Human Resource and Compliance Essay Example

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Introduction & Background Information

In Boghraty’s (2018) seminal publication on Organizational Compliance and Ethics, an interesting question, especially in the context of the present analysis, is raised: if criminal justice is designed for ensuring personal accountability, how can a corporation – an entity without persona – be punished or held accountable? This is a longstanding and seemingly persisted question with roots dating as far back as early the 18th Century. Two recent developments, as Boghraty (2018) further observes, and rightly so, have resuscitated this question, giving it special prominence. First, as globalization has picked pace and individual economies have become increasingly integrated, the size and influence of multinational enterprises (henceforth, MNEs) have grown significantly – as has been their capacity to cause serious harm to individuals and society at large. These functionally massive and structurally complex MNEs not only control vast resources but also have the ability to partake in misdeeds beyond that which individuals could attain. Recent history is awash with instances of such misconduct. For example, in 1984, in what has come to be branded as the world’s industrial disaster, Union Carbide India Ltd.’s failure to implement proper occupational safety standards led to the spillage of nearly 30 tons of toxic methyl isocyanate gas into the nearby slums of Bhopal, killing approximately 15,000 people and more than 600,000 workers (Boghraty, 2018; Business Standard, 2022).

More recently, in 2010, BP caused the Deepwater Horizon Oil Spill, killing 11 people and polluting one of the world’s most diverse and productive maritime ecosystems (Monnier, 2021). Other notable organizations that have engaged in wrongdoing include Volkswagen and its cheat devices and Siemens – EU’s largest manufacturing corporation – and its cross-continental bribery scandals. These crimes were committed not by errant employees but by pervasive business-operating models and institutional culture. In this regard, Boghraty (2018) argues that MNEs and corporations, in general, are not essentially fictional entities but instead are real and extremely powerful agents whose conduct (or lack thereof) can cause significant harm. In this respect, a second fundamental development has been the curtailment of the government’s ability to deter as well as punish corporate crime. Boghraty (2018) notes that corporate defendants are inherently unable to survive indictment and sentencing. Thus, for years, governments, in the US and beyond, has always worked towards balancing these two conflicting interests – that is, the need to deter corporate crime against avoiding collateral harm – by doing what scholars, including Boghraty (2018), refer to as “getting business corporations to develop a conscience” (p.3). This has been attained by the criminal justice system employing the so-called “carrot-and-stick” approach designed to encourage corporations to self-police through compliance to regulatory frameworks and ethics programs. In most cases, the “stick” is often wielded by the government through its relevant law enforcement agencies and refers to the threat of financial penalties, including the potential to strip a business entity of all its assets.

On the other hand, the “carrot” is usually an offer of clemency if a firm maintains an effective ethics and compliance program (Boghraty, 2018). As further elaborated in the ensuing subsections, compliance and ethics (C&E) programs are internally-operated policing systems meant to ensure that corporate entities’ personnel and agents not only obey the law but also behave ethically. They are meant to act as a check against business operations’ pursuit of profit. Available evidence reveals that these programs work effectively when properly conceived and executed and that they help reduce incidences of commercial or corporate misconduct. At the heart of this drive to encourage corporate self-policing has been the expanding and evolving role of human resource management (hereafter, HRM) to police their own employees and their corporate organizational activities and commercial interest pursuits by ensuring that companies fulfill their legal and moral obligations. Ensuring compliance is not an easy feat, especially in an exceedingly litigious contemporary business environment that is infatuated with rights (Robinson et al., 2015). The problem is even much harder today, where businesses have to remain compliant with a host of regulations, laws, and restrictions on the local as well as international levels.

This is, however, not a new thing. HR compliance is an area that has been traced back to the very beginning of the HR function – to regulatory and administrative roles (Bright et al., 2019). It continues to be a critical function that HR manages, and in the light of the numerous regulations and laws governing employment relationships and corporate functions, including CSR, a number of studies have been done to explicate and shed more light on this rapidly evolving and significant function. This study endeavors to extend this growing body of literature by examining extant studies to discuss the role of HR in organizational and corporate regulatory compliance. To attain this aim, the ensuing discussion is premised on and guided by the following four overarching objectives: (1) to discuss the role of HR in compliance, (2) to enumerate the importance of HR regulatory compliance, (3) to discuss practicable ways of implementing HR compliance best practices, and (4) to explain what federal regulations are and indicate why they are important. The discussion also seeks to list some of the pertinent HR compliance issues. But first things first.

The HR Compliance Concept

What is Compliance?

