 |
Onboarding Best Practices |
 |
|
|
Good Guy = Bad Manager :: Bad Guy = Good Manager. Is it a Myth? |
|
|
|
Five Interview Tips for Winning Your First $100K+ Job |
|
|
|
Base Pay Increases Remain Steady in 2007, Mercer Survey Finds |
|
|
|
Online Overload: The Perfect Candidates Are Out There - If You Can Find Them |
|
|
|
Cartus Global Survey Shows Trend to Shorter-Term International Relocation Assignments |
|
|
|
New Survey Indicates Majority Plan to Postpone Retirement |
|
|
|
What do You Mean My Company’s A Stepping Stone? |
|
|
|
Rewards, Vacation and Perks Are Passé; Canadians Care Most About Cash |
|
|
|
Do’s and Don’ts of Offshoring |
|
|
As employment laws grow more complex, many organizations remain unprepared. Only one-third of responding organizations take a proactive approach to labor law compliance, according to our 2025 research. Meanwhile, 22% do not take proactive steps, 20% have outdated processes, 16% have only partially documented procedures, and 9% remain purely reactive.
That’s not to say all the news is bad. For example, fully 78% agree they are well prepared to deal with labor and employment compliance concerns.
However, it’s difficult to stay on top of key issues due to challenges such as the growing scope of federal and state HR-related mandates, changing interpretations of laws, and a lack of internal resources. In fact, just 49% believe their initiatives are adequately funded. Alarmingly, 34% have faced employment-related enforcement action in the past year, highlighting the risks of underinvestment in this area. Other challenges include lack of training and outdated technologies.
Wage and hour laws continue to top compliance concerns, followed closely by family and medical leave and benefits-related regulations. Only 13% report fully up-to-date compliance systems, and automation remains limited even though compliance consumes a substantial portion of HR teams' time.
Looking ahead, 62% of organizations expect AI to support legal compliance monitoring, though only 27% anticipate adopting AI tools in the next two years. The contrast between compliance leaders and laggards is stark in this area: leader organizations are almost twice as likely to feel prepared to deal with labor and employment compliance concerns (95% vs. 58%), more likely to conduct frequent audits, and significantly more likely to invest in training, tools, and secure, integrated technologies. As legal demands intensify, organizations that fail to modernize risk will face greater legal, financial, and reputational exposure.
This report, which focuses primarily on U.S.-focused compliance issues, helps HR professionals navigate this complex environment by addressing:
To offer you a succinct overview of the report's contents, we have distilled the key findings below.
HR.com’s “State of Legal Compliance and Employment Law 2025” survey ran in the first quarter of 2025. We gathered responses from 199 HR professionals in virtually every industry vertical. Respondents are from all over the world, with the majority from North America, especially the United States.
The participants represent a broad cross-section of employers by number of employees, ranging from small businesses with fewer than 50 employees to enterprises with 20,000+ employees. Two-thirds of respondents are from midsize and large organizations.
1. Many organizations face risks due to weaknesses in their employment and labor law compliance processes.
2. Despite the dire consequences of non-compliance, organizations struggle with providing adequate support for the issue.
3. Wage and hour laws are the top compliance concern, with other regulatory issues following closely.
4. Poor automation and integration of compliance technologies remains a challenge despite compliance-related issues taking up a large part of the HR department’s workweek.
5. Artificial intelligence (AI) is expected to play a role in compliance processes, though its widespread adoption is not apparently imminent.
6. Compliance leaders outperform laggards* in virtually every area. When compared with laggards, compliance leaders are:
Because a majority of HR.com members are based in the United States, this report primarily focuses on U.S. legal and compliance issues.
We asked respondents to rate their organizations on the employment and labor law compliance maturity model (outlined in graph below). Although a third of organizations take a proactive approach to labor law compliance, two-thirds operate with some level of deficiency. This was about the same proportion of responses in last year’s research on the same topic.
About a fifth (22%) rely on systematic processes but lack proactive risk assessments, leaving them susceptible to legal changes. Another fifth document their processes but fail to keep them updated, creating compliance risks. Additionally, 16% have only partially documented procedures, while 9% take a purely reactive stance, heightening their exposure to legal liabilities.
