Human resources compliance is a term that receives quite a bad reputation since people believe it is just boring paperwork or some tedious administrative task.
However, in real life, non-compliance is not just a technical issue, it can trigger a lot of legal battles, heavy fines, or workplace issues like harassment, discrimination, and retaliation.
We firmly believe that employers need to be aware of this and learn how to protect their businesses, become fully compliant with all HR regulations and guidelines, and create a fair and safe working environment.
With that in mind, here’s all what need to know to become and stay compliant in 2025:
What is Compliance in Human Resources?
HR compliance is the process of having policies, procedures, and legal requirements in place that would ensure a workplace operates ethically and legally. It means aligning labor laws to prevent discrimination and create a fair working environment, all the while protecting the company from lawsuits, hefty fines, or reputational risks.
Types of Compliance in Human Resource Management
HR compliance falls into several categories, but it essentially operates on two levels. First we have the policy and procedure establishment that have to align with the latest employment laws and regulations. And second, we have the active enforcement of these policies that would ensure the company and its employees become and stay compliant within the laws.
Here’s a breakdown of the types of compliance and their responsibilities:
1. Statutory Compliance
Statutory compliance in human resource management means companies need to follow government-mandated employment laws.
These include the following regulations that are non-negotiable legal obligations for each company:
- Minimum wage
- Working age requirements
- Anti-discrimination policies
2. Regulatory Compliance
Regulatory compliance in human resources goes one step further and it requires strong adherence to rules set by the regulatory bodies.
The organizations would then fall into three categories:
- Independent commissions
- Executive agencies
- Government corporations
3. Contractual Compliance
Contractual compliance guarantees that companies would honor legally bound agreements made to their vendors, employees, or partnered organizations. Breaking away from these terms and conditions would lead to legal disputes, heavy fines, and financial penalties.
4. Union Law Compliance
Union law compliance applies to all companies that are employing unionized workers, like for example, the members of American Federation of Teachers (AFT). Employers are required to follow these union regulations and collective bargaining agreements in order to maintain fair and honest labor practices.
The human resources department is primarily responsible for compliance, but it can also be assisted by employees and other departments in order to ensure an ethical, safe, and legally effective workplace.
Human Resources Compliance Issues Examples
Every company, regardless if it is a small, medium, or large-sized business, has to adhere to labor laws and regulations. Failing to do so would expose the company to various fines, legal issues, and reputational damage.
Here are a few examples of very common compliance challenges that many businesses may or already encounter:
Example #1 – Wage & Hour Laws
In the United States, for example, there is a patchwork of local, state, and federal laws that govern employee rights regarding working hours and wages. Within these regulations, there are outlines for everything, from daily work limits, to weekend pay and overtime.
Non-Compliance Example
An Oregon company pays its employees the minimum wage of $7.25 per hour, which is a federal requirement.
However, the state’s minimum wage requirement is $14,70, so by ignoring the state law, this company risks penalties for underpaying its employees and failing to meet the legal standards.
Example #2 – Family & Medical Leave Act (FMLA)
This act ensures employees are able to take unpaid leave for any specific medical or family reason, such as caring for a sick member of the family, personal illnesses, or the birth of a child. It applies to all employers that have 50 or more employees within their companies.
Non-Compliance Example
A company that has 75 employees on its record denies a worker unpaid leave to take care of their seriously ill parent with a cited reason that it would “disrupt the flow of operations”. This refusal actively violates the FMLA and the company is subject to penalties.
Example #3 – Workplace Safety & Security
Safety and security fall under the human resources regulatory compliance that is governed by the Occupational Safety and Health Administration (OSHA). Every company needs to follow safety regulations that are relevant to their sector regardless of the specific standards mandatory for various industries.
Non-Compliance Example
A construction company frequently neglects to provide its workers adequate equipment, like hard hats, respiratory masks, or goggles. Since these workers are operating within high risk areas with heavy machinery, it means the construction company violates OSHA’s standards and puts its employees at an increased risk of injury or various health issues.
Example #4 – Pay Transparency Laws
Pay transparency has been a trending topic over the last few years even though there is no labor law to force companies into showing each position’s salary.
However, in various countries and states, there are a few pay transparency laws that have been passed, forcing employers to comply with local payroll laws, requiring actions such as these:
- Publishing the salary range in a job posting
- Providing salary range to an employee upon a request
- Disclosing pay range to a candidate at a certain point in the recruitment process
Non-Compliance Example
A tech company posts various job openings without any salary range, despite the local law mandating employers to include the pay information within the job ad. With the exclusion of this important detail, this tech company risks penalties, in addition to reputational damages among applicants who value transparency in pay.