Accounting failures at Waste Management, Inc. (1998), Enron (2001), and others (e.g., WorldCom, Tyco, and the Lehman Brothers scandals) have raised the need for adequate internal controls. They have also increased both the public and legislative focus on the significance and imperativeness of corporate accountability, transparency, and compliance with existing laws and regulations (Benedek, 2012). In of these corporate scandals involving labor law violations and employment malpractices, organizations are prioritizing the development and implementation of compliance and ethics (C&E) programs. These programs seek to prevent unethical and illegal conduct as well as to detect and address these malpractices within organizational policies, operations, and culture (Harrison & Murphy, 2008). This shift has also prompted the development of the C&E professionals who design and implement these programs.

In many organizations, however, ensuring compliance falls within the human resource responsibilities. While C&E presents exciting career prospects for HR professionals, the field is driven by the sad admission reality that some employers are constantly seeking shortcuts to minimize their costs, even at the cost of employee wellbeing. During good economic cycles, non-compliance is driven by greed – the drive for making as much profit as possible at whatever cost – often leading to violations involving overtime, fringe benefits, and workplace safety (Harrison & Murphy, 2008). In contrast, economic downturns create desperation as companies aggressively pursue cost-cutting measures. Many compliance violations during this period relate to wrongful dismissals, downsizing, and minimum wage. However, factors such as increased government enforcement and litigation, as well as negative press coverage, which risk permanently denting the image of an organization.

Generally, compliance refers to the conformity of organizational processes to all relevant legislation. It implies demands placed on the behavior of all members of an organization. HR compliance is a subset of compliance and can be defined in various ways. It can describe the process used by HR to define and implement policies, procedures, and training to ensure that employees understand and adhere to all applicable laws and regulations (PowerDMS, 2020). here, the focus is on employment laws. HR compliance can also describe the process of ensuring a company meets its legal obligations to the state, federal, and international laws and regulations (Tansey, 2020). These obligations center around HR practices of recruitment, onboarding, employee relations, termination, payroll, benefits, and risk and safety. a more comprehensive definition is given by Wald and Winterfeldt (2012), referring to the act of monitoring and maintaining the rules, regulations, policies, and obligations given to employees as part of their job roles and tasks. Theoretically, compliance regulations are not needed in organizations that have fully committed workers and fully informed organizational leaders. In practice, however, organizations cannot rely on the benevolence or the presumed good morals of their employees to adhere to regulatory provisions, especially when they are working alone in private spaces. For this reason, an independent function is needed to ensure compliance.

Elements of HR Compliance

HR compliance comprises several sub-types of compliance. BasuMallick (2020) identifies ten such types, including statutory, regulatory, contractual, union law, HR technology, internal training, international labor law, and country-specific HR compliance. Statutory compliance deals with adherence to laws formulated by all the levels of government, such as minimum wage, minimum working age, and anti-discrimination. The failure to comply amounts to criminal behavior. Regulatory compliance deals with the rules and guidelines set by regulatory bodies. An example is guidelines for hazard prevention formulated by the US OSHA (Occupational Safety& Health Administration). Similarly, non-compliance constitutes a criminal offense. Contractual compliance deals with the agreement signed between an employer and an employee when the latter gets employed. Employment contracts are signed by all workers regardless of the nature of their tenure (i.e., payroll workers, part-time workers, and interns alike). A violation on the part of employees can result in termination or some form of punishment specified in the contract (e.g., demotion, pay cuts, or withdrawal of benefits). In contrast, a violation by the employer could result in a civil lawsuit.

Union law compliance involves respecting the right of workers to form or join unions, as stipulated by the NLRA (National Labor Relations Act) (BasuMallick, 2020). through union membership, workers obtain a higher bargaining power in employment negotiations. Compliance with the union policies and procedures often saves companies from pa tedious conflict with workers in the form of strikes and go-slows that disrupt normal operations. HR technology compliance involves ensuring that the technology platforms adopted by human resource departments comply with applicable regulations related to data rights, privacy, and security. Examples of such laws include HIPAA, which governs the use and protection of health information, and the GDPR, which covers employee and consumer data rights (BasuMallick, 2020). usually, employers are assured of compliance when they sign service-level agreements (SLAs) with the technology vendors.

