HR Headaches: The Cost of Non-Compliance Is Rising — What Can I Do?

It’s expensive to be out of compliance. Here’s what small business owners and HR leaders can do to prevent hefty fines.

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Is your business compliant?

Here's what you need to know:

  • Non-compliance can result in hefty fines for your business
  • All departments in your business need to be aware of non-compliance issues
  • Good HRIS software can help your business remain in compliance

The cost of non-compliance is skyrocketing. Organizations can’t afford to be out of compliance between penalties, global and regional regulation, reputation repair, and updating processes and technology after a data breach.

A recent study by Global Scape, The True Cost of Compliance with Data Protection Regulations, has revealed that out-of-compliance costs are 2.71 times higher than maintaining compliance. In dollars, that’s $14.8 million annually, on average. The cost of staying compliant, however, is only $5.5 million.

Being non-compliant can cost you almost three times as much as being compliant.

In other words, businesses that invest in regulatory compliance and risk management save significantly more in the long run. And that’s just the financial incentive. When you consider the time it takes to rebrand and regain customer trust, solid compliance practices can save years of productivity.

To effectively implement regulatory compliance and data protection regulations (and ultimately eliminate the cost of non-compliance), it’s essential to understand why companies fall out of compliance.

What contributes to the cost of non-compliance?

Compliance failure results in several direct and indirect fees. When it comes to non-compliance penalties, the amount due largely depends on the specific compliance violations. Typical compliance regulations for businesses include:

  • Health Insurance Portability and Accountability Act (HIPAA): Fines up to $250,000 and 10 years of imprisonment for individuals. If it is discovered that the violation occurred due to a lack of training, the employer is penalized.
  • Occupation Health and Safety Administration (OSHA): Fines up to $13,653 for each penalty. Companies can face up to $136,532 in penalties for repeated violations over 3 years.
  • Affordable Care Act (ACA): $2,700 per employee for 101+ employee businesses ($202,000 for a 101 employee business)
  • Equal Credit Opportunity Act (ECOA): Violations range up to $10,000 for individual lawsuits and up to $500,000 or 1% of a company’s network for class-action suits.
  • Payment Card Industry Data Security Standard (PCI-DSS): Non-compliance penalties can range from $5 to $100,000 per month depending on the company size and the scale of the violation.
  • General Data Protection Regulation (GDPR): Starts at $11.03 million or 2% of the company’s revenue, whichever is greater.

These numbers are high, but even the smaller PCI-DSS cost of non-compliance can become expensive if compliance isn’t remedied. And none of these fines include the hefty legal fees, compliance audit costs, and loss of revenue due to client mistrust.

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What this means for your business

For HR teams, this means that their system is incredibly vulnerable. Human Resources maintains records of every employee, sometimes including health records and other sensitive information. But other departments can also lead to a compliance failure. For example, sales representatives failing to adequately secure payment data according to PCI-DSS or marketing teams ignoring GDPR standards can lead to compliance violations and fines.

Compliance isn’t just an HR issue — all departments need to be responsible.

The good news is there are many steps that smaller organizations, individual departments, and even enterprise companies can take to remain compliant while keeping costs down.

How to remain compliant (and eliminate the cost of non-compliance)

For HR, in particular, there are a few different things that you can do to avoid fines and a data breach. But these steps may also apply to other departments within your organization. It can be helpful to work together with both IT and the C-suite to ensure your compliance efforts are iron-clad and supported.

For HR, you’ll want to stay on top of:

  • Benefits compliance
  • Anti-discriminatory laws
  • Family and Medical Leave (FMLA)
  • Local and federal labor laws
  • Form I-9 for immigration
  • Safety laws
  • Union laws
  • Data protection laws, such as GDPR or CCPA

Keep in mind that there are global, regional, federal, and city-wide laws that you’ll need to consider. It can be helpful to maintain a compliance calendar or invest in a digital HR system that automatically adheres to compliance regulations.

Use an HRIS system that can help you stay compliant.

To that end, HR teams can ensure they meet compliance standards through:

  1. Using HRIS software with baked-in compliance measures or enough customization to meet compliance requirements.
  2. Working with IT to protect the HR network using firewalls and anti-virus software.
  3. Updating the employee handbook with all protocols after reviewing that they meet compliance standards.
  4. Training employees on how to handle data, including securely turning in or storing their paperwork. There should also be training on topics such as anti-discriminatory policies and safety precautions within the office.
  5. Perform an internal compliance audit at least once a year to ensure everything is up-to-date.
  6. Maintain an open line of communication between employees and management to nip issues in the bud and provide ad hoc training when needed.

Stay on top of compliance

Compliance is complicated. But it doesn’t have to be time-consuming. Many times, staying compliant can be as simple as staying on top of deadlines and ensuring all company policies are communicated to employees.

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