Transforming HR Compliance: Less Risk, More Reward

Close up of wooden see saw with words risk and reward

Focus on these three areas to help reduce HR compliance risk exposure while also cutting costs.

Companies have the potential to overcome challenges and identify opportunities to make compliance more efficient and strategic by applying automation, outsourcing and process improvement to HR operations in the same ways they do for other processes throughout their organization.

As a recent ADP Research Institute® survey suggests, compliance challenges and complexity can have a major impact on a company's growth. When asked about their biggest challenges to expanding globally, midsized business owners cited the complexity of government regulation and the ability to comply with employee data laws.

Tackling sources of HR compliance risk

Employer compliance challenges are broad and complex, including a wide range of operations. Some of those issues include:

  • Wage garnishments
  • Affordable Care Act (ACA) compliance
  • Unemployment claims compliance

Each of these areas of responsibility can benefit from a thorough process review to identify sources of inefficiency and error — and opportunities to streamline, automate and optimize.

Wrangling with wage garnishments

One of the most common and complex HR compliance issues faced by employers is wage garnishment. Wage garnishment — the legal seizure of employee pay to repay debts and meet obligations like child support payments, tax levies, student loans and consumer debt — impacts one in 14 U.S. workers, and an estimated 12 percent of those with a garnishment have more than one type.

The ACA is complicated, and potential penalties can be steep for companies that aren't compliant. Efficiently meeting the demands of the employer mandate and federal and state health coverage reporting requirements is essential to avoiding compliance-related penalties.

Employers who fail to comply on time, or fail to properly document compliance, may face substantial financial penalties. In 2020, the penalty imposed on employers that failed to offer coverage increased to $2,570 annually per full-time employee (minus the first 30 FTEs). The penalty for employers that fail to offer coverage that meets ACA standards increased to $3,860 annually per full-time employee. Employers that fail to comply or fail to properly document their penalty face a potential non-filing penalty of $550 per eligible employee.

Compounding the complexity of compliance are state healthcare compliance requirements, which vary from state to state.

Unemployment claims challenges

According to the U.S. Department of Labor, nearly 1 in 5 unemployment overpayments results from employers failing to promptly or properly respond to state agency requests.

Responding to unemployment claims can be complicated and time-consuming. If not properly managed, the unemployment claims process can potentially lead to significant erroneous unemployment claim payments.

With 53 state-level tax jurisdictions, unemployment claims and related taxes can present a similar challenge in terms of complexity as ACA compliance.

Beyond maintaining compliance, unemployment claims management activities generate a tremendous amount of overhead for your staff for routine tasks including:

  • Mail processing
  • Claims review
  • Protests
  • Appeals
  • Hearings
  • Benefit changes
  • Benefit wage audits
  • Tax rate review
  • Responding to state agency requests

All of these tasks can be streamlined and managed more efficiently and effectively by leveraging automation and selective outsourcing.

Go deeper

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.