Human Resource Management

What is HR compliance?

Quick answers to help you manage compliant employee documents and records

What is HR compliance for employee document management?

Very broadly, HR compliance refers to the practice of ensuring your HR policies and procedures adhere to all applicable laws, ethics and regulations and updating them as regulations change and your organization grows. It is a critical component of HR’s role, but perhaps one of the most overlooked.

When we look at compliance for employee document management specifically, the following aspects should be in place:

  • A file exists for every employee, past or present, and this file includes all documents required by law
  • Access is limited to authorized users
  • Documents have classifications applied, and those that require additional protections are kept separate
  • Documents are reviewed to ensure that those that have expirations are up to date
  •  A process to preserve employee files when litigation is pending or reasonably anticipated
  • There is a process to provide an employee with access to the contents of their file upon request
  • A retention schedule dictates how long the documents should be kept and a secure disposition process is in place to destroy them at the appropriate time

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What are the key compliance challenges for HR employee document management?

One of the biggest challenges when it comes to managing employee files is that documents tend to be scattered everywhere. HR may use multiple systems to collect, store and share documents – sometimes the same documents in multiple places – creating information silos. This makes it almost impossible to ensure compliance on the aspects listed above. For companies that are still maintaining paper files, this compounds the challenge further and introduces additional risks like fire, flood or theft. Remote or hybrid working arrangements may also be a contributing factor.

Often the organization has not defined a central repository as most HR systems are not designed to manage documents. They may struggle with defining a record, and more specifically what is NOT a record, or tend to retain too many records for too long, creating additional risk. There may be a lack of training for HR and people leaders on how to properly manage employee files and adhering to HR compliance responsibilities. Without understanding the information flow it becomes impossible to adhere to regulations, particularly if it’s not clear where your documents are and which ones are considered records.

The other key challenge is the continually growing list of complex laws and regulations and the increasing links between privacy, security and records management.  It is expected that by year-end 2023, ​75% of the world’s population will have its personal data covered under modern privacy regulations, up from 25% in 2021. Each jurisdiction will have its own rules when it comes to employee documents and privacy, making it difficult to create one-size-fits-all policies and procedures for global HR compliance.

Why is HR compliance important?

The primary reason that most organizations focus on HR legal compliance is to avoid risks and fines. Legal fines, penalties or lawsuits can be the result of a failed audit or brought on by a disgruntled employee and can often be enough to cause significant damage. If an employee initiates legal action, it becomes critical that HR can produce all required documents quickly and accurately.  

Beyond the threat of penalty, HR compliance is critical in protecting both your company’s reputation and the trust of your employees, particularly with the increase of cyber risk. As with your customers, employees need to know that you are managing their private information with the utmost security and care. Ask any company that has experienced a breach or faced a lawsuit and they will tell you the impact this has had on their business and on the productivity and engagement of their workforce. 

What are the capabilities of the best HR compliance software?

A robust HR document management solution will help simplify HR and compliance challenges by:

  • Limiting access to even the most confidential employee documents
  • Automating the retention and disposal of documents according to company policy
  • Integrating with other HR systems to provide a single source of truth
  • Providing audit trails and reports on document access and versions
  • Ensuring employee files are complete and up to date with all required documents
  • Leveraging existing role-based permissions
  • Empowering employees to view and update their own files without HR intervention
  • Maintaining comprehensive security & privacy
  • Making it easy for HR to locate a document or download a file quickly
  • Prohibiting changes to documents during an investigation or legal action

What are some HR compliance best practices?

Document your employee lifecycle

When it comes to employee documents, create an inventory of your collection points, processes, and any locations where documents could be stored, considering the risks and pain points along the way. This is the first step in completing an HR compliance risk assessment. Then dig one level deeper by auditing your employee files to understand which documents are included, why they are important, and who has access.

Define your policies

After doing your research into applicable regulations for your industry and geography, define your document retention policies and identify which documents should be included in a file and which are must-haves. Understand why you collect these documents, ensure they have the right level of protection, and determine how they will be disposed. Consider access requirements for HR, employees, managers, other internal departments as well as external vendors. Ensure a process is in place in case of litigation, audit, investigation, or subject access request.

Automate your processes

Invest in technology that will manage all employee documents in one centralized location, reduce your compliance risk, automate your processes and free up HR’s time to spend on other strategic projects.

Review and refresh

Once a year, go through an HR compliance checklist. Set aside time to review your documentation and policies, research changes and additions to regulatory requirements, and audit both your processes and employee files to make sure everything is still on track.

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Janine Wendling

A 20+ year veteran at OpenText, Janine oversees product strategy and market activities for our HR document management solutions, supporting the HR digital transformation for SAP SuccessFactors customers. Prior to this role, Janine led the HR Technology team where she was key in OpenText’s own internal SuccessFactors and Extended ECM for SAP SuccessFactors implementation.

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