These findings highlight a critical gap: while structured compliance exists, a lack of proactive risk management could leave many organizations unprepared for evolving regulations. Organizations should shift from passive documentation to dynamic, forward-thinking compliance strategies to mitigate legal risks and enhance organizational resilience.
Large organizations, tend to have more compliance concerns but also more compliance staff members, are more likely to have reached the most mature level of compliance (39%) when compared with midsized (33%) or small organizations (27%).
To take a closer look at what differentiates organizations with more mature compliance processes from those with less mature compliance processes, we separated our sample into two cohorts:
Of course, correlation is not the same as causation. While we cannot state that any particular practice will lead to success in managing legal compliance, we do see intriguing relationships that might result in greater success.
With 55% of HR departments prioritizing wage and hour laws, pay compliance is the biggest concern for organizations today. This, along with family and medical leave (47%) issues, have remained the top priorities for HR departments over the last two years.
The focus on benefits-related laws (37%) also ranks high, reflecting a focus on employee entitlements. Privacy/security (31%) and classification laws (35%) highlight growing concerns over workforce management.
Lower attention to workplace discrimination (20%) and immigration laws (21%) suggests some risks may be underprioritized. HR teams must balance these priorities to ensure comprehensive legal compliance.
The Americans with Disabilities Act (36%) and the Family and Medical Leave Act (34%) continue to present significant compliance challenges, likely due to complex accommodations and leave requirements. They have remained among the top 5 challenges over the last two years of this research.
Also among the top 5 are the Occupational Safety and Health Act (21%) and the Fair Labor Standards Act (22%). This highlights ongoing difficulties in workplace safety and wage standards. Rounding out the top 5 are pay transparent laws (33%), which are relatively new and state-based may be especially complex to comply with. Addressing these top challenges requires clear policies, good training, and proactive compliance strategies.
While 78% of organizations feel prepared to handle labor and employment compliance, only 49% agree that compliance initiatives receive adequate funding. The state of funding for labor and employment compliance issues has not improved over the last two years, with about half of respondents reporting poor funding.
This funding gap could contribute to enforcement risks, as 34% report facing at least one employment-related action in the past year. Organizations must bridge this disconnect by ensuring that compliance preparedness is backed by sufficient financial and operational support to mitigate legal risks effectively.
Most compliance leaders (95%) feel well prepared for labor and employment compliance concerns, compared to just 58% of laggards. Well-funded initiatives (68% vs. 28%) likely contribute to this confidence.
A chi-square test of independence shows that compliance leaders are significantly more likely than laggards to say their compliance-related initiatives are well-funded and they are well prepared to deal with labor and employment compliance concerns.
Based on our research, please consider these suggestions:
Over a fifth of organizations (22%) struggle to keep up-to-date with compliance, rating six or less on a 10-point scale. Struggles are not surprising; laws are frequently changing at federal, state, and local levels, so it takes excellent processes to stay current. However, these organizations have significant gaps in their compliance knowledge, leaving them vulnerable to legal risks.
Fortunately, three-fifths of the respondents have sufficiently good processes to keep up-to-date, scoring themselves at eight or higher out of 10.
A clear divide exists between compliance laggards and leaders in compliance knowledge. Among compliance laggards, 43% rate their organization's understanding of compliance developments as six or less out of 10, suggesting significant gaps in staying current. In contrast, compliance leaders rate their knowledge much higher, with 89% scoring eight or more out of 10. This stark contrast underscores the importance of investing in proactive compliance strategies to bridge the gap and reduce legal risks.
A chi-square test of independence shows that compliance leaders are significantly more likely than laggards to rate up-to-date understanding of all employment compliance developments highly (8 to 10 on a 10-point scale)
How much time do HR departments spend on addressing regulatory and legal compliance? A third of HR departments spend between 11% and 25% of their workweek on regulatory and legal compliance. While this indicates that compliance is a priority, it also suggests that HR teams are balancing multiple responsibilities.
However, with a quarter of respondents dedicating 26% to 50% of their time to compliance, and a small percentage allocating even more, it’s clear that compliance burdens can detract from other strategic HR initiatives. Organizations may need to evaluate their compliance processes for efficiency or consider investing in compliance technology or dedicated staff to reduce the workload on HR teams.
