5 Reasons to Outsource HR Compliance

The growing complexity and diversity of employment laws are resulting in compliance issues across a range of areas. A small mistake or an overlooked detail could result in significant fines and costly lawsuits.

Most SMBs (Small and Midsize Businesses) don't have large HR teams that can give compliance due time and attention. Employees struggle to stay up to date with new requirements while business owners get ready to face unpleasant consequences.   A tried-and-tested way out is outsourcing.  

Let's take a closer look at the key reasons to outsource compliance to an HR partner. 

1. Saving Time

According to a Risky Business survey, HR specialists spend about 36 hours per week on compliance-related tasks, from tracking advisory proposals to communicating new policies. This is a full-time job for a single HR employee. 

If hiring a new staff member is out of the question, outsourcing compliance can be an excellent time-saving solution. Instead of distributing compliance-related activities among your team members and paying them overtime, you can delegate these tasks to an HR outsourcing partner. 

The time-saving advantages are especially appealing to companies that offer employee benefits and group health insurance plans. The number of laws and regulations they have to keep track of is significant and often requires close attention from several employees. 

2. Reducing Risks 

Small and midsize businesses can face a variety of compliance risks. The most common issues small HR departments have to deal with include:

• Inaccuracy of wages — regulated by the Fair Labor Standards Act (FLSA) 
• Wrong penalties for unpaid leave — regulated by the Family and Medical Leave Act (FMLA)
• Workplace safety non-compliance — regulated by the  Occupational Safety and Health Administration (OSHA) 
• Problems with immigration law compliance — regulated by the Immigration Reform and Control Act (IRCA) 
• Problems with benefits compliance — regulated by the Affordable Care Act and Employee Retirement Income Security Act) 

From workplace harassment to diversity and inclusion, failing to pay close attention to the new developments puts companies at significant risk. The new additions to the legislation are easy to miss; especially if you are busy with other HR functions.

When you outsource compliance to an HR partner, you delegate these tasks to experts who dedicate their work time monitoring legislation changes. They can also help you design and implement new company policies to ensure compliance. 

3. Saving Money

Since proper compliance can require as much as 36 hours of dedicated time weekly, many companies contemplate hiring extra employees. Adding a new member to your HR team can be costly. Besides paying salary and arranging benefits, you have to invest your time and money in the selection, interviewing, and onboarding. 

Hiring a new employee is always a risk. With high churn rates haunting the labor market, you have to be ready for associated costs. 

According to several studies, the real cost of losing an employee is about 33% of their annual salary.  With the average annual salary of an HR specialist being about $70,000 per year, the costs can be high. When you throw opportunity costs into the mix, the figures are astounding. 

4. Avoiding Fines

Non-compliance doesn't just hinder the company's reputation, it can lead to significant fines.  For example:

• Untimely completion of I-9 Form — businesses need to complete their section of the form within 3 days after the employee starts working for the company. Fines for failing to fill the form timely varies from $230 to $2,332. 
• Failing to offer affordable coverage — if you are an applicable large employer, you could be facing penalties in case you don't offer affordable coverage 
• Consolidated Omnibus Budget Reconciliation Act (COBRA) violations — penalties for COBRA violations include excise tax penalties ($100 per day), statutory penalties (up to $110 per day), and civil lawsuits with related attorney costs. 
• Minimum wage violations — if an employer willingly or repeatedly doesn't pay minimum wage, they are subject to a penalty of up to $1,000 per violation. 

By outsourcing compliance, you make sure that all the new laws and developments are noticed and integrated in a timely manner. This can help you avoid significant fines and keep your business afloat. 

5. External Expertise

The complexity of HR compliance makes it hard for one person to handle. If you already have a designated HR team member dealing with compliance, they can still benefit from external expertise. 

When a third party proactively monitors recommended sources, offers best practices, and provides a second opinion, it's much easier to avoid compliance risks and fines. Since the HR outsourcing partner is working with several companies in your industry, they are exposed to new changes quickly. 

Should You Outsource HR Compliance? 

With compliance being a highly volatile element of HR, keeping up with it can be time-consuming and taxing. By outsourcing compliance to an HR outsourcing partner, you can save time, cut costs, reduce risks, avoid fines, and gain access to valuable external expertise.