Compliance is so Boring
Compliance is just another word for a rule. Rules are boring. Sure, some rules are necessary. Stopping at red lights is important, and yes, employees should always wash their hands before returning to work. But, is air safety truly compromised if I don’t return my seat to its upright position before landing? In Alaska, it’s against the law to give a moose a beer, or for an idiot to vote in Alabama. Connecticut doesn’t allow anyone to call a pickle a pickle unless it can bounce. Seriously, these are real things, and you’re out-of-compliance with legislative ordinance if you can’t toe-the-line. Compliance is boring, unless that is, you’re faced with the consequence of a violation. A penalty of any sort presents in the same way no matter what your beliefs might be about the rule – no matter how boring it may seem. When it comes to labor matters, compliance is anything but boring because the consequences for ignoring them can be severe.
Compliance is also overshadowed by its more attractive and less boring siblings i.e., the other types of value derived from workforce management systems. For example, the notion of boosting employee engagement is incredibly exciting. It’s easy to envision a sales associate grinning from ear-to-ear when her new schedule properly accommodates university coursework and other preferences. That joy translates directly to higher quality customer exchanges and better sales. Efficiency is cool too. What’s not to love about being simultaneously fast and accurate on-the-job? And, then there’s the cost driver. Handsome and articulate, cost is the guy that your girlfriend tells you not to worry about. Cost is the big shoes that you’re always trying to fill, and the fundamental reason why workforce management systems have such a powerful impact. It saves money, makes money, and improves the quality of money, all at the same time.
A Steady Giver of Value
But alas, Compliance is a steady giver of value. Yes, it’s boring but without automated platforms to ensure regulatory alignment to scheduling laws, accurate pay, federal leave standards, and the continuous stream of three and four letter acronyms coming from the Department of Labor (DOL), engagement and efficiency and cost improvements can never be obtained. Compliance is table-stakes for enterprise workforce management systems but allusive without understanding them, or having the flexibility to deliver in a fully auditable manner. Companies, and the vendors that design workforce management systems, must have a firm grasp on the rules and the know-how to properly administer them. Further, without the flexibility to accommodate company-specific interpretations, or the ability to evolve with them over time, you’re left with nothing but rhetoric. Here’s my top five compliance considerations.
- Affordable Care Act (ACA): enacted in 2010 to provide all Americans access to affordable healthcare. In doing so, ACA introduced a series of reporting and compliance requirements for qualifying employers with 50 or more full-time employees. There is a complex matrix that employers must administer regarding full-time equivalency, tax control grouping, and employee seasonality. Large employers, per these definitions must provide both “adequate” and “affordable” coverage to their full-time employees based on pay rates, or incur a penalty. Notwithstanding a cost of $3,000.00 per employee violation, ACA in its current form will create $186B in additive healthcare expenses for “large companies” over the next six to seven years.
- Defense Contract Audit Agency (DCAA): under the current presidential administration, there will be a new era in government spending and fresh economic opportunity for contractors. Regardless of whether it’s infrastructure investments, defense spending, cybersecurity, outsourcing, or workforce acquisition, federal spending in private sector goods and services will increase. There’s a catch – and it’s called DCAA. This government agency reviews the accounting practices of government prime and subprime contractors including the audit of workforce timesheets and labor billing details. Penalties for charging the government for “unallowable” costs can be disproportionate when compared to the original award and have consequences for individual employees as well.
- Fair Labor Standards Act (FLSA): first passed in 1938 as a reaction to labor abuses during the Industrial Revolution and Great Depression, more than 87% of compliance violations in 2016, where employers were directed to pay back wages, were related to inaccurate pay for overtime. Not including penalties, DOL reports that more than $250M was paid back to employees in 2016. Important to note that individual states such as California, New York, and Pennsylvania have equally complex, to that at the federal level, labor and pay laws that employers must abide by too. Industries with the highest number of offensives are construction and food services, but there’s new rulings on “white collar” exemptions to overtime thresholds that could change that.
- Fair Scheduling Acts (FSA): although not a federal mandate yet, predictable and dependable schedules for hourly employees is a trend that is sweeping the nation. More than 60% of the American workforce is hourly and should be, the argument is, protected from “abusive” scheduling practices that, for example, require work on extremely short notice. Largely impacting retailers and food services, San Francisco was the first municipality, and Oregon the first state, to pass fair scheduling laws that require at least a two-week posting notice. Other cities and states have followed to either pass or introduce legislation including, Seattle, New York, Arizona, California, Chicago, Connecticut, Maryland, Massachusetts, Minnesota, Ohio, and Washington D.C.
- Family Medical Leave Act (FMLA): intended to help “balance the demands of the workplace with the needs of families” by providing 12-weeks of leave during a 12-month period for qualifying events, FMLA was first implemented in 1993. Although the total number of cases has experienced a steady decline over the years, the amount of penalties and back wages has increased. Wrong doing by employers was found in 54% of the cases for such things as termination, job protection errors, and refusal to grant leave, under the terms of FMLA for qualified employees. Employers must properly document time and expense for continuous, intermittent and reduced schedule leave events because of pregnancy, hospitalization, chronic illness, or long-term conditions.
Compliance in the context of workforce management is a big topic. One that could have included pages of insight and experiences, if for only these five areas. Beyond these are a gauntlet of Unions and Collective Bargaining Agreements (CBA) that make the broader compliance topic anything but boring. What is clear is that digital applications that support the business processes of scheduling, timekeeping, leave management, payroll, and customer billing, are directly aligned with the haunting requirements of federal and state legislation. Properly architected workforce management platforms address these demands and the associated labor impact to help mitigate the risk of potential compliance errors. So, even though boosting employee engagement, achieving better efficiencies and reducing costs are more attractive deliverables of workforce systems, don’t overlook the importance of compliance and following the rules.
Dr. Scott Morgan, Vice President, Workforce Management, @scottmorgansphr
- Infor Workforce Management