Internal compliance deals with adherence to organizational policies, which must be created within the confines of the statutory and regulatory laws. For instance, if the minimum wage is $12 per hour for payroll workers, a company can opt to pay its workers a minimum of $15 per hour but not less than the minimum wage. Training compliance involves adhering to the specific training requirements stipulated by certain industries. Many professional jobs such as nursing, engineering, and accounting come with their own certifications. Public accountants, for example, must have a Certified Public Accounting (CPA) qualification, while registered nurses must have a bachelor’s degree in nursing or an (associate’s degree in nursing) from an accredited nursing school. Training policies can also be dictated by state and federal governments. In California, for example, companies with at least five employees are obligated to provide two hours of interactive or classroom anti-harassment training to employees in supervisory roles (BasuMallick, 2020). employees in non-supervisory roles require one hour of such training.

International labor law compliance involves adherence to guidelines set by international labor bodies, specifically ILO (International Labor Organization). While the adoption of some recommendations is left to the discretion of regional and national labor authorities, some conventions are legally binding on member states, especially those related to human rights, children’s rights, gender-based discrimination in employment, and the right to decent work (BasuMallick, 2020). Country-specific compliance involves adherence to HR regulations set by a country, such as employment-related factors such as minimum age, retirement age, minimum wage, work hours, and work arrangements. For example, France passed the Right to Disconnect law that allows employees to disregard work emails outside the official work hours (BBC News, 2016). The law applies to companies with fifty or more employees. This law arose out of complaints that workers were forced to reply to work emails without receiving corresponding overtime pay, yet the failure to disengage from work activities carried the risk of burnout, stress, and sleep problems. Many countries have no such laws, and workers can be penalized for ignoring work emails. Therefore, knowledge of country-specific labor regulations is necessary, particularly for multinational companies that manage a globally distributed workforce. Lastly, workplace compliance involves adhering to the internal rules specific to the workplace environment. Examples include dress codes, communication channels, break and lunch breaks, arrival and departure times, procedures for office meetings, and even the use of company equipment and machinery. Nevertheless, these policies must not contravene statutory and regulatory laws.

Research question one: What is HR role in compliance?

HR can participate in compliance in various ways. First, HR can establish interdepartmental C&E committees. A compliance committee comprises in-house executives responsible for helping an organization navigate regulatory compliance obligations (Kelly, 2020). The executives are drawn from multiple departments to provide a wholesome view of an organization and monitor all the changes occurring in various areas that could increase the company’s risk profile. The main task of the committee is to identify emerging compliance risks such as cybersecurity while keeping older risks at acceptable levels. It also discusses and formulates disciplinary policies for employees who violate compliance procedures.

Second, HR can help build a culture of compliance within the organization. This role recognizes the importance of systemic, daily, formal, and informal behaviors in forming the foundation for legally compliant companies. Here, HR can undertake several tasks, including continuous learning of current compliance law, modeling ethical leadership behavior to fellow employees, forcefully advocating cultural decency and civility, encouraging executives to be accessible and visible to subordinate employees (i.e., discourage pomposity and pretentiousness among them), conducting prompt and proficient complaint investigations, and incorporating ethics, values and the company code of conduct in every orientation, onboarding, and operations review activities (Harrison & Murphy, 2008).

Third, HR ensures company compliance with both HR and non-HR requirements (Tansey, 2020). HR requirements relate directly to the core HR functions (i.e., hiring and managing employees). Examples include fair recruitment practices and ensuring workplace safety. On the other hand, non-HR requirements fall outside the primary HR functions. Examples include (1) general business compliance such as the anti-discrimination laws and the Affordable Care Act (ACA) reporting; and compliance with data security laws such as HIPAA (Health Insurance Portability & Accountability Act) and GDPR (General Data Protection Regulation).

Fourth, some organizations have an HR compliance officer responsible for ensuring organizational compliance to external and internal labor laws and regulations and educating employees about emerging compliance issues. The HR compliance officer has several roles and responsibilities, including creating an employee handbook, employee education, hiring the right talent, conducting routine compliance training, investigating work-related accidents, and assessing healthcare information (Pribanic, 2021). An employee handbook is an effective way of reaching all employees simultaneously. It outlines the policies and procedures of the organization as well as the employee responsibilities, liability, and channels for seeking redress in matters related to their jobs. Educating employees on all the legal and regulatory requirements that can affect the company is essential since these compliance laws are ever-changing. Despite many HR functions being overworked or understaffed, an HR compliance officer should organize regular training sessions and audits to not only brush up on employee compliance knowledge but also weed out chronic violators of compliance laws to prevent legal liabilities. Many of the compliance issues facing organizations would reduce considerably if companies hired the right people to run the human resource department. HR activities such as employee benefits and talent management can be complicated, especially when dealing with multidisciplinary and multicultural teams or the emerging shift towards flexible working arrangements such as remote working. Successful compliance, therefore, requires qualified and experienced professionals to work in HR departments. Here, the compliance officer also conducts background checks on prospective hires in line with the Fair Credit Reporting Act (FCRA) provisions for accessing credit records as well as criminal history (Pribanic, 2021). This ensures that the organization hires only the most qualified and responsible people to minimize the risk of non-compliance.

