Friday Feature: HR and Payroll Compliance is Risky Business

Legal compliance is an always on concern for human resource and payroll professionals.  But does that mean they are doing everything they can to avoid the risk and expense of non-compliance?  We recently published the results of a survey in which we asked these professionals about compliance practices in their organizations.  And what we found was that most of our respondents have valid reasons to be concerned about the risks of non-compliance in their organizations.

More than half of human resources (HR) and payroll professionals (55 percent) have witnessed compliance activities by their colleagues that created unnecessary risk.  Larger organizations (more than 2,500 employees) face bigger risks, as more than two-thirds (68 percent) of respondents say they have seen colleagues cut corners when it comes to compliance.  We don't think most of these respondents are deliberately creating this risk, but rather are overburdened, understaffed, or lack the proper resources required to handle anything above and beyond the day-to-day activities required to run their  departments.

There is a direct link between technology investment and time spent on compliance: organizations utilizing newer solutions spend nearly ten fewer hours per week on compliance (34 hours per week with a solution 1-5 years old versus 43 hours per week with solutions 5+ years old.)  These respondents are ready to embrace newer technologies, with 74 percent agreeing that cloud solutions are best suited to support today's continually changing compliance landscape.

One issue that often plagues organizations is the need for manual interventions to address systems that don't communicate with each other.  Nearly half (47 percent) of survey respondents say maintaining multiple, duplicate employee records leads to increased compliance risk. The survey found organizations maintain an average of five separate records per employee and dedicate 32 hours per week on manual, duplicate data entry.

HR and payroll departments spend approximately 36 hours per week on compliance-related activities ranging from tracking regulatory proposals to creating and communicating new policies. Research we released in 2017 showed that a single major regulatory change is costing businesses between $40,000 and $100,000.

HR and payroll professionals have a long list of priorities they would tackle if they could spend less time and money on compliance, including:

• Improving overall payroll efficiency (22 percent);
• Increasing manager effectiveness (13 percent);
• More employee/internal communications (11 percent);
• Organizational strategy (10 percent); and
• Better performance management (nine percent)

Kronos has put together an e-book with tips to help readers understand and address compliance risk.  Click here to download "Real Risks, Sensible Solutions."