HR Compliance and what it means for small businesses

Jul 27, 2020 Workplace Advice

Businesses are continually evolving and growing. They usually rely on their knowledge or their accountants’ to ensure HR compliance. Ineffective HR practices affect some businesses. However, some businesses excel at keeping up to date with their obligations as an employer. Getting lost in the complexities of HR policies and procedures is easy. It is why HR usually is at the bottom of the to-do list. The impact of inefficient HR compliance can be expensive. This can appear in the form of fines, legal costs, turnover, lost productivity, absenteeism, and, most importantly, brand damage.

Most of the obligations fall under the National Employment Standards (NES) contained in the Fair Work Act 2009. Whilst labour laws are complex, the costs associated with being non-compliant are huge. Employers can be fined upwards of AUD 63,000 if they fail to keep up to date employee records.

In addition, changes to the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 mean employers involved in serious contraventions now face penalties of up to A$630,000 per contravention. The maximum penalty for individuals is now A$126,000 per contravention.

To avoid penalties HR mistakes should be recognised and resolved before they become serious problems.

What’s an HR compliance audit and why do it?

Businesses should use an HR audit as a tool to get a complete picture of their existing HR processes and practices. It entails a thorough review of HR policies, procedures, systems, and employee-related documentation. An HR audit is like any risk assessment that a business performs and should form part of the risk assessment catalogue. A well-managed review can help identify improvement areas before compliance issues arise. An HR compliance checklist can help small businesses in the absence of dedicated HR resources. They can ensure that businesses stay compliant with employment legislation. A well-done transparent HR audit can result in three significant benefits for the company. It can:

  1. Help identify conflict or problematic areas that affect retention and turnover.
  2. Have a positive effect on employees as it shows that the business is actively looking at improving working conditions.
  3. Mitigate risks of fines and lawsuits due to non-compliance with employment legislation. Not addressing these risks can damage the company’s reputation with candidates as well as clients.

The HR audit process

The audit process is time-consuming and needs someone who is willing to give it the time it needs. It helps to have someone knowledgeable who can help you tick off all the points on the HR audit checklist. The audit process consists of four main steps:

  • Pre-audit – this phase involves the collection of qualitative or quantitative information
  • Analysis – this step takes the most time. It involves assessing the information gathered in the pre-audit phase. This information can be in the form of processes, policies, HR documents, and data.
  • Final Report – This step involves documenting the findings along with recommendations to improve.
  • Improvement Plan – This is where compliance tasks that need immediate attention get top priority. It is followed by tasks that require long term improvement.

With the help of an HR consultant, small businesses can ensure policies and procedures are airtight to avoid fines and lawsuits. When done right HR Compliance can also help contribute to positive company culture. Continuous review and improvement should form part of the key performance criteria. Continuous improvement will ensure that the company stays compliant with changes in employment legislation.

Get in touch…

The information contained in this blog is general in nature. If you are unsure about how to go about an HR audit, you can use our free HR Compliance Checklist to get you started. Alternatively, contact us at VeiraMal Consulting to conduct an HR audit to ensure your business stays compliant.