The other role of the HR compliance officer is investigating work-related injuries and accidents in collaboration with other relevant authorities such as line managers and supervisors. If the investigation establishes that the company is liable for non-compliance with work safety regulations, the compliance officer is expected to recommend corrective policies to prevent recurrence (Pribanic, 2021). But if the fault lies with the injured employee, a refresher compliance training session may be needed for all employees. Lastly, the HR compliance officer is tasked with assessing the capability of employees based on the information provided by healthcare providers. Such evaluations facilitate decision-making related to departmental placement, possible disability accommodations, and return-to-work approvals after a medically-induced leave of absence. Other roles of the HR compliance officer include working with the legal department in communicating the requirements for compliance training programs, updating HR policies and practices in line with regulatory changes, and communicating compliance requirements to top management for inclusion in strategic decision-making (Pribanic, 2021).

Research question two: Why is HR regulatory compliance important?

The primary reason behind HR compliance is to avoid the substantial financial and legal costs associated with non-compliance. Recent statistics published by Hilb Group Company (2019) show a 400% increase in employment lawsuits in the last two decades. In 2019 alone, the Wage and Hour Division (WHD)of the Department of Labor received about $322 million worth of wages owed for wage violations. In addition, sexual harassment payouts were the highest in 2019 at $68.2 million. The law does not assess the intention behind non-compliance. So, whether it was a mistake or intentional is immaterial as hefty fines apply. For instance, ACA violations attract $500,000 in penalties, while the Disabilities Act imposes a $55,000 fine (Integrity HR, 2021). Mistakes made on Form I-9, FLSA (Fair Labor Standards Act) violations, and COBRA violations attract $1,000, $1,100, and $100 in fines per mistake or beneficiary. While some of these fines seem small, the cost adds up quickly when multiple errors or clients are involved. Cumulatively, these fines could bankrupt a small company. Even though big companies may afford the payouts, it may set them back in their revenue, profit, and market goals.

Other than financial losses, non-compliance can also result in reputation loss and employee turnover. Employees and business clients tend to avoid working for or dealing with companies with a reputation of disregarding employment laws and regulations. People seek to work where they are valued first as human beings and then as integral assets to the organization. Disregarding their welfare and career aspirations often leads to non-compliance lawsuits that signal to prospective employees about the poor corporate culture. Reputational damage is magnified in today’s era of social media, where negative posts can be viewed by millions of people. In addition, the proliferation of activist sites on the internet has made companies hyper-vigilant. This can be particularly damaging to multinational corporations that have clients worldwide.

According to a joint global survey done by Deloitte and Forbes Insights (2015), 87% of the surveyed executives identified reputational risk as the biggest strategic challenge facing organizations. Over 300 individuals drawn from three regions – the Asia Pacific, the Americas, and EMEA – participated in the study. The participant pool consisted of C-level executives, risk executives, and board members employed in five industries: financial services, consumer & industrial products, life science & health, energy and resources, as well as the technology, media, and telecom industries. World Economic Forum corroborates these sentiments arguing that at least 25% of the market value of a company is directly related to its reputation (Deloitte & Forbes Insights, 2015). The Deloitte study also identified grave consequences of reputation loss are grave, including the loss in revenue and earnings, decline in the value of the brand, vulnerability to regulatory investigation and possible legal penalty or business closure, the loss of customers, and a drop in share prices.

Employee turnover is another cost linked to regulatory non-compliance by human resources. Many industries and companies are increasingly finding it difficult to attract and retain top talent. One study conducted by Gartner found that about 30% of the 5,025 surveyed employees witnessed at least one compliance violation in 2017 and were therefore twice as likely to seek alternative employment (Internal Audit 360, 2018). Of these, 59% reported actively looking for new jobs, unlike 29% of the participants who had not witnessed any violation but were looking for new employment. As such, regulatory non-compliance drives away the very qualified and morally-strong professionals the organization needs to blow the whistle on compliance violations. This leaves morally-weak employees who perpetuate further violations. Besides, the cost of replacing experienced workers is expensive. Studies estimate the cost of new hires – including recruiter fees, orientation, training, and unavoidable rookie mistakes – at 33% of the salary paid to an established employee in a similar role (Ascentis, 2021). Increased labor costs cut into the earnings of the company.

