Staying Compliant is Costly, Difficult for Many HR Departments

By Aliah D. Wright Mar 13, 2015
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Organizations are squandering resources by using different IT systems or using manual processes to remain compliant with regulations and laws governing their employees, according to a new study released by ADP and CFO Research.

What’s more, the research reveals, relying on separate systems to stay on top of human capital management-related (HCM-related) compliance can increase the overall cost of being compliant.

Complex and evolving regulations are putting pressure on businesses that use in-house systems to address HCM-related compliance requirements, according to a press release from ADP. Additionally, some companies may face a “compliance gap,” as technology alone generally does not address all these requirements.

“The research clearly shows that many companies are wasting resources and increasing their risk by using time-intensive manual processes to manage disparate systems for HCM-related compliance activities,” said Doug Politi, president of ADP Added value Services.

Key Findings

The survey was conducted with 161 senior finance and human resource executives at U.S. companies with 250 or more employees in December 2014, in an effort to examine the varying approaches to HCM-related compliance and the value of making compliance systems more user-friendly. This is the third year that ADP has collaborated with CFO Research on an HCM-related compliance-focused employer study.

Half of survey respondents say they rely on multiple, separate information systems or manual processes to manage their HCM-related compliance.

Of the HR and finance leaders surveyed, 42 percent reported they do not have access to real-time, consolidated HCM-related compliance data through a dashboard or some other technology platform.

Other findings of the study:

  • 35 percent of survey respondents said they spend more time now on HCM-related compliance than they did two years ago, compared to only 13 percent who said they spend less time.

  • 58 percent of survey respondents graded the ease of use of software systems and applications that their company uses to manage HCM-related compliance a “C” (average) or lower.

  • Nearly one-third of survey respondents disagreed with the statement, “The system(s) my company employs for HCM-related compliance activities are easy to understand and use.”

    Lack of Integration Increases Cost

    Many respondents expressed discontent:

  • 78 percent of those surveyed said the lack of integration of HCM-related compliance processes and information systems raises their company’s compliance costs.

  • 62 percent of survey respondents said the time and attention required for HCM-related compliance activities are a drain on company resources.

  • 57 percent of survey participants said it takes longer to enter or revise information in their company’s HCM-related systems.

  • 40 percent of survey respondents said the effort and time necessary for HCM-related activities substantially or moderately increases the cost of complying with the requirements of the Affordable Care Act (ACA).

    ​The ACA is also increasing the amount of time companies will need to spend in order to remain compliant, the survey revealed. More than one-third of those surveyed said HR professionals tasked with keeping track of HCM-related activities will need to spend more time on HCM-related compliance tasks over the next two years, primarily because of new regulatory requirements, increased regulatory enforcement and a lack of integration between the systems they use to manage such compliance.

    Many survey respondents believed that making HCM systems more user-friendly was important (80 percent). Meanwhile, 38 percent said improving the existing technology and systems they use to manage HCM-related compliance would benefit their companies tremendously.

    “In working with ADP, our study tells us that a majority of respondents grade the ease by which they use their HCM-related compliance system as average or below average, and they feel the constant evolution of new regulatory requirements has increased the difficulty of staying compliant,” said Celina Rogers, vice president and editorial director at CFO Publishing.

    And even though other studies have shown that using data can help companies make better business decisions, nearly a quarter of those surveyed said their company’s management rarely or never uses HCM-related compliance data to support their business decisions.

    “Finance and HR leaders are eager to support innovation at their companies, and innovative companies want every activity they pursue—including compliance—to capitalize on data and analytics to help drive strategic, profitable growth,” Rogers said.

    Aliah D. Wright is an online editor/manager for SHRM.

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