The Escalating Risks and Costs of Managing Wage and Hour Regulatory Compliance

Workforce Management, October 19, 2009 | Go to article overview

The Escalating Risks and Costs of Managing Wage and Hour Regulatory Compliance


KRONOS INCORPORATED

Highlights of a commissioned study conducted by an independent research firm on behalf of Kronos Incorporated.

Kronos commissioned Forrester Consulting to evaluate companies' risk, costs, business processes, and information technology associated with managing workforce regulatory compliance. This study, conducted in the summer of 2009, examines the impact that the global recession is having on companies' increased risk exposure to regulations and laws governing wage and hour compliance, including the resultant costs as well as companies' ability or inability to manage their workforce compliance in a costeffective manner. The economic downturn is spurring job cutting across all industries, which in turn is resulting in greater scrutiny by managers, employees, ex-employees, and regulatory agencies of workforce management practices, policies, processes, and systems. Also, despite the fact that the recession is beginning to abate, companies' heightened risk will continue to mirror the lagging job losses for the next 18 to 24 months.

Five Key Findings

Downsizing as a reaction to the global recession is yielding increased compliance risk and costs.

One of the effects of wholesale job cutting is that bid-off employees and those remaining are checking to make sure that management has dotted every "i" and crossed every "t" in following the letter of the law with regard to regulatory workforce compliance. As a result, compliance costs are rapidly escalating.

Most companies have yet to bridge the gap between their strategic emphasis on compliance risk management and their operational execution in support of this objective.

Most companies place regulatory risk management at or near the top of their strategic imperatives. But evidence of that strategy flowing down to operational execution is lacking. Most companies do not budget for compliance costs, operate in reactive (vs. proactive) mode (i.e., only when necessary), manage many workforce or labor tracking processes related to compliance manually, and do little to measure their effectiveness.

The knowledge gulf between companies' workforce compliance policymakers and operational managers is the culprit.

The regulation-to-policy-to-process knowledge chain is fraught with missing links. Companies' policymakers and operational managers are often at odds about how - and how well - that knowledge chain is implemented and maintained.

The knowledge gulf is exacerbated by the fact