What Is My HR Compliance Risk?

Let’s face facts, dealing with employees is a minefield these days. The regs are different state-by-state, are affected by number of employees and can even be specific industry-by-industry. And it’s especially dangerous for small and mid-market firms that may not have HR expertise in-house. They simply don’t know what they don’t know. We see it here at Nimble all the time as it relates to ACA non-compliance. So it is critical that one understands the regs, the risks and where the organization falls… no matter what the size.

FROM WORKEST / BY JEAN SPENCER

Small business owners and HR managers know all too well: HR and business compliance are difficult to navigate and risk of noncompliance carries serious consequences.

HR Risk Management – Not the Easiest Thing to Navigate

Small business owners and HR managers know all too well: HR and business compliance are difficult to navigate and risk of noncompliance carries serious consequences. Between changing legislation, dynamic workforces, and a complex set of rules that’s subject to frequently change, it’s nearly a full-time job just to understand the rules, let alone implement them.

This is particularly hard for small and medium-sized businesses which may not have the resources to have a dedicated legal office, let alone an HR manager. Often these roles end up being multi-faceted, with one person wearing multiple hats.

The Disproportionate Reality of HR Risk for Small Businesses and Medium-Sized Businesses

The unfortunate reality this brings, however, is that few small and medium-sized businesses have an accurate sense of their true HR risk. Particularly, they aren’t aware of their “unknown unknowns” a term popularized by former U.S. Secretary of Defense, Donald Rumsfeld. There are known knowns, the things one knows, like how to tie a shoe or how to do a certain task. There are known unknowns, the things one is aware of that they don’t know, like a different role in the company or a different language. And then there are the unknown unknowns, the things one doesn’t know that they don’t know. Something like a parking ticket that flew off your windshield, so you never saw but are responsible for.

The “unknown unknowns” factor can be a significant challenge for HR managers and business owners. This is because there are potential HR risks that they may not even be aware of. These risks can be difficult to identify and address, making it challenging to develop effective risk management strategies.

One example of an “unknown unknown” HR risk could be a data breach. HR managers may have taken all necessary precautions to secure employee data, such as implementing secure passwords and firewalls. However, they may not be aware of an unpatched vulnerability in their HR management software that could be exploited by a hacker. This unknown vulnerability could lead to a data breach and potential legal and financial ramifications for the organization.

Another example of an “unknown unknown” HR risk could be a change in legislation. HR managers may have comprehensive knowledge of current employment laws and regulations, but they may not be aware of pending legislation that could impact their organization. For example, a new law could be passed that requires the organization to provide additional benefits to employees, which could significantly impact the organization’s bottom line.

What Can You Do To Mitigate HR Risk?

There are ways to start to get a handle on a sense of your HR risk – even with 15 minutes of your time.

We recently released an “HR Risk Bingo” card. It’s developed as a (hopefully) clever way for human resource professionals or business operators to figure out a rough estimate of their HR risk. This is by no means a full audit (which we also provide as a paid-for service, learn more here). Instead, it’s a fun way to scratch off boxes to quickly be exposed to your particular HR risks, including both the known knowns, and the more disturbing unknown unknowns.