Legal Compliance

Because of the proliferation of financial services regulation and tough corporate penalties for offences such as money laundering, large companies have established internal audit functions or even specialist regulatory compliance departments.

The importance of regulatory compliance is now widely recognised by senior management. Moreover, legal obligations placed on financial service companies are so complex that sophisticated software is now rapidly emerging. These allow companies to match their internal policies and procedures with the external strictures laid down by constitutions, statutes, case law, codes of practice, stock market and governance rules, international agreements and conventions.

However, the primary focus for corporate compliance safeguards has remained on financial and consumer protection issues. Compliance with employment laws, and related constraints, has been largely left to HR departments which frequently do not have the time, systems or mix of skills to deal with them. For this reason controls have tended to be ‘ad hoc’ – applied only when a problem arises – and then resolved by consulting external legal advisers in a reactive rather than proactive way.

Yet, ironically, the volume and complexity of employment law changes easily matches those in the financial sphere and also change just as rapidly. This problem is compounded if a company is seeking to maintain employment law compliance across many jurisdictions – especially if the languages in which laws are drafted differ significantly and English-language texts are not easily available. On top of regulations are also sectoral collective agreements which, in many countries, have general effect on all companies in the sector – whether or not directly party to them.

As a consequence of these practices, a huge gap has emerged between a company’s employee handbook, what actually happens when a particular situation arises and the legality of those actions. This places a substantial liability on companies that typically try to side-step the mismatch by patching it up or by resolving it financially through entering into compromise agreements with employees, ex-employees or contractors in dispute with them. This activity remains barely visible because so few of these problems ever reach the public arena of the courts.

Above all, HR compliance needs to be integrated into the overall business strategy. Updating the employee handbook must not be seen as a suitable project for the new HR recruit, administrators or – rue the day – an enterprising Intern. Even overworked HR departments need to build in time for seasoned professionals to undertake scheduled compliance audits.

FedEE® can provide much useful guidance and support in this field to ensure that compliance is carried out in a timely and efficient way.