Research Report Summary: The HR Compliance Business Impact Report
How U.S. employers manage compliance risk in the workplace
Posted on 05-25-2018, Read Time: Min
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Maintaining compliance and managing risk are among the toughest challenges that HR professionals face, especially those working within large organizations that have global operations and a complex workforce.
Add to the mix a constantly changing legislative landscape where every jurisdiction must adhere to its own set of rules and regulations or risk facing hefty fines and penalties for non-compliance.
In December 2017 and January 2018, HR.com partnered with Ceridian, the global human capital management technology company, in order to:
- Investigate whether HR is able to keep up with rapidly changing legislation
- Identify the areas of compliance that create the greatest costs and that are the most difficult to manage
- Learn what strategies organizations use to stay up-to-date with new mandates
- Highlight the compliance issues that have the biggest impact on workplace policies and procedures
The survey, 'The Impact of HR Compliance Issues on the Workplace', reveals how effectively HR professionals within a cross-section of U.S. organizations manage compliance issues in their workplace and the overall business impact that these changes have on their policies and procedures.
Here are a few key findings from the study.
Finding #1: Only 32% Organizations Have High Understanding of Relevant Compliance Issues
Only about a third of respondents said their organizations did very well at maintaining an up-to-date understanding of compliance issues. Almost half scored moderately well, leaving about a fifth with a relatively poor understanding. Given how unforgiving compliance can be, this is one area where maintaining a “moderately good” understanding of the issues is probably not good enough.
Finding #2: Changing Interpretations of Laws and the Growing Scope of Mandates Create the Biggest Headaches for HR Compliance
About 69% of respondents identified changing interpretations of laws and regulations as a factor that makes keeping up with compliance difficult. Nearly as many (64%) said the growing scope of federal and state HR-related laws and mandates was an issue.
Complexity, which one might have expected to rank more highly, was only the fourth most commonly chosen issue. Why? Probably because HR can deal with complexity as long as everything else remains constant. The bigger problem is that that compliance is often a moving target.
Complexity, which one might have expected to rank more highly, was only the fourth most commonly chosen issue. Why? Probably because HR can deal with complexity as long as everything else remains constant. The bigger problem is that that compliance is often a moving target.
Finding #3: Firms Skilled at Compliance More Likely to Use HCM Technology
Human capital management technology represents an often-overlooked tool to help employers make dealing with compliance challenges easier. Such technologies can provide a flexible framework that allows the employer to build the attributes necessary to maintain compliance with applicable regulations.
What’s notable is that use of human capital technology was the biggest factor differentiating the organizations that—based on self reports—were best at compliance from those that were worst. That is, those that were good at compliance were far more likely to use technology than those who were moderate or poor at compliance.
What’s notable is that use of human capital technology was the biggest factor differentiating the organizations that—based on self reports—were best at compliance from those that were worst. That is, those that were good at compliance were far more likely to use technology than those who were moderate or poor at compliance.
Finding #4: FMLA, FLSA and ACA Identified as Top Three Issues
Three compliance-related issues were most frequently identified as most important to respondent organizations:
- Federal and state paid leave mandates and the Family and Medical Leave Act (FMLA)
- Uncertainty around changing federal Fair Labor Standards Act (FLSA) overtime rules
- The Affordable Care Act (ACA) employer requirements
These are all potentially expensive and complicated compliance issues. For example, the trend of expanded paid sick and family leave laws at the federal, state, and local levels can create confusing and sometimes conflicting compliance requirements depending on where an employee works.
It’s notable that one of the biggest issues was not overtime rules per se but uncertainty about potential changes to those rules. The challenge is amplified when court decisions intersect with agency interpretations of regulations and laws.
Finding #5: 75% Are Concerned with the Higher Cost of Healthcare Benefits
Organizations with employees in the U.S. have had concerns about rising healthcare costs for several decades. This hasn’t changed.
In fact, a solid majority of respondents (75%) were concerned with the higher cost of providing healthcare benefits.
On a related note, about half said they were concerned about the need to shift more healthcare costs to employees, and nearly two-fifths said they were concerned that rising healthcare benefits would add stress to the lives of employees.
Together, these three factors suggest that higher health benefit costs are difficult for employees as well as organizations. Other factors mentioned were the costs associated with prescription drugs, the aging of workforce, and unhealthy employees.
About 61% of respondents said their organizations were encouraging employees to participate in wellness programs, making greater use of high deductible health plans and making more extensive use of flexible spending accounts (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs).
In fact, a solid majority of respondents (75%) were concerned with the higher cost of providing healthcare benefits.
On a related note, about half said they were concerned about the need to shift more healthcare costs to employees, and nearly two-fifths said they were concerned that rising healthcare benefits would add stress to the lives of employees.
Together, these three factors suggest that higher health benefit costs are difficult for employees as well as organizations. Other factors mentioned were the costs associated with prescription drugs, the aging of workforce, and unhealthy employees.
About 61% of respondents said their organizations were encouraging employees to participate in wellness programs, making greater use of high deductible health plans and making more extensive use of flexible spending accounts (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs).
Finding #6: The Costliest Law to Comply With Is the ACA
About 51% of the respondents pointed to one issue that they found most costly: the Affordable Care Act, or ACA. After the ACA, the FMLA and workers’ compensation were the most frequently cited as being costly.
Despite the finding that ACA was costly, a considerable fraction of respondents (29%) said it was not a burden at all. These organizations were more likely to use an HCM solution to help maintain compliance.
Despite the finding that ACA was costly, a considerable fraction of respondents (29%) said it was not a burden at all. These organizations were more likely to use an HCM solution to help maintain compliance.
Finding #7: A Single-Payer Health Plan Could Have Four Key Effects
In the U.S., a growing number of politicians are advocating for the implementation of a single-payer national healthcare plan.
Asked what would happen in their organizations if the U.S. were to implement a single-payer healthcare plan covering all U.S. citizens, respondents were considerably more likely to agree than disagree with the following statements:
Asked what would happen in their organizations if the U.S. were to implement a single-payer healthcare plan covering all U.S. citizens, respondents were considerably more likely to agree than disagree with the following statements:
- Would cause employees to be anxious about losing existing coverage (56 percentage point difference)
- Would spur them to offer supplemental healthcare benefits (44 percentage points)
- Would make providing healthcare benefits less complicated (38 percentage points)
- Would reduce the costs of providing employee benefits (26 percentage points)
Finding #8: 31% Are Concerned About Changes in the FLSA ‘Duties Test’
The study shows that changing regulations is a major source of difficulty in remaining compliant. Some possible changes to the FSLA created particular concern. The highest rated concern was changes to the FLSA “duties tests” that could make it more difficult to classify executive, administrative or professional employees as overtime exempt; that issue was chosen by 31% of respondents.
Conclusion
Compliance is not a glamorous area. It is, however, an area where HR must get things right. Leadership assumes HR will have this topic perfectly nailed down. Successful compliance relies on knowledge of the regulations, experience in applying them, and the appropriate processes and systems to maintain compliance day to day, week to week, and year to year.
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