On the flip side, HR regulatory compliance has beneficial effects on organizations, including attracting quality workers, improving workplace safety, improving employee retention, and business growth. Top employees ordinarily aspire to work for reputable companies that, in turn, enhance their visibility and career prospects. As such, organizations can enhance their appeal by being compliant with labor laws and regulations. In contrast, non-compliant companies only attract individuals fixated on making short-term gains and therefore are not concerned about violations so long as they are not adversely affected (Ascentis, 2021). compliance with safety regulations such as OSHA also creates a safe working environment. Lastly, compliance means fewer regulatory interventions and legal suits, leaving the organization with ample time and financial resources to expand business operations. Besides, the company appears more trustworthy to external stakeholders such as business partners and investors. As a result, the entity can leverage its reputation to secure business inputs such as loans from creditors and product inventories from manufacturers.

Research question three: How to implement HR compliance best practices?

Based on the discussion presented thus far, it is clear that ensuring compliance is an important HR function. Implementing an effective C&E program based on available best practices is, however, easier said than done. Multiple studies have looked into this issue and provided valuable insights and conclusions that can be used to inform and guide the implementation of C&E programs. Gammisch and Balina (2014) focused on compliance management systems (CMSs) and examined how businesses can be sustainably managed using the technique. The study explored the question of whether CMSs matter or not and if it does to what extent. In a 2012 survey about workplace ethics which was done across the EU with a sample of 3,000 participants, it was found that a majority (77%) practiced honesty on a daily basis (Basran, 2012). Similarly, about three-quarters (71%) reported not feeling pressured at work to contravene their organization’s ethical standards. However, 22% of the employees reported feeling pressured to compromise on ethical standards (Basran, 2012). Studies show that this pressure can lead to unethical decisions – a phenomenon that, in the long run, can have a damaging impact on the company, especially with regards to fines and image. This is particularly significant in a corporate landscape where most organizations lack written standards of ethical business conduct in place. In the EU, Basran (2012) found that nearly 53% of organizations re affected.

The Case for CMSs

          A functioning CMSs could be critical in this regard, helping to foster ethical business behavior. Based on this, Gammisch and Balina (2014) drew insights from the principal-agent theory and examined how it can assist organizations in weeding out corrupt practices. The overarching research question, which led the research work, postulated that specific CMSs activities could enhance the business conduct of organizations and, therefore, can have a positive impact on business commercial practices. The study thus sought to study CMS activities and how their applications could curb corruptive behavior. The aim was to evaluate the pertinence of CMSs from a theoretical perspective and, using findings from the analysis, test the outcome of activities to ascertain which provided the best outcome. Despite the study’s limitations, such as lack of generalizability, practical findings are that CMSs have a positive influence overall. The strongest influence is attributable to activities that are based on four key administrative and HR functions, namely (1) information, (2) controls, (3) instructions, and (4) reporting (Gammisch & Balina, 2014). These activities, however, need to be tailored specifically to address specific business needs.  Accordingly, and as a piece of general advice, it can be inferred, and rightly so, that these activities should be chosen and subsequently implemented in a holistic manner – embedded in a general risk analysis outcome to ensure that the pertinent compliance risks are addressed.

Moreover, Gammisch and Balina’s (2014) findings reveal that in implementing HR C&E programs, it is critical that organizations evaluate the aspect of control. It is found that if control is to be decreased in the future and employees telecommute as workplace environments become more virtualized, it is imperative for organizations to depend on morally upright employees with sound ethical understanding to implement their C&E programs. This change also needs to be lived by the managerial function to change organizational culture without comprising the stability and overall control of the firm. Therefore, in implementing compliance programs, findings from best practices analysis divulge that it is essential that the programs are tailored to address specific organizational C&E shortcomings or targets.  Coglianese and Nash (2021) did not explore the best practice approach of implementing HR compliance initiatives but offered CMSs interpretations that are critical for the present discourse. Like comparable studies, especially Benedek (2012) and Gammisch and Balina (2014), Coglianese and colleagues also found that regulatory compliance is important for public values espoused by regulation. Unfortunately, most business establishments remain out of compliance with various regulatory requirements applicable to them. Besides presenting possible dangers to the general public, this state of non-compliance incidences also exposes affected organizations to significant liability risk. CMSs may assist in this regard by reducing the prospects of non-compliance.

But do CMSs actually work?