While 35% of organizations conduct internal audits annually to ensure compliance with legal and regulatory issues, 31% do so sporadically, and 7% never audit at all. The 21% that audit more frequently than once a year demonstrate a proactive stance, but the overall frequency of audits remains inconsistent.
This inconsistency suggests a lack of proactive compliance management. Irregular audits can leave organizations vulnerable to legal risks, highlighting the need for more frequent and systematic reviews to ensure ongoing compliance.
There is a clear gap in audit frequency between compliance leaders and laggards. While 36% of leaders audit more than once a year, only 11% of laggards do the same. Additionally, 39% of leaders conduct annual audits, compared to just 27% of laggards. This suggests that frequent audits contribute to stronger compliance, while less rigorous auditing leaves laggards more vulnerable to legal risks. Organizations falling behind should consider adopting a structured audit schedule to improve compliance oversight.
A chi-square test of independence shows that compliance leaders are significantly more likely than laggards to say they conduct compliance audits more often than annually.
Many organizations lack essential compliance resources. While 39% say tools and technologies are sufficient, 32% disagree, signaling infrastructure gaps. Education and training receive better support (46% actively agree), but a quarter still report deficiencies. Budget and other support rank lowest, with only 35% agreeing they are adequate.
The proportion of respondents saying their organizations provide sufficient amounts of the listed resources has remained around two-fifths or below, indicating no dramatic improvements in the support offered by organizations across the last three years. These shortfalls suggest underinvestment in compliance, a problem that increases legal risks. Strengthening these areas is crucial for improving compliance outcomes.
Compliance leaders are far more likely than laggards to provide sufficient training (66% vs. 29%), tools (64% vs. 25%), and budget support (51% vs. 22%). This disparity suggests that underinvestment weakens compliance effectiveness, leaving laggards more vulnerable to legal risks.
A chi-square test of independence shows that compliance leaders are significantly more likely than laggards to say their organization provides sufficient amounts of listed resources to stakeholders.
Based on our research, please consider these suggestions:
Relatively few say their compliance processes are highly automated (28%) or part of an integrated system (42%). This suggests that many organizations struggle with efficient, streamlined workflows. Additionally, only 38% agree their compliance processes use up-to-date technologies, indicating that many are not leveraging the latest technology to stay ahead of evolving regulations. That said, however, 62% feel as if their compliance processes are secure and safe. Of course, this still leaves over a third who indicate there may be security and safety concerns, problems that might be reduced through greater investments in updated and integrated technologies.
Compliance laggards are at a significant disadvantage, with lower adoption of automation, up-to-date technologies, and secure systems compared to leaders.
A chi-square test of independence shows that compliance leaders are significantly more likely than laggards to say their compliance-related technologies are secure and safe, part of an integrated system, up-to-date and highly automated.
Just 36% say it is easy to create useful compliance reports quickly, and only 29% agree that their reporting and analytics capabilities provide meaningful insights. This suggests that organizations are struggling with effective compliance reporting, which can hinder proactive risk management.
When compared with leaders, compliance laggards struggle significantly with generating useful reports and gaining meaningful insights, highlighting a critical gap in their compliance management. Without investing in stronger reporting and analytics capabilities, these organizations remain at a higher risk of missing key compliance issues.
A chi-square test of independence shows that compliance leaders are significantly more likely than laggards to say their HR-compliance-related reporting and analytics enable quick and easy to create useful compliance-focused reports and result in meaningful insights.
Many organizations anticipate major upgrades in their compliance technologies over the next two years. The most common expectations are to upgrade outdated technologies (44%) and improve system integration (43%). Rounding out the top five are improving employee experience, increasing self-service and providing higher quality data. It is interesting to note that the proportion looking to incorporate AI has grown to 27% from 10% in 2023 and 22% in 2024.
These trends highlight a strong focus on upgrading technologies, improving their integration and user interfaces, and enhancing their quality of data. These upgrades could significantly reduce compliance risks and enhance organizational agility.
Among organizations that expect to incorporate AI within the next two years, they are most likely to say AI will enhance the ability to monitor legal compliance (62%), require HR professionals to build new technological skills (57%), and ease the gathering and analysis of compliance-related data (55%).
About half (51%) also anticipate the need for new AI-related guidelines. Ethical concerns such as employee privacy (49%) and bias monitoring (45%) are seen as emerging priorities. In contrast, fewer organizations expect AI to assist with contract reviews (36%). These trends highlight the need for HR to focus on upskilling, ethical governance, and cross-functional collaboration.
Based on our research, please consider these suggestions:
The top concerns related to non-compliance with employment laws include potential lawsuits and large liabilities (69%), followed by heavy fines (61%), and damage to the organization’s reputation (50%). These risks underscore the high cost of non-compliance, both financially and reputationally. Organizations must prioritize strengthening compliance processes to mitigate these significant threats.
The most significant barriers to staying updated with HR compliance laws stem from the expanding the scope of federal and state mandates (46%) and the evolving interpretations of HR-related laws (38%). These have remained the top two challenges over the last three years.
These challenges, coupled with resource constraints like insufficient budgets (30%), underline a critical vulnerability in compliance management. Without adequate resources and a proactive approach, organizations risk falling behind on compliance, exposing themselves to legal and financial risks.
Most organizations stay informed about compliance changes through self-directed learning, with 78% reading relevant materials and 68% relying on membership organizations. Over half also use online searches and subscription services (both at 53%). Fewer consult external experts (45%) or outside counsel (48%), while only 23% turn to internal experts or HR technology solutions. Just 15% outsource compliance entirely. These patterns suggest a strong preference for reading materials, often from membership organizations, subscription services and Internet searches.
The larger the organization, the more likely they will rely on outside counsel to stay abreast of changes to laws and regulations.
While 48% of respondents agree that their organization will place greater importance on legal compliance in the next two years, just 7% disagree. This suggests uncertainty or lack of urgency around the need to prioritize compliance despite the growing regulatory landscape. Organizations that do not actively plan to enhance their compliance focus may be vulnerable to legal risks in the future.
Below are some key suggestions for how organizations might become more successful in people analytics.
1. Adopt a proactive approach to compliance. Move beyond simply documenting compliance processes. Organizations should implement proactive risk assessments, continuously monitor, and make regular updates to compliance strategies to anticipate and manage potential legal changes before they occur.
2. Prioritize high-risk compliance areas. Focus on areas such as wage and hour laws, family and medical leave, and benefits-related compliance, which have the highest potential impact on your organization. Allocate resources and expertise to these areas to prevent legal complications.
3. Invest in automation and technology. Leverage compliance automation tools to streamline processes, reduce human error, and improve efficiency. Integrate systems to ensure that compliance management is seamless and up-to-date, minimizing vulnerabilities in compliance workflows.
4. Implement regular and thorough compliance audits. Establish a clear schedule for comprehensive audits to identify gaps in compliance and ensure your organization remains aligned with current regulations. Regular audits will help mitigate legal risks and improve organizational resilience.
5. Strengthen compliance leadership. Build a strong compliance leadership structure by investing in skilled professionals and ensuring that compliance leaders have the resources and authority to enforce policies. This leadership is essential for maintaining a culture of compliance across the organization.
6. Allocate adequate funding for compliance initiatives. Ensure that compliance initiatives are fully funded and supported at every organizational level. Underfunded compliance efforts create vulnerabilities, so invest in the right tools, training, and personnel to address legal risks effectively.
7. Address the complexity of evolving regulations. Given the expanding scope of federal and state regulations, organizations need to prioritize staying informed about legal developments. Establish a system for tracking and analyzing changes to avoid falling behind on compliance.
8. Prepare for the role of AI in compliance. Start exploring AI-powered compliance solutions to streamline data gathering, legal monitoring, and reporting. However, ensure that AI applications are properly managed and safeguarded to prevent data privacy issues and biases.
9. Reduce the compliance burden on HR. Streamline and optimize compliance processes to reduce the time HR spends on compliance-related tasks without sacrificing quality. Automating manual processes and leveraging technology will free up HR teams to focus on more strategic, high-value activities.
10. Foster continuous compliance training. Establish a culture of ongoing education and training on compliance for all employees, especially for managers. Regular training will ensure that staff members are up-to-date on legal requirements and understand their role in maintaining compliance.
take a proactive approach to labor law compliance
More than a fifth (image) of organizations struggle to keep up-to-date with compliance
agree or strongly agree that their compliance processes use up-to-date technologies
Benefit from the expertise of renowned industry professionals who have contributed to the development of this survey research, study findings, and virtual event presentations.
