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Why compliance is one of HR’s top concerns, and how to tackle it

Posted by: ADP on 24 September 2015 in Compliance

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What causes HR the biggest headache globally? The answer came to us last year when XpertHR’s first major survey on managing employees globally found that ‘Keeping up-to-date with employment law requirements’ is the biggest challenge for international HR. In case you’re wondering, the other top answers were: managing cultural differences (67.8%), recruiting and retaining the right people (60%) and getting hold of accurate pay benchmarking data (58.9%).

Regulation and fines are on the increase

In fact, it’s not just an HR headache. Senior finance executives also spend nearly 30% of their time each week (yes, each week!) on compliance.

Statistics compiled by Jury Verdict Research show that employment lawsuits have risen 400% in the last 20 years, with the average compensatory award in federal employment cases now exceeding $490,000 (not including lawyers fees).

A sizeable majority of mid-size businesses (67%) expect the burden of employment laws and regulations to increase within the next three years; in just one year alone in 2011, there were 17,000 proposed tax rule changes across 10,000 unique tax jurisdiction types.

The impact of globalisation on HR

The blame, if it lies anywhere, falls to globalisation. It’s not going away any time soon – it’s something all businesses, and individuals, will and must embrace ever more enthusiastically. But managing the HR challenges that come with it can become central to an organization’s success or failure.

Many organizations find themselves in a situation where a lack of standardized and integrated HR and payroll has become a critical cause of compliance costs, which for global companies average a staggering $3.5M each year.

To combat this, effective compliance and risk management means staying up-to-date with HR technology and employment law.

The path to better compliance

A truly global payroll solution combines strong centralised best practices and software with local experts on the ground. It means everyone working in a standardised way with fewer tools to grapple with. If it’s delivered from the cloud then all-the-better, because it has the advantage of a system and infrastructure which are always up to date, relevant and maintained by outside experts.

An outsourcing partner can harmonise payroll and HR administration across systems and tools, cultures and languages, and at the same time ensure compliance with fast-changing laws. Through a cloud-based system, a global network of local experts is at the client’s disposal to handle compliance requirements to keep a company in conformance with local legal and regulatory changes.

Little surprise then that half or more of small and mid-size companies indicate that they already use or plan to use outside partners to help them with HR compliance in the payroll and benefits areas within the next three years. When asked why, they say it’s to stabilize costs, lower risk, increase employee productivity, scalable solutions and improve access to top talent.

As employment and payroll rules adapt, having the expertise in-house to remain on top of all these changes can be complex and costly. Nearly every company has access to — or is already using — various sources of compliance-related expertise and information. However, in a highly competitive economy, falling short in key areas of compliance can put a business at a significant disadvantage. It only makes sense for companies of all sizes to use the tools and expertise available to become compliant. Only by doing so can today’s businesses reach their full potential in the turbulent years to come.

For more insights regarding compliance download ADP latest white paper “Managing Compliance and Mitigating Future Risk”

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TAGS: Compliance employment law requirements global payroll HR administration HR challenges regulations

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