Recently, and as Coglianese and Nash (2021) further illustrate, managers, including HR practitioners, have begun using CMSs in a bid to address and curb non-compliance issues in various domains, such as finance, healthcare, and occupational health and safety, amongst others. This is because CMSs have been proven to help organizations institute systematic processes by which managers, including HR practitioners, improve their organization’s compliance profile with existing industry and government regulations. This, according to the study, helps businesses detect (1) compliance obligations, (2) assign duties for meeting them, (3) monitor and track implementation progress, and (4) take the appropriate course of action as required. In effect, CMSs make a corporate entity’s internal review and enforcement obligations. Theoretically, therefore, CMSs reduce non-compliance probabilities by increasing regulatory information available to managers and workplace personnel, facilitate internal organizational incentives to remedy cases of non-compliance once detected, and help promote a workplace culture of compliance. In cognizant of these potential benefits, firms are increasingly adopting CMSs as part of their functional organizational structure.

Benedek (2012) echoed near-similar sentiments, noting that the critical step in implementing C&E programs is situating the overall execution process within the organizational, managerial function. This, the study reveals, and arguably so, is one of the most effective best practice approaches. This, however, converts the process into a compliance management issue. According to Benedek (2012), compliance management aims not just to (1) detect and prevent corporate misconducts and mistakes but also to (2) minimize potential damage arising from such crimes, (3) prevent a recurrence, and (4) improve business control processes. The aim is to enable organizations to operate with non-compliance incidences occurring. It is also essential to note that compliance management varies from one corporate entity to another. It is also a broad concept, which under the compliance management umbrella may include, among others, compliance to (1) business-related laws and inhouse organizational regulations, (2) health and safety issues, and (3) environmental matters. Lately, issues to do with data security, antitrust considerations, competition, and intellectual property have also featured prominently. Wu and Van Rooij (2019) concurred.

Drawing from empirical data of participant observation regarding responses to legal rules compliance in two firms, the study found that in such contexts, Compliance Dynamism exists. This means, as Benedek (2012) also alluded, means that a C&E program cannot be a one-fits-all solution to all corporate non-compliance challenges. It varies for different regulatory regimes, over time, as well as between businesses. Organizations also learn about appropriate ethical and legal responses on a constant basis as no compliance situation is the same. Compliance – and adjunct requirement measures – is also situational and varies from jurisdiction to jurisdiction. Therefore, the manner in which a C&E program is implemented in the US is different from that in Kenya, Japan, China, and whatnot. Fundamentally, Wu and Van Rooij (2019) divulge that compliance implementation should be conceived not as a singular isolate state but rather as a string of reiterative related processes that are conceived and executed in their specific situational context. There is, however, a risk that with this conceptualization, compliance initiatives might be designed to address too many areas yet generate fewer results. Therefore, best practice approaches and as Benedek (2012) contends, C&E initiative should be strictly defined in both scope and execution.

On whether (or not) CMSs actually help organizations improve their compliance to existing regulations and codes of practice, Coglianese, and Nash (2021) reviewed extant empirical publications related to CMSs to establish how they function. The study sought to determine if CMSs help organizations fulfill both the letter and spirit of extant regulatory frameworks. The researchers also considered lessons that can be extracted from research about the efficacy of broader systems of corporate codes of ethics and risk management. This is because these systems either (1) comprise regulatory compliance as an HR component or (2) present comparable bottlenecks with regards to internal HR administrative monitoring and influencing of organizational culture and behavior.

In general, Coglianese and Nash (2021) found that organizations with certain forms of CMSs in place record comparatively fewer compliance contraventions than those without CMSs. These firms also exhibit marked improvements in their risk management profile. For large organizations, however, these effects were found to be somewhat modest. In huge corporations, that study established that implementing proper and functioning compliance measures needs more than just instituting a CMS. It requires proper HR managerial attitudes, organization-wide cultures, and appropriate information technologies that transcend the conventional systematic checklist processes typical of CMSs.

From the findings presented thus far, CMSs include an array of enabling factors. Key of these include the establishment of ethical personnel to help manage compliance and the implementation of in-house procedures and management structures to encourage compliance. Collectively, these tools are what enable businesses to be their own enforcement agency – helping them to not only identify but also correct and prevent their own compliance shortcomings. As such, in implementing HR compliance programs, it is critical that HR practitioners ensure that they incorporate CMSs elements applicable to their case. Some of these elements are:

  • Operationalizing internal compliance policies
  • Making policies and procedures accessible
  • Personnel training, especially in policies and procedures
  • Recording keeping and auditing. This is essential for monitoring and evaluating the extent of regularly compliance and adherence to stipulated internal procedures and codes of ethics
  • Establishing workable procedures for undertaking corrective action of non-compliance (Coglianese & Nash, 2021).

