When you think about HR compliance and why it is important, what’s the first thing that comes to mind? For most people, their first thought is legal risk. The conversation around HR compliance often focuses on legal risk, and as a result, HR compliance has become a “check-the-box” exercise. It is a task that need to be completed to mitigate legal risk. While legal risk is certainly one reason to stay on top of HR compliance, it is far from the only reason (and maybe not even the most important reason).
It’s time to reframe compliance and start thinking about it from the perspective of workplace culture. HR Compliance is the foundation of any workplace culture. It is the starting point for any discussion about culture – and it is the place to start when thinking about how to build and promote your culture.
What is HR Compliance?
What are we talking about when we say “compliance”? When we talk about HR compliance we are talking about compliance with employment legislation. This includes legislation such as:
- Health and Safety
- Employment Standards
- Human Rights
- Pay Equity
- Official Languages
This legislation includes both Acts and Regulations that set the minimum legal requirements that employers must meet. They deal with employer obligations and employee rights.
Why Care about Compliance?
Why should you care about compliance? Legal Risk is the obvious answer, and we have written several posts that explain the legal risks of non-compliance, including the risk of class action litigation and director and officer liability.
But there are other, maybe even more important reasons.
The first is reputational risk. This can have far reaching consequences. An employer who does not comply with their legal obligations to their employees faces the risk of unwanted media attention and developing a reputation as an employer who does not care about its employees. Social media just expands the scope of this risk. Employees aged 18-34 are 3 times more likely to share a negative work experience on social media. And this may impact more than your reputation as an employer. Other stakeholders may, rightly, ask if you are not complying with your legal obligations to your employers, what other legal obligations are you not complying with?
The second is your ESG score. COVID really shone a light on workplace culture – prospective employees, investors and customers or clients were looking at how companies were treating their employees. This has shifted the focus when it comes to ESG. All of these stakeholders are now looking more closely at how employers treat their employees.
The “S” in ESG stands for Social, and a big part of the focus on the “Social” includes employers who do right by their employees. Investors are looking at this and so are prospective employees.
Here’s an interesting number – Forbes recently reported that “…47% of investors considered the “S” aspect of ESG to be the most important when making decisions, overtaking “E” (the environment) at 35%. They also noted that “…as organizations navigate the complex road toward societal change and demands for transparency, HR is key in molding the message regarding social issues“.
The way you deal with HR compliance sends a message – either positive or negative. And it says something about your culture.
What is Workplace Culture?
What are we talking about when we say “workplace culture”? When we talk about workplace culture, we are talking about more than just team building events, wearing hoodies in the office and pizza Fridays. Workplace culture is about how you treat your employes and how your employees work. It is closely tied to your values and should be an expression of those values.
Why Care About Workplace Culture?
There are many reasons to care about and cultivate a positive workplace culture. But let’s focus on some hard numbers. A positive workplace culture is directly linked to increased revenue. Companies with a strong workplace culture have seen a 4 times increase in revenue growth.
And conversely, a poor culture leads to turnover – and turnover is costly. It costs in terms of reputation (why can’t this company keep its employees, what do they know that we don’t), and it costs in terms of lost productivity.
Stats on this vary a bit, but numbers suggest that the replacement cost of an entry-level employee is between 30% and 50% of their annual salary. A mid-level employee turnover costs 150% and above of their annual salary. And a high-level or highly specialized employee costs approximately 400% of their annual salary to replace.
HR Hierarchy of Needs
So, what does compliance have to do with workplace culture? Most HR professionals are familiar with Mazlow’s heirachrcy of needs and its application in the workplace. There are some slightly different versions of the workplace model, but the base of the pyramid is always the same. This heirarchy plays a key role in building workplace culture by highlighting what is needed for a strong, connected workplace with engaged employees.
The base of the period is all about compliance – this is your starting point. The Physiological and Safety platforms in this hierarchy are directly connected to your HR compliance obligations. Issues such as pay, benefits, working conditions, job security and physical safety all start with compliance. These are all issues that are addressed in employment legislation.
Minimum requirements for pay are set out in employment standards legislation. This legislation sets out minimum requirements for wages, pay periods, pay statements, and payment for vacation and overtime. The same legislation protects an employee’s right to benefits on termination and provides certain minimum benefits, such as leaves of absence. Job security is also addressed in employment standards legislation in the form of rules around termination and temporary lay-offs.
Working conditions and physical safety are addressed in employment standards and health and safety legislation. Under employment standards legislation, employers have minimum requirements for hours of work, scheduling, and overtime, among other things. And health and safety legislation sets out an employer’s minimum obligations to ensure its employees’ safety with requirements for training, health and safety representatives or committees, policies and procedures, and first aid requirements, as well as very specific safety standards for certain industries.
These obligations are the foundation for your workplace culture, and they should be your starting point when you think about culture. Think of it this way:
- Your compliance obligations are the bare minimum. They are the starting point for how you build your culture.
- What does it say if you are not meeting these minimum legal obligations? If an organization is not complying with its legal obligations, that says something about its values. It says something about the culture of the organization.
- If you are complying with all of your legal obligations, thinking about the way you comply is also part of your culture:
- Do you go above the minimum requirements in some areas? If so, that shows what you value as an organization. That’s culture. For example, an organization that goes beyond the minimum requirement for family related leaves of absence will be seen as an organization that values family and has a culture that supports family.
- Do you help employees understand their legal rights? That’s culture too. That shows that transparency is important.
- Do you encourage employees to speak up about compliance issues? That demonstrates a culture that values openness and communication and creates a workplace culture where employees feel they can speak up.
There are two key takeaways here:
- If you are not complying with your minimum legal obligations to your employees, that says something about your workplace culture. You are sending your employees and other stakeholders a message about your culture and values. When you are thinking about workplace culture and the culture that you are trying to build, you need to start with a hard look at where you stand with compliance.
- When you think about how to build and promote your workplace culture, think about how to leverage compliance. Look at your legal obligations and think about how you can build on those to action that culture. There are many ways to do this, for example offering more than the minimum standards in areas that reflect your organization’s values or being very transparent about compliance to demonstrate that you have a culture of safety and concern for employee well-being.
How Compliance Works Helps HR Professionals
Understanding your employment law obligations means looking at a number of different sections of employment standards laws, including both the Acts and Regulations. It can be hard to know where to look, or to feel confident that you looked at everything.
Compliance Works makes it easy to identify all of your requirements by pulling together all of the related requirements from Acts and Regulations in an easy-to-read plain language summary that is always up to date, providing you with confidence that you have it all covered.