Placing clear and visible safety signs in areas where specific hazards are present (if applicable)

• Creating a system for reporting incidents, near misses, and accidents, and conducting thorough investigations to identify root causes and prevent future occurrences

• Implementing regular workplace safety inspections (if applicable) to identify and address safety concerns

8. Conduct regular performance evaluations by:

• Determining a regular schedule for performance reviews based on each worker’s time zone and availability

• Gathering all necessary information beforehand, such as performance data for the month, goals, and any previous evaluations

• Defining the purpose and objectives of the performance evaluation, such as providing feedback or setting goals for the future

• Asking employees to complete a self-assessment or provide input on their performance before the meeting

• Focusing on specific examples so that feedback is clear and actionable

9. Respond promptly and appropriately to employee complaints by:

• Developing and implementing a clear complaints policy

• Documenting all complaints, including the nature of the complaint, the date it was reported, and the actions you took to investigate and resolve the complaint

• Maintaining confidentiality throughout the complaint process

• Making sure you follow up with the employee who reported the complaint to ensure they feel their complaint was taken seriously and appropriately addressed

Ensuring HR compliance with Remote

As you can see, maintaining HR compliance is one of the most complex and challenging tasks your company faces — especially if you’re hiring across borders.

Remote can save you the time, resources, and headaches of understanding international labor laws and keeping up with any changes, giving you the peace of mind that you’re fully compliant wherever you choose to hire.

Our local, on-the-ground teams of specialists are experts in HR compliance, and help ensure that you’re covered in every area, including onboarding, leave, benefits, taxes, relocation, contractor management, and more.

To see how we can help you stay compliant, speak to one of our friendly experts today.

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