So, how can business enterprises best implement HR compliance programs?

It is clear from the literature that HR compliance programs, including CMSs, are structured around – and indeed based on – specific legal responsibilities that apply to organizations or business enterprises within which they have been conceived and established. For business entities, these requirements normally revolve around substantive obligations relating to such domains as financial accounting and tax reporting, occupational health and safety, labor/employment practices, CSR, and lately, environmental protection (Coglianese, & Nash, 2021). Whereas specific issues that elicit compliance response programs differ across organizations, the general best-practice structure of such programs (including CMSs) usually follows what is referred to as a “plan-do-check-act” model. Basically, this model calls upon managers to do five essential things in so far as addressing the identified compliance issue is concerned. First, to design a plan for how their firm will fulfill its applicable regulatory (ethical and legal) responsibilities, and second, to implement the HR compliance plan. Afterward, the HR managers then assess to ensure that the plan is functioning and undertake appropriate measures to correct issues as they arise (Coglianese & Nash, 2021).

For Benedek (2012), however, any form of organizational self-regulation in the issue of HR compliance management begins by adopting an existing regulatory framework and complying with the stipulated provisions. One of these is FSGO (Federal Sentencing Guidelines for Organizations), which for businesses operating in the US, forms the basis for comprehending and managing compliance risks. The FSGO helps US-based firms to not just plan but also implement HR programs that help ensure compliance, ascertain and approve non-compliance, and are regarded as effective by law enforcement. According to Benedek (2012), the pertinent FSGO components essential for implementing HR Compliance programs include:

  • Organizations establishing compliance standards and protocols to be followed by all employees as well as agents and stakeholders of the institution
  • The compliance program to be rolled out and superintended by high-ranking organizational personnel, e.g., HR compliance managers
  • Organizations must guarantee that critical discretionary authority is not granted or delegated to personnel with a proclivity towards criminal behavior
  • Organizations should ensure that appropriate training and effective communication regarding the compliance programs and guidelines are provided
  • Appropriate monitoring and evaluation of the performance of the compliance system must be set up together with functional reporting mechanisms
  • After a non-compliance or offense is detected or reported as the case may be, organizations must take reasonable steps are taken to prevent future reoccurrence.

Research question four: What are the federal regulations, and why they’re important?

          Several federal regulations govern how employers and employees relate to each other. Some of the relevant legislations include ADEA (Age Discrimination in Employment Act), ADA (Americans with Disabilities Act), FLSA (Fair Labor Standards Act), FMLA (Family & Medical Leave Act), NLRA (National Labor Relations Act), and WARNA (Worker Adjustment & Retraining Notification Act) (BCcampus Open Publishing, 2019).

          ADEA was implemented in 1967 to protect those aged 40 years and above from being discriminated against based on their advanced age in employment-related decision-making. The law protects both job applicants and existing employees. As such, it is a criminal offense to terminate, deny promotion, withhold compensation and benefits, or fail to assign job assignments to older employees in favor of their younger counterparts.

          ADA came into force in 1990 to protect the rights of qualified individuals living with disabilities. Private employers, employment agencies, labor unions, and local and state governments cannot discriminate against such individuals, specifically those with a physical or mental impairment that compromises at least one of the major life activities. The law obligates employers to make the necessary workplace accommodations such as creating ramps for employees who use wheelchairs, scheduling regular breaks for diabetic employees to take their insulin shots, providing reserved parking, and designating modified washrooms.

          FLSA stipulates fair standards related to minimum wage, overtime wage, youth employment, recordkeeping, and full-time and part-time work. In contrast, FMLA grants eligible employees the right to a 12-week unpaid, job-protected leave within a period of 12 months (BCcampus Open Publishing, 2019). The leave is granted for family and medical reasons.

          NLRA extends unionizing and collective bargaining rights to many employees employed in the private sector without fear of retaliation. Lastly, WARNA obligates employers to notify their workers, their families, and communities 60 days prior to closing a plant or mass layoffs. The law applies to entities that employ at least 100 workers minus those who have only worked with the employer for less than 6 months within a 12-month period (BCcampus Open Publishing, 2019).

Research question five: What are some examples of HR compliance issues?

HR compliance is dynamic. Organizations must anticipate changes and address them before they yield costly consequences. BasuMallick (2020) identifies four factors that make compliance a challenge for many entities. First, laws and regulations evolve at a faster pace than organizations can keep up. Large organizations with their employees working in multiple states, regions, or countries are expected to keep up with many changing HR  regulations. As a result, the risk of unintentional non-compliance is high. Second, HR technology vendors are not profoundly concerned with compliance and therefore increasing the risk exposure of the entities that implement them. Today, technology is deeply enmeshed within the organizational fabric as entities rely on information systems and digital networks to streamline their operations and automate routine tasks. However, some of these tech platforms are not explicit in their data collection protocols, some of which may be founded on biased algorithms.

Third, individuals differ in the way they interpret laws and regulations. For instance, this issue primarily applies to violation cases where there is no witness other than the parties directly involved. In sexual harassment cases, it is usually the word of the victim against that of the perpetrator. Unless there is a witness, it becomes difficult to ascertain the truth. As a result, the verdict arrived at by HR may not be sufficient for the parties involved, causing an escalation in the form of employee resignation or a lawsuit. Fourth, persistent negative behavior undermines the ability of HR to ensure compliance (BasuMallick, 2020). some companies have a history of non-compliance in matters such as sexism, underpayment of women, or discrimination of minorities. It becomes hard for human resources to change such cultures, resulting in numerous cases of violations.

Thus, HR compliance issues commonly revolve around employment laws, employee safety, and recruitment and termination processes (PowerDMS, 2020). Employment laws deal with issues such as working hours, remuneration, compensation, anti-discrimination, and anti-harassment. Examples of compliance violations include child labor, pay differentials based on any other criteria (e.g., gender, race, religion, or nationality) instead of merit, workplace bullying, and sexual harassment. Employee safety is regulated by OSHA. The legislation obligates employers to create safe workspaces for their employees. Hiring and termination processes can create conducive conditions for compliance violations, especially when dealing with immigrants and labor unions.


HR compliance traces back to the very beginning of the HR function’s regulatory and administrative roles. HR compliance programs are integral to organizational performance. They specify the laws, regulations, and policies that both employers and employees must follow to ensure that the organization operates lawfully. Therefore, this paper sought to answer five questions: (1) to discuss the role of HR in compliance, (2) to enumerate the importance of HR regulatory compliance, (3) to discuss practicable ways of implementing HR compliance best practices, and (4) to explain what federal regulations are and indicate why they are important. The human resource department is the best-suited unit to deal with compliance issues because of its direct involvement in employee affairs. Its significant control over employee welfare places it in a unique position to influence employee behavior in ways that benefit the organization. HR compliance consists of several elements ranging from statutory, regulatory, and industry-specific compliance to international and country-specific labor laws. HR plays specific roles in ensuring regulatory compliance, including the establishment of compliance and ethics committees, building a philosophy of compliance within the organization, and ensuring adherence to both HR and non-HR requirements. Some entities have gone further to establish the position of an HR compliance officer whose roles include creating an employee compliance handbook, conducting routine employee training and education on compliance, hiring the right talent, conducting work-related accidents, and providing health-related recommendations regarding job roles and responsibilities. HR regulatory compliance is essential because it reduces the risk of litigation and the resultant legal costs, enhances company reputation, attracts quality workers, improves employee retention, enhances workplace safety, and supports business growth. Compliance also helps minimize the cost of non-compliance, such as lawsuits and reputational damage. Some of the relevant legislations include ADEA, ADA, FLSA, FMLA, NLRA, and WARNA. These federal legislations provide various safeguards against employment discrimination while increasing the bargaining power of employees in negotiating favorable work contracts with their employers. They also ensure that employers create safe working conditions, free of the risk of avoidable injury and accidents. Federal safety laws also ensure that affected employees who get injured through no fault of their own are compensated and their jobs secured while they recover. However, compliance is a challenging endeavor for many companies because of the ever-evolving labor employment and labor laws, the failure of HR technology vendors to comply with HR laws, differences in legal interpretation, and a culture of non-compliance that undermines compliance efforts. The typical HR compliance issues revolve around employment laws, employee safety, and recruitment and termination processes. Examples include cases of child labor, immigrant labor, sexual harassment, workplace bullying, and unionization. Nevertheless, a qualified HR department, adequate awareness creation of compliance issues, and commitment from the top leadership will go a long way in entrenching a culture of ethics and compliance. Specifically, organizations can ensure compliance by establishing compliance standards and protocols for all employees and other stakeholders, engaging the support of high-ranking personnel in rolling out the compliance programs, ensuring that critical discretionary authority does not go to personnel with criminal inclinations, continuously monitoring and evaluating the performance of compliance systems, and implementing remedial steps to prevent the recurrence of compliance violations.


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