Get Started
Back to Resources

Article

What are the Risks of Employee Compliance Violations?

Corporate scandals, highly publicized lawsuits, fines totaling millions of dollars—these typically aren't scenarios you want associated with your company name. Today, employee compliance is one of the most important parts of business, yet only 40 percentof companies say they are thoroughly prepared for a compliance audit. To keep out of hot water and uphold employee compliance standards, businesses must adhere to both internal policies and procedures as well as federal and state laws.

But while commitment to workforce compliance must stem from executive leaders, the daily activity of carrying it out often falls on the shoulders of HR professionals who must ensure that employees across every business unit and division are uniformly trained on policies and procedures on an ongoing basis to minimize risk. By understanding the consequences of non-compliance and being armed with the right tools HR executives can ensure their organization stays on the right track. Here, we explore three major risks of non-compliance and how to stay on the right track.

The financial costs of non-compliance

Simply put, non-compliance is costly. Just this year, Fresenius Medical Care North America (FMCNA) agreed to pay $3.5 million to settle violations. Not only can lawsuits result in fines, penalties and settlement expenses, but if a company leader has to step down, stock prices can drop and the company as a whole can take an even larger hit. Texas Instruments, for example, saw shares decline 2.2 percent just hours after their CEO stepped down over code of conduct violations. Simply adhering to laws and standards to begin with is generally much less costly than dealing with the financial consequences of non-compliance.

Serious legal consequences

Legal action and criminal charges are another potential result of failure to comply with employee compliance laws such as workforce safety, corporate governance and stock management. Enron, for instance, was one of the most widely-reported corporate accounting scandals of all time. Executives knowingly hid billions of dollars of company debt, which eventually bankrupted the company and landed the CEO in jail.

Culture, brand and reputation damage

Major employee compliance violations tend to be widely publicized and because public image is such a key part of business success, customer distrust can be a major repercussion. Loyal customers may leave, potential partnerships may fall apart, and it can become much more difficult to attract high-quality candidates. For example, in 2015 it came out that Volkswagen had installed software on millions of cars to bypass Environmental Protection Agency (EPA) emissions test standards. The company took a big reputation hit and has only recently recovered more than $40 billion in market value to bring it back to where it was before the news broke.

Staying on track with employee compliance

Luckily, there are many ways to uphold employee compliance standards and set precedent for quality human capital management (HCM). Many compliance requirements are recurring and require accurate reporting, which means they complement learning and training initiatives. Today's comprehensive HR software allows HR professionals to automatically assign required compliance training either on a large scale or to a specific department or person, helping to increase completion rates, eliminate margins of error and reduce the manual work of assigning and tracking courses. Software also ensures accurate reporting by recording who has taken required training and when.

In addition to having a system in place for delivering effective compliance training, it is important for HR professionals to communicate that compliance is about more than just avoiding fines. Help employees understand how adhering to compliance standards protects their health and safety through engaging training and assessments, on-the-job observation and open discussion.

When thinking about employee compliance in the context of HCM, it is also important for HR professionals to make sure policies and processes are easy to follow and understand. Compliance documentation should be easily accessible, and policies should be logically organized, precise and clear. Compliance requirements frequently change—revisit and revise them as needed have a system in place to update employees.

Remember, non-compliance affects the entire organization. HR professionals are a critical component of helping businesses adhere to both internal policies and protocols as well as federal and state laws. Prioritize communication around workforce compliance initiatives, empower employees with the right training and stay up-to-date with changes to regulations to minimize company risk.

Looking for a way to keep your employee compliance data timely and accurate? Automate compliance processes to reduce errors, costs, and paperwork with Cornerstone HR.
 

Join 38+ million people who realize their potential using Cornerstone

Let's Talk