People are a company’s greatest asset—but they can also pose the greatest risk. For many entrepreneurs, it can be easy to let HR risk management planning fall by the wayside while you focus on the day-to-day activities of running a growing business. However, failing to properly manage these considerations can expose you to a multitude of liabilities and negative outcomes, from claims about unpaid wages or discrimination, to diminished employee morale and increased turnover.
But where should you focus your energy when you have so many things already competing for your attention? To make it simple, we’ve broken down the top 10 HR risk management concerns that should be at the top of your list.
Top 10 HR Risk Management Concerns
1. Payroll
Payroll covers a variety of functions, but these two areas regularly trip up business owners:
Wage and hour laws - Under the Fair Labor Standards Act (FLSA), if you’re incorrectly classifying employees (independent contractor vs. employee and exempt vs. nonexempt), inaccurately calculating overtime, or allowing “off the clock” work, it could result in penalties or legal action.
Payroll tax - One of the biggest pitfalls of processing payroll is incurring payroll tax penalties for making errors, including filing or depositing taxes late, completing the forms incorrectly, or depositing and reporting incorrect amounts, all of which can result in hefty penalties or legal trouble for your business. To avoid this, automate the process with payroll software.
2. Pay equity
Equal pay laws prohibit paying people unequally based on gender, sex, race, age, or disability. Pay inequality may unintentionally occur when offering job candidates higher pay to compete for talent, or if you haven’t properly evaluated the market rate for pay and provided adequate increases to your workforce. Even if a discrepancy is unintentional, if you can’t defend why you’re paying a woman or someone in another protected group less than others with equal qualifications, experience, and job duties, your business is at risk for government fines or discrimination lawsuits.
3. Workplace discrimination or harassment
Federal anti-discrimination and workplace harassment laws prohibit employers from taking adverse action “based on race, color, sex, ethnic origin, disability or age, as well as because of genetic information or veteran status.” Here are a few tips for to ensure your business stays in compliance:
Create a well-drafted anti-harassment and anti-discrimination policy
Educate your workforce, including management, on both the law and your policy
Provide anti-discrimination and DEI trainings to reduce likelihood of discrimination and promote a more inclusive workplace
Promptly investigate any complaints and ensure the persons handling the investigations are experienced in this area (consult an HR expert if necessary)
4. Benefits administration
Benefits are an essential part of any competitive compensation package, but they also come with complex regulatory requirements. Some of the top compliance concerns include the Employee Retirement Income Security Act of 1974 (ERISA), which sets standards for private sector retirement and health plans, as well as COBRA, HIPAA, the Affordable Care Act and more.
Visit the Department of Labor website for a comprehensive health benefits compliance guide and consult your HR representative or benefits administrator for guidance.
5. Talent attraction and retention
With ongoing labor shortages and skills gaps, the competition for talent today is fierce. That’s why it’s essential to create a strong talent pipeline and growth opportunities as part of your HR risk management planning so you can attract and retain skilled workers.
In addition, over-reliance on key individuals can cause significant disruption if they quit or become unable to work, so include succession planning in your talent strategy to mitigate your key person risk. Finally, maintain fairness in your external and internal hiring practices in order to stay compliant with anti-discrimination laws and reduce turnover.
6. Terminations
In the United States employment is predominantly “at-will," so employers seldom need cause to dismiss workers. However, regulations regarding employee terminations and anti-discrimination laws must also be carefully followed to avoid wrongful termination or discriminatory lawsuits.
To reduce your risk, thoroughly investigate any wrongdoing before a dismissal and hold a termination meeting to provide a reasonable explanation for your decision. Also, stay up to date on federal and state laws regarding continuation of benefits and share all necessary paperwork and final paychecks in a timely manner (in Texas, within six days of termination).
7. Family and medical leave
While the Family and Medical Leave Act (FMLA) offers enormous benefits for employees, it can be challenging to administer. To maintain FMLA compliance, it’s advisable to define comprehensive HR policies and standard operating procedures so employees know what to expect and leave requests can be handled fairly and consistently.
8. Form I-9
The U.S. Citizenship & Immigration Services requires employers to complete Form I-9 for all U.S. employees to verify authorization to work in the U.S. A host of regulations are associated with completing and retaining I-9 forms—and violations can potentially cost your business thousands of dollars per employee. If you’re not confident that yours are complete, accurate, and up to date, an I-9 audit could protect your business from incurring fines.
9. Safety practices and workers’ compensation
It's critical to know the workplace safety standards for all of your business locations. Under the Occupational Safety and Health Act of 1970 (OSHA), employers are obligated to identify and eliminate workplace hazards. While many states follow OSHA regulations, others have passed even more stringent laws.
Requirements for workers’ compensation benefits also vary greatly from state to state. Texas doesn’t require workers’ compensation insurance (with some exceptions), but going without can leave your business open to litigation, so weigh your options carefully.
10. Cyber security and data privacy
With cybercrimes and data privacy breaches increasing in frequency and sophistication, failing to develop and train your workforce on proper cyber security procedures is a huge vulnerability for your organization. Establish formal policies and procedures around computer usage, e-mail, and the internet to reduce your risk.
Bottom line: to protect your business, and support a healthy, productive workforce, you can’t afford to overlook these common HR risk management concerns.
Need HR compliance and risk management support? Our HR experts can help.
Our HR services include Employee Investigations, Offboarding Services, Form I-9 Audits, full HR Audits and more to ensure your business stays in compliance and on track for success. We’ll dot the i’ and cross the t’s so you can focus on growing your business!
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