How to Ensure Human Resources Legal Compliance
There are two key strategies to ensure complete compliance: knowing how to conduct a compliance audit and following the best practices regarding HR compliance.
Let’s dive into the details of both:
a) How to Conduct an HR Compliance Audit
HR compliance audit is a structured review to ensure your company’s HR practices perfectly align with all legal standards. This helps to identify potential risks, improve HR operations, and timely address compliance gaps.
To do this, here’s a step-by-step mini-guide on conducting an HR audit:
1. Determine the Scope
The first thing you need to do is identify which areas you’d want to review, like wage and hourly laws, workplace safety, benefits, employee classification, or equal employment practices. Some areas may require more attention than others, so it will depend mostly on your company’s industry, size, and feedback from employees.
2. Identify Compliance Obligations
Next, you need to understand the local, state, and federal laws that apply to your company’s operations. For example, if you are a small business or a startup and employ 15 people, then OSHA would classify you as a low-hazard industry, which in turn means you will not need to submit a full illness and injury report.
3. Evaluate HR Policies & Processes
It is imperative that you review your existing policies to make sure that they align with the latest human resources compliance requirements. This includes overtime rulings, leave/absence policies, workplace safety regulations, payroll processes, and pay transparency laws.
4. Document Compliance Issues
After the first three steps are completed, make sure to create a report that will outline any gaps in compliance or concerns that have popped up during the audit.
5. Develop an Action Plan
Create a detailed plan of action to close any compliance gaps that have appeared during the initial report. Make sure to sign responsibilities for each task, set specific deadlines, and determine if there is a need for additional training, new system, or policy updates.
6. Follow Up & Observe
After all changes are implemented, ensure regular observation practices to maintain HR compliance. You can schedule annual or bi-annual audits to see if there are any new issues and how quickly they are being addressed.
b) Human Resources Compliance Best Practices
Becoming a compliant workplace is not an easy task and it requires including laws and regulations into daily practices. By complying with the best practices available, you ensure your company creates a fair and transparent working environment, reducing legal risks in the process.
Focus on the following key strategies to ensure your company stays compliant:
- Create an HR Compliance Checklist
- Stay Updated on Legal Changes
- Set Up an HR Compliance Calendar
- Leverage HR Technology
- Apply Policies Consistently
- Make Compliance a Team Effort
- Provide Employee Compliance Training
- Train Managers on Compliance
Human Resources Compliance Checklist
HR compliance consists of a wide range of components, so creating a checklist can save valuable time and ensure you stay proactive and on top of all HR management aspects.
However, the items on a compliance checklist may vary depending on a company’s size, industry, and location, here are some basic categories for all types of businesses:
- Recruitment, Interviewing, Hiring
- Onboarding Procedures and Company Policies
- Employee Classification
- Diversity, Equity, Inclusion, and Belonging (DEIB)
- Safety and Workers’ Compensation
- Compensation and Benefits
- Termination and Separation
- Unions and Collective Bargaining Agreements
- Data Privacy and Information Security
HR Compliance Recap
Human resources compliance is more than just a mere boring administrative task. It takes a collective responsibility that involves employees, managers, leadership, and the HR department.
Companies can reduce the legal and financial risks when they introduce compliance into everyday practices, stay informed on latest legal changes, and create a culture of transparency.
When these priorities are properly addressed, the workplace becomes a great place to be in, ensuring no legal disputes, fines, or penalties.
Frequently Asked Questions (FAQ)
What is legal compliance in human resources?
Legal compliance in HR means that all HR activities need to align with specific statutes, laws, and regulations, and is divided into regulatory and statutory compliance.
Does OSHA compliance fall under human resources?
Yes, OSHA compliance falls under the HR team and depends on the company’s industry, mainly. For example, in high-risk environments, there is a need for one or several people who will be responsible to maintain workplace safety, while for smaller companies, it may fall under the umbrella of HR managers.
How does human resources achieve legal compliance?
This can be achieved through education of all departments within a company. Employees need to be educated on key issues, with regular training on compliance topics as this helps to create an informed workforce.
What is compliance to law in human resources?
Compliance in human resources is defined as a process of aligning the workplace policies with city, local, state, country, and world’s labor laws, while also being synchronized with specific industry regulations.
