[IMGCAP(1)]Ever-evolving regulatory complexity, coupled with an increasingly competitive marketplace, globalization and the rise of part-time and casual employees make it more difficult than ever for growing businesses to keep up with the numerous changes in the law, risking costly noncompliance.
Midsize organizations in particular encounter pressure in the face of expectations. They are expected to operate as nimbly as a small business, but abide by the same regulations that govern larger companies.
Common Compliance Mistakes and Concerns
A common mistake that plagues many midsize organizations includes noncompliance with the rules around the secure handling of employee data. Many still rely on manual processes to keep track of employee schedules and time-off requests, and are using several disparate and separate systems to handle HR records, pay and benefits.
From the pay side in particular, midsize business owners are realizing that payroll rules are complex to manage because of ongoing legislative changes. The state and federal labor requirements for overtime and meal breaks, along with compliance requirements for payroll reporting, quarterly filing and year-end filings require expertise that some midsize business owners lack in terms of internal resources.
In full acknowledgement of tax code complexities, let’s not forget requirements of the Affordable Care Act, which happen to add extra compliance concerns for midsize business owners. Under the legislation, companies that grow to more than 50 full-time equivalent employees need to record specific information about health care coverage being offered to employees to meet ACA requirements. This fact necessitates the precise tracking of employees’ service hours, under specific methodology, in order to determine not just who are eligible employees, but also when they become eligible.
Strategic Solutions to Avoid Noncompliance Fines
Noncompliance with state or federal regulations and the ACA can result in steep fines, penalties and employee lawsuits and even damage to the organization’s brand reputation.
To help mitigate the risk, growing businesses can turn to attorneys and accountants for advice, and consider using a third-party human capital management solutions provider to help enable compliance, so they can remain focused on managing their core business.
Typically human resource information systems and time and attendance systems amongst smaller and midsize organizations—if not completely manual—have been separate from payroll, which causes issues in data integration and synchronization. Legacy HR and pay solutions lack the ability to provide real-time data to enable effective decision-making, and there are no safeguards in place to ensure that employees are accurately allocating their time to projects. Additionally, midsize organizations often do not have as many dedicated HR resources and need to juggle many different demands.
That said, midsize organizations are challenged to manage the benefits plans offered to their employees, accurately track employee time, and continue to pay their employees—all while ensuring they meet their legislative compliance requirements, as employers.
In support of this need, human capital management cloud solutions offer a viable, affordable technology approach to help enable compliance and mitigate risks. Cloud solutions enable midsize organizations to take advantage of not only the latest in compliance updates, but also the latest in innovation to support their payroll, HR and operations needs. That said, not all HCM cloud solutions are created equal. Here are some qualities and questions that midsize organizations should keep in mind when considering HCM technology in the cloud:
1. Does the (cloud-based HCM) solution provide a single system of record for all employment information? Does it keep track of: a) employee availability and time off requests; b) data around HR relevant employee life events such as marriage, change of address or the birth of a child; c) benefits insurance, and does it offer automated open enrolment, and; d) data (example: hours worked) needed to comply with payroll tax laws?
2. In regards to the ACA, does the technology allow for: a) the capability to use the most appropriate measurement period for the operating environment; b) the seamless transition of new hires from initial measurement periods to the measurement periods for ongoing employees and; c) the capabilities and data necessary to accurately perform the required average hour calculation?
3. Does the solution provider have a proven track record of delivering on compliance updates and data security of the company’s employee data?
4. Does the solution have self-service capabilities (via the Internet, mobile or various clock functions) to enable employees and managers to maintain their own employee profile information, approve employee transactions, track and approve time worked—helping improve record accuracy and data integrity while reducing the manual work required to administer these functions?
5. With the regulations around handling and sharing of employee data across countries being particularly complex, does the solution provide the tools and information needed to manage a global workforce?
A Final Thought
Midsize business owners are faced with numerous regulations that govern their day-to-day operations. One of the biggest challenges besides wearing multiple hats and finding more hours in the day is staying compliant with the latest legislation. Though unintentional, many are at risk of failing to comply with the legislative standards, either because of the lack of familiarity or access to resources who are familiar with the legislation, or basic human error due to outdated manual processes, disparate systems or otherwise. Unfortunately, these are not legitimate reasons to escape enforcement of the law, which may include fines and penalties.
Thus, employers of all sizes must ensure they achieve compliance with employment standards requirements as failure to do so can be costly. Human capital management only becomes more complex as a company grows, due to the increase in the number of employees and data that comes with them.
That said, using the services of a third-party human capital management solutions provider to help enable compliance can certainly help mitigate risk but also help midsize organizations focus on managing their core business.
Shelley Ng is vice president of product management at Ceridian, a global human capital management technology company serving over 25 million users in more than 50 countries.
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