Hidden compliance risk in HR workflows

The biggest risk to your company’s compliance standards isn’t your tech. It’s you. And the processes you use everyday. Don’t worry, we’re not saying that you’re doing this on purpose. Or even that your competency is up for question. The truth is a lot more simple – we're human, things are constantly changing and, frankly, the amount of data that we’re working with these days is out of control.

Usually, the issues come from a few simple things. First, steps being too manual (the sprawling number of spreadsheets an HR team can produce is a clear sign of this). Second, unclear ownership of those steps, manual or not. This risk might be more prevalent with organisations where the people team has grown greatly or had recent restructuring shifts. The third issue is inconsistent workflows. You do a task one way, your HRBP does it another, and HR admin yet another and your CPO, who usually doesn’t get this into the weeds, has come in and revealed a secret fourth way to do the task. All of these are opportunities for risk to creep in. 

HR workflows and processes are even more exposed than most because that’s where all of the sensitive stuff is: pay, contracts, regulated and protected data. That’s why it’s important to know how to spot the risks before they have time to impact your business.

Where compliance risk typically hides

Compliance risk in HR can be hidden in just about any process, but there are some areas of your work that it’s more likely to creep in. Here are some of the key places that you need to keep an eye on because they’re most prone to introducing risk:

Manual data entry and re-keying

Manual data entry is always risky. We’re human and can make mistakes and data entry is one of the places that can happen most easily. A mis-typed 0, an erroneous full stop and all kinds of chaos can occur. The biggest risks appear in payroll errors, incorrect records, and audit gaps. These are most present when you’ve got disconnected systems and are using spreadsheet workarounds to get things done.

Inconsistent processes across teams or locations

When processes aren’t the same across every team, you’re asking for trouble. This can easily lead to problems like unequal treatment or regulatory breaches. Both of which could expose you to grievances. Especially common in growing organisations, these inconsistencies can add up quickly and can be one of the most difficult to identify. Teams (and individuals) may not even realise that they’re doing anything differently.

Poor document and record management

This comes up frequently in audits. Even for organisations that start off with the best laid plans, years of growth and turnover can mean that standards slip and records fall through the cracks. It’s important to look out for missing contracts, outdated policies and the inability to demonstrate compliance.

Early warning signs of compliance risk in HR workflows

Although compliance risk can be pervasive, there are ways to spot it before it makes an impact on your business. Here are a few of the early warning signs that can indicate it’s time to take action:

• HR correcting payroll regularly – If this is happening often, it’s a sign that there’s something in your processes that isn’t working well
• Managers emailing approvals – When managers have to manually email approvals, your automation isn’t set up to handle the processes you have and they could easily get lost
• Policies applied differently by department – This one’s pretty self-explanatory. If every department isn’t doing things the same way, things are getting missed whether you’ve seen it or not
• Difficulty producing audit evidence quickly – This is a big risk if you are in a heavily regulated industry or if your business handles lots of customer data (think about your ISO certifications for instance)
• Employees questioning inconsistent decisions – When you have employees coming to you with inconsistencies, you know that cracks have already started forming and it’s time to dig deeper

If any of these feel familiar, don’t worry, there are plenty of ways to take action and mitigate these risks.

How organisations reduce workflow-related compliance risk

Reducing risk is the number one goal here. While knowing where to look for breaches is useful, you really want to stop them in their tracks.

Standardise processes before automating

Automation is all well and good (and, honestly, one of the best ways to remove human error), but it’s almost impossible to effectively automate a workflow if you haven’t defined it. And standardised it. Often, you’ll find that no two team members do things the same way or there is some manual part of the process that’s been grandfathered in for so long, no one even remembers why. (True story, we’ve seen both of those issues in clients in the past six months.)

Remember that scenario from the beginning of this article? The one where everyone on your team does something just a bit differently? Which of those workflows would you automate? Which version of it would actually reduce risk? And would that automation impact every version? You have to make it a single, standard process before automating anything.

Define ownership and approval paths clearly

Who owns your workflows? Whose job is it to make sure inputs are clean and outputs are effective? Who has the final say before automation takes over?

These are the questions you have to answer to reduce risk. Answer them, communicate them and document them. Having loosely defined ownership is how processes slip and risk re-enters the picture. And making sure all of this is shared and visible is what makes it work.

Regularly review and audit HR processes

Your business is not a static thing. Even fairly stable organisations have changing needs and goals. The people you hire change, your customers change, the economy changes, the law changes. And if you let your HR workflows stagnate, you’re introducing the opportunity for compliance risk to take root. Review your processes regularly (minimum annually) so that you know you’re not risking data breaches or, worse, legal breaches.

Audit and refine your tech stack

The last step is to look at your people technology. Is it still serving you? Are there a million and one manual tasks because of your people or because you need to create workarounds for the software you’re using? Is the platform actually suited to the needs of your business as it stands now or have you evolved and need new tools? Or, has the tech evolved and now you’re duplicating your efforts across multiple platforms?

These questions can really only be answered once you’ve reviewed your processes, people and strategy.

Compliance risk happens because there’s a mismatch between the way you want things to be done and the way things are done. You’ll find it in the small, repeated steps of everyday HR work, but that’s where you can catch it too. So, if you’re worried about risk, take the steps to

Worried about how compliance risk is sneaking into your HR or payroll workflows? Book a free consultation with our team.