Transforming HR Compliance: Making the Case for Change
Quantifying cost savings, risk reduction, and better business insight opportunities for HR compliance
When it comes to addressing human resources (HR) management compliance risks, all too often, companies accept operational overhead as a cost of doing business. In many cases, the perspective of HR compliance management as an acknowledged cost center reinforces the status quo. This inhibits the exploration of opportunities to boost efficiency, cut costs and relieve staff of unnecessary administrative burdens.
It's feasible for HR departments to overcome the status quo and identify opportunities to make compliance more efficient and strategic through innovation, automation and outsourcing.
Sources of HR compliance costs and opportunities for savings
There are two main sources of HR compliance costs within a company: the ongoing operational costs (via people, systems, and processes) to avoid or mitigate compliance risks AND the financial and reputational impacts to a business because of non-compliance.
Unless or until a major compliance failure, or a series of smaller non-compliance issues occur that put the company at serious financial or reputational risk, companies rarely scrutinize the cost, effort or effectiveness of their HR compliance programs.
Considering the activities HR is involved in, there is a wide range of potential compliance risks, including in these areas:
- Payroll tax processing
- Employee pay
- Wage statements
- Wage garnishments
- Employee fraud
- Employee wellness/financial planning
- Tax credits and incentives
- Employment tax compliance
- Unemployment claims
- Affordable Care Act (ACA) compliance
By striking a better balance between HR-related compliance risk management and business outcomes, companies can further reduce costs, better manage risks and drive better business outcomes through automation and process transparency.
Why change? Overcoming the HR compliance status quo
The world of work is getting more complex. When it comes to HR compliance, the status quo is no longer good enough. With so much changing so quickly, it's no wonder that, according to a 2020 survey conducted by the ADP Research Institute®, 40% of all business owners surveyed indicated that they had experienced unintended expenses as a result of non-compliance with government regulation.
The good news is that in spite of increasing complexity, companies that embrace technology and adopt best practices not only stay ahead of the curve in terms of managing compliance risk, but they can also significantly reduce operational costs and improve overall business efficiency and effectiveness. They can take pro-active steps to avoid being a member of the 40% that reported experiencing unintended expenses due to non-compliance. At the same time, they can invest in a business model that delivers an ongoing return on investment in terms of efficiency, costs savings and potential tax credit expense offsets driven by process improvement and innovation.
Opportunities for efficiency gains and greater operational effectiveness include:
- Labor savings: reducing HR compliance cost/effort and allowing for re-allocation of effort to more meaningful, impactful work
- System and service optimization: reduction/elimination of "technical debt" related to maintenance and support of existing systems and technologies
- Risk avoidance: optimization of processes and enhancement of company-wide visibility to HR compliance exposure to reduce risks and associated business impacts
- Strategic focus/opportunity: going above and beyond compliance management to identify new opportunities to offset costs and align HR/finance with corporate strategic goals and priorities
Often the measure of any investment in process improvements, technology or services is return on investment.
To learn how HR process improvement can elevate your operations, download the Transforming HR Compliance guide. This interactive resource provides personalized insights into your organization's potential savings based on your company size.