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By Barbara E. Marcus, SPHR, New Mexico Mutual Group
Our Corporate Governance Department recently announced the revision of our company’s fraud manual. ‘They’ became ‘we’ as they soon asked for assistance from Human Resources. Together with the request came the statement that the Human Resources Department, as well as the Finance and Corporate Governance Departments, holds one of the three cornerstones of the company’s fraud program.
As the project developed, it soon became that each department also holds a rung in the three-legged stool known as Compliance. Amidst all of the diverse areas that make up our organization, these three departments play a critical role in guiding the rest of the company, by demonstrating the highest level ethical and professional behavior in all business transactions, and the utmost integrity in all we do.
The Human Resources Department responsibility in this area is two-fold. First, Human Resources upholds and maintains a working environment that allows employees to act ethically, professionally and with integrity along the path of compliance. Second, Human Resources also must maintain compliance within the law to minimize company exposure and liability.
Awesome responsibilities at best - how do Human Resources professionals fulfill these roles and accomplish these tasks? How is the gap bridged between the vastness of this area of responsibility and the reality of day-to-day workings within the typical Human Resources Department?
It is incumbent upon our profession today and in the past that we always set the example and tone for the rest of the organization by performing our jobs at the highest level of professionalism and integrity. And to do this, it is imperative that we have professional partners and collaborators while performing our functions.
Recently, in an article entitled “Guidelines Initiative Aims for Common Compliance Framework Language” by Allen Smith, Sr. Legal Editor, HR News, (HR News, 10/05), Smith explains four key areas of compliance recommended by the Open Compliance and Ethics Group (OCEG). These areas are recommended to assist business organizations and particularly Human Resources Departments within these organizations, in accomplishing their tasks and fulfilling their functions within the current atmosphere of ‘SOX’ corporate governance and a desire to ‘raise the bar’ and operate in an environment of integrity and professionalism. They suggest a much-needed bridge between the expectations of the modern corporate culture and the reality of day-to-day tasks.
According to Smith, compliance requires legal compliance, standards and guidance, core practices, and advanced practices. If we break these items down within our responsibilities as Human Resources representatives for our organizations, we may find that integrating these items into our daily lives and professional practices may already be a reality and part of our everyday activities.
Working with our Corporate Governance Department on the corporate Fraud Manual, it became clear very quickly that the best way for our Human Resources Department to profess compliance is to first and foremost make sure that all legal documents due over the course of the year are calendared, completed, and/or distributed within the prescribed time frames. By knowing and complying with the law, this ensures that the Human Resources Department remains in compliance, thus minimizing legal exposure while maximizing corporate integrity.
Here are a few examples of items to calendar for legal compliance purposes under the Human Resources Department purview:
- Plan documents
- Pension plan SPDs
- Summary Annual Reports
- Forms 5500 (and Forms 5558, if necessary)
- Payroll Tax Reports and Returns
- Form 941
- Distribution of W-2 forms
- COBRA
- New hire notifications
- Timely notification to former employee and covered dependants upon termination
- Equal Employment Opportunity Commission
- EE0 – 1 Report
- OSHA
- OSHA 300 log calendar year reconciliation
- OSHA 300 log posting
- State Government
- State new hire forms
As a service entity within our company, it is a constant performance objective to communicate with our customers - the employees - staying in legal compliance assists us in doing just that, whether it means disseminating Summary Annual Reports on our 401(k) plan or sending out COBRA notices.
The next area that allows the Human Resources Department to understand its compliance connection within the organization is identified as standards and guidance. Closely connected with legal compliance issues, these items are intertwined with the many laws governing all actions taken by the Human Resources Department, which must be interpreted and applied to actual day-to-day activities within the organization.
The key to a successful Human Resources Department that develops and consistently operates within set standards and guidelines is consistent compliance. Decisions that involve interpretation and adaptation of a policy, practice or the law involving an employee must be clearly analyzed and verified legally where appropriate. Working closely with the Corporate Governance Department or legal counsel, in-house or otherwise, is important to appropriately respond to Human Resources issues in the ever-changing modern business environment. This coordination assures compliance and consistency within standards and guidelines, not only within the organization but also within current legal trends. Although many Human Resources professionals feel like ‘legal eagles’, it is important to work closely with those who professionally ‘soar’ within this arena to ensure proper corporate governance!
Consistency and legal compliance within a set of standards and guidelines that are adhered to by all levels of employees and management set the cornerstone for an organization’s integrity. After all, the standards and guidelines serve as the measuring stick in which an organization is judged and measured. It is imperative that a Human Resources Department within any organization assist and support their organization in the development, implementation and adherence to corporate standards and guidelines.
According to Smith and the OCEG, organizations must also examine their core practices. Each Human Resources Department is unique, however there are several common activities that are fairly standard such as recruiting and selection; hiring, orientation and possibly training; compensation; performance evaluation; benefits; and organizational development. It is important that an organization and its Human Resources Department regularly examine their practices within these general areas of responsibility to determine if core practices fall within compliance guidelines. Perhaps this means reviewing current forms and templates being used to see if there is a need for revision or replacement. Another suggestion might be a targeted examination of communiqués being sent out to the employees.
In addition, it is also important to periodically examine those practices that are not used regularly which can be referred to as advanced practices. Advanced practices, when used, carry extreme importance, such as the review and revision of a several year old Employee Handbook or Policies and Procedures Manual.
The shared responsibility of upholding and maintaining compliance, ethics and corporate governance in conjunction with other departments, is a vast responsibility indeed. However, a Human Resources Department can contribute to this effort by working in conjunction with the Corporate Governance Department and/or legal counsel to maintain a consistency in legal compliance, adherence to standards and guidelines, and periodic reviews of core and advanced practices to assist the overall organization in maintaining integrity and professionalism.
Constant reviewing of practices, procedures and policies with other areas of the organization such as Corporate Governance and Finance, the Human Resources Department can also assist the organization in maintaining standard practices that are responsive to modern-day challenges, which can be easily termed as ‘best practices’ in maintaining the highest integrity and professionalism within the organization’s industry, community, and business world.
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