By Jim Huffmyer with strategic HR, inc.
Human Resources (HR) has never been more necessary. The competitive forces that companies face today will continue to challenge organizational excellence. The efforts to achieve such excellence—through an emphasis on learning, quality, teamwork, and re-engineering—are driven by the way organizations get things done and how they treat their people. Those are fundamental HR issues.
To state it plainly: achieving organizational excellence must be the work of HR.
Companies need to create a new role and agenda for HR that focuses not on traditional HR activities, but on outcomes. HR should not be defined by what it does but by what it delivers—results that enrich the organization’s value to all stakeholders.
How can HR help deliver organizational excellence? Here are four ways:
- HR should become a partner with senior and line managers in strategy execution, helping to move planning from the conference room to the marketplace.
- HR should become an expert in the way work is organized and executed, delivering administrative efficiency to ensure that costs are reduced while quality is maintained.
- HR should become a champion for employees, vigorously representing their concerns to management and at the same time working to increase employee contribution; that is, employees’ commitment to the organization and their ability to deliver results.
- HR should become an agent of continuous transformation, shaping processes and a culture that together improves an organization’s capacity for change.
Can HR transform itself alone? Absolutely not. The primary responsibility for transforming the role of HR belongs to the CEO and to every line manager who must achieve business goals. Why? They are answerable to shareholders for creating economic value, to customers for creating product or service value, and to employees for creating workplace value. It follows that they should lead the way in fully integrating HR into the company’s real work. Indeed, to do so, they must become HR champions themselves.
As reported in the Bloomberg HR benchmark report for 2015-2016, they identified several key indicators for the HR department.
- The median ratio of human resources staff to total employee headcount declined to 1.1 full-time equivalent HR employees for every 100 workers served by the human resource department, down from a record high of 1.3 human resource staff members per 100 workers in both 2014 and 2013.
- Recruitment and retention remain at or near the top of most HR professionals’ agendas, with nearly nine of out of ten respondents saying that hiring and keeping employees are extremely or very important. Controlling healthcare costs was cited by roughly three-quarters of respondents, down from 86 percent four years ago.
The Price of Non-Compliance
Because of the multitude of laws affecting each stage of the employment process, it is extremely important for an employer to regularly review their policies and practices to ensure regulatory compliance, potentially resulting in costly fines and/or lawsuits. A few examples:
- Organizations can be fined $1100 for any violation of the appropriate payment of overtime for non-exempt employees, in accordance with the Fair Labors Standards Act.
- It could cost the organization lost wages, benefits, interest, and attorney fees for any violation of the Family and Medical Leave Act. For an employee making $35,000 / year who was incorrectly terminated for 3 months – that violation could cost you $12,000 PLUS the company’s and employee’s attorney fees.
- Penalties for failing to post required safety notices or keep accurate records may go as high as $10,000 each.
- Violations of the COBRA law can result in penalties from a number of regulatory organizations including:
- IRS: The Internal Revenue Service penalty is a non-deductible excise tax of $100 per day violation. If there is more than one Qualified Beneficiary in the family, the Internal Revenue Service excise tax is $200 per day.
- ERISA: Since COBRA requirements are part of ERISA, failing to comply with COBRA may subject an employer to an ERISA penalty of up to $100 per day, per violation. This penalty may be levied per Qualified Beneficiary with no family maximum.
In addition, the organization is responsible for claim payments, “making the person whole,” potential court levied damages and attorney fees.
- Non-compliance with Federal Immigration Reform Act requirements can result in a fine up to $1000 per employee.
- Benefit plans which are not compliant with ERISA regulations can result in a fine of $1000 per day against benefit plan administrators in addition to civil penalties.
- Violations of the Americans with Disabilities Act can result in reinstatement of the terminated employee and payment of back pay, benefits, attorney fees, and potential compensatory and punitive damages.
Penalties such as these help signify the importance of conducting periodic human resources analysis and to maintain fair and consistent policies and procedures across the organization. Avoidance of penalties in addition to maintaining a happy and productive workforce will also save the organization monies associated with costly turnover. Losing one employee is estimated to cost a company 100% of the employee’s salary to replace the worker.
In the event of an audit or lawsuit, your business could be fined hundreds of thousands to millions of dollars if your records and practices are non-compliant with employment regulations. Below are some real-life examples of the cost of non-compliance. It doesn’t matter your size, your industry, or your intention, the government will fine you.
Non-compliance of federal and state employment regulations can directly impact the bottom line of any organization. It is important to understand the ramifications of business decisions so as to minimize the financial exposure of business decisions. The following are some examples given by the Society of Human Resource Management (SHRM) of the financial impact non-compliance is having on American businesses.
Wrongful Termination – $500,000
Average defense costs are approximately $85,000. Jury verdicts typically average $500,000.
Sexual Harassment – $95 Million
In 2011 a Belleville, IL employee was awarded $95 million in a sexual harassment case because the employer did not handle the complaint correctly.
A judge awarded a recruiter $8.1 million for sexual harassment, sex discrimination, retaliation, and emotional distress claims against her employer.
Age Discrimination – $4,200,000
A former claims adjuster, age 37, was awarded $4.2 million by a jury who found that age was a determining factor in his termination. After a jury trial, an employee was awarded more than $800,000 in damages from the employer, who was found to be in “willful” violation of the Age Discrimination in Employment Act.
Racial Discrimination – $380,000
An African-American employee, who was fired after testing positive on a drug test, was awarded $380,000 by a jury. The employee was asked to submit testing after he was involved in a minor accident. Although he requested a confirmatory test, the company refused and terminated him.
Family and Medical Leave Act (FMLA) – $80,000
A hospital employee was fired when she took leave to care for her two sick children. After being found liable, the hospital had to pay $58,000 in back pay and benefits.
A jury awarded an employee, who was fired after requesting leave for depression and anxiety, $19,000 in damages and $80,000 in attorney’s fees.
Disability Discrimination – $7,100,000
A verdict in the first Americans with Disabilities Act case to be litigated by the Equal Employment Opportunity Commission (EEOC) awarded $572,000 to a plaintiff who was fired after he was diagnosed with terminal brain cancer.
A jury awarded a discharged executive $7.1 million in compensatory and punitive damages after he was fired one day before he was scheduled for release from an outpatient alcohol rehabilitation program.
Fair Labor Standards Act (FLSA) – $10,000
The FLSA provides that an employer found guilty of willful violations of the Act may be fined up to $10,000. Subsequent violations may include imprisonment for up to six months. Furthermore, the employee has the right to sue “any court of competent jurisdiction” for any unpaid minimum wages or overtime.
Illegal Immigrant Workers – $10,000
If a company is found to willfully violate the Immigration Reform and Control Act, the company can face up to$2,000 for each unauthorized alien. If subsequent violations follow, the company will be subject to fines ranging from $2,000 to $10,000 per violation, and an additional $1,000 per each paperwork violation incident.
National Origin Discrimination – $18,000,000
A Texas federal court jury has awarded four former managers of a large convenience store chain more than $18 million after the chain was found to have discriminated on the basis of national origin.
Religious Discrimination – $500,000
A security guard was awarded $500,000, including attorney’s fees, after he was harassed and prevented from praying at work.
Negligent Hiring – $2,500,000
After a deliveryman attacked a customer, the employer was held liable for $2.5 million for negligently hiring and retaining the deliveryman. No job interview was conducted; no references were requested, and he was not asked to complete a job application. It was later discovered that the deliveryman had a juvenile record for armed robbery and burglary and had adult records of arrests and convictions for assault and battery.
COBRA – $1,000,000
Both husband and wife were covered under group plans for their respective employers (dual coverage under both plans). The husband contemplated leaving his employer and asked if he would be entitled to elect COBRA. His employer assured him that he could elect COBRA. He paid all monthly premiums due for coverage. Several months later, his wife gave birth to twins who required intensive medical care. The husband’s plan denied claims for coverage, asserting that the husband should never have been permitted to elect COBRA because he had dual coverage at the time of the termination. The wife’s plan denied all claims as well. A lawsuit resulted. The court awarded damages to the husband and wife in excess of $1 million.
Equal Employment Opportunity Commission (EEOC) – $775,000
The EEOC alleged that Target created and condoned a racially hostile work environment at its store in Springfield, Pennsylvania. The agency said a group of black employees were subjected to inappropriate comments and verbal berating based on race. Further, when one of the black employees objected to this treatment, he was retaliated against, according to the agency. The settlement provides a class of 14 employees with $775,000 and requires that all managers in the store receive training in the company’s equal employment opportunity policies.