Regulatory Compliance: The Newest Hot Potato for HR and the HRO Community

As if HRO buyers and providers didn’t already have enough to worry about, regulatory compliance risk management has been added to the list. The United States’ new administration has quickly focused on employment-related regulations and compliance, squarely dropping a new hot potato between buyers and providers. Think about the challenges and implications of the following:

•  The Department of Labor is expected to get a major funding increase in the new budget year and has plans to hire hundreds more wage and hour investigators and to significantly increase the number of compliance audits, according to reports in HR Executive, Workforce Management, and Human Resources IQ. Will you be prepared if an auditor knocks on your door?

•  On July 8, 2009, Janet Napolitano, Secretary of the Department of Homeland Security, announced that all federal contractors and sub-contractors must use E-Verify for employment verification by September 8, 2009, stressing the need to “create a more reliable and legal workforce.” Are you E-Verify certified yet?

•  The Lily Ledbetter Fair Pay Act of 2009, which became law on January 29, 2009, expands the timeframe for filing wage and pay gender-based discrimination claims. Are your wage and hour policies, practices, systems and payroll up-to-date and compliant across every jurisdiction?

•  Effective January 1, 2010, the Americans with Disabilities Act potentially expands coverage areas previously considered impairments. This may impact the whole employee lifecycle including hiring, career movement and development, leaves, work accommodation, discipline and dismissals. Are HRO strategies helping manage across programs and processes, or are they reinforcing HR silos?

Following the direct regulatory changes is challenging, and where there are layers of implications it gets even more complex. For example, do you know if your company/customer is getting American Recovery and Reinvestment Act stimulus funds and also recruits H-1 employees? If so, the hiring and immigration hurdles are now higher than ever.  

These changes are major opportunities for legal advisors and full-scale employment consultants; they also impact HRO service providers.

Compliance expertise and risk mitigation has long been part of the HRO value proposition, but it was largely overshadowed by the drive for cost reductions and self-service capabilities and technology. Now HRO buyers are discussing the impact of new compliance issues on new deals, renewals and even their existing contracts, and their interest in and focus on indemnification and liability issues are on the rise. In fact, the regulatory compliance issue has already driven some clients and vendors back to the negotiations table for contractual terms rework. Who informs who of which changes, who is responsible and accountable for what, who updates and upgrades systems, processes, tracking, controls, recordkeeping, reporting and audits to improve compliance and mitigate new risks? And who pays for all this, and how much?

Where there is change there is opportunity. Forward-thinking service providers can differentiate their value proposition by proactively addressing their expertise and capabilities in compliance matters, thus showing they will be a partner in risk mitigation by helping their clients be cost-effective, competitive, compliant employers of choice.

Linda Merritt, Research Director, HRO, NelsonHall

FYI – I’m new to NelsonHall’s team of HRO analysts, and very much look forward to engaging with all of you!

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