HR Corner, HR Resources

HR Compliance Checklist for Small Businesses

Complying with HR rules and regulations rests at the end of the priority list of many startups and small businesses. They have either just forayed into the industry or are looking forward to acing the competition, and thus, they have their focus locked on growth and development. As a result, they spend less time on their human resources. 

But it is in the best interest of small businesses to be HR compliant. With HR compliance, a small business ensures that the employees are taken care of. Also, by complying with HR regulations, a startup or small company makes sure that it is being transparent and fair in its HR policies and practices.

Before we dig further into the significance of HR compliance for small businesses and share the checklist, let’s first understand HR compliance and what all risks it magnetizes when it is overlooked.

What is HR Compliance?

It is the development of policies that make sure the employment and work practice are as per the law and regulations. Along with adhering to the law, HR Compliance is about meeting the human resources’ short-term and long-term objectives.

‘That sounds simple. What’s the challenge?’ you might wonder. 

It is noteworthy that the labor/employee laws and regulations keep evolving. They undergo amendments time and again. And the organization’s HR policy must be in sync with these laws all the time. Failing to do so attracts non-compliance penalties which no organization, especially the startups and small businesses, would appreciate.

Non-Compliance Risks

As a small business owner, your apex priority is to grow your business and brand. Amid your business-boosting goal, HR statutory compliance might feel like a burdensome task. But to overlook HR compliance is laying up trouble for yourself. Here’s what HR non-compliance can cost.

  • Hefty Penalties: As mentioned above, if you are out of HR compliance, you might end up paying a hefty penalty for your negligence. In New Zealand, a kindergarten manager bullied one of the teachers. When that teacher refused to join work (because she felt unsafe), the kindergarten dismissed her. Under the Unjustified Dismissal Under Employment Relations Act, the kindergarten ended up paying a whopping NZ$ 100,000 to the teacher in case.
  • Reputation on the Hook: Other than monetary damage, there are also non-monetary risks attached to non-compliance with HR policies. A study conducted by Accenture states that consumers support brands that care about social issues. So to build a positive reputation in the industry and market, HR compliance is indispensable.
  • Talent Repeller: Candidates spend time and energy to find out organizations that have all the HR policies in sync with the rules and regulations. Issues related to wages, workplace safety, and gender bias are red flags for bright minds.
  • Legal Troubles and Imprisonment: Shutting eyes to HR compliance can lead to legal issues for the company. Founders, top management, or HR personnel may even have to face imprisonment for non-compliance.

HR Compliance for Small Businesses – A Checklist

Human resources have a vital role to play in shaping a small business. Human resource functions keep your business compliant with the regulations and keep your people happy. But unlike their established-company counterparts, small businesses have limited resources to fulfill their compliance responsibilities.

However, with these basic HR compliance requirements, one can easily keep their small business on the right side of the rules, regulations, and law. Have a look at this HR compliance checklist.

  • Hiring Process: Draw a clear outline of the hiring process. Documenting hiring standards will help you stay consistent on quality whenever hiring takes place. Frequently review and update job application forms, descriptions of the jobs, contracts, and employment letters. Update and upgrade your onboarding process from time to time. These efforts keep hassles away at the time of compliance audit.
  • Compliance Regarding Background Verification: Both the administration and employees are particular when it comes to background verification. There exist different laws to keep a check on the way businesses conduct background verification. A small business must adhere to these laws. If it is not abreast with these rules, professional third-party background verification partners are there to lend a helping hand.
  • Safety Compliance: Companies that show concerns regarding employees’ safety see boosted morales, an escalation in productivity, and fewer injuries. Drafting drug-free workplace policy, employee disciplinary action, having rules that ensure action against those who conduct sexual harassment or discrimination are some different safety compliances a small business must adhere to.
  • Paying Minimum Wage: India pays the most competitive labor cost in Asia. The minimum wage in India is somewhere around INR 176 per day. As a small business, you need to make sure that you pay equal to or more than this minimum wage to your people. Equally significant for small businesses is to stay updated with the minimum wage in the country. Other remuneration compliance includes on-time payment, proper work hours tracking, bonus, and paying overtime.
  • Include Benefits in Compliance: One of the ways to retain your employees is by providing them benefits. Include in your HR compliance benefits such as paid leaves, maternity/paternity leaves, insurance, and others. Though these benefits invite extra cost, they are essential to retaining top talent. Even laws in many countries make it mandatory for businesses to offer various benefits programs to their employees.
  • Employee Management: A crucial part of HR compliance, employee management includes setting up performance objectives, providing feedback to employees, creating appreciation/recognition programs, etc. By complying with employee management, a small business can keep the employees engaged, which in turn, helps boost their productivity.
  • Other Statutory Compliances: These include but are not limited to policies on short-term/long-term disabilities, employees union, data privacy, regulations related to international hiring, retirement, resignation and termination policies, and contractual employment compliance.

The Bottom Line

HR is a morass of constantly evolving laws! Startups and small businesses overlooking these laws and regulations will be left in the dust. Have an equal focus on business growth and HR compliance to steer clear of any troubles coming your way. Stay updated with all the local HR laws for a satisfied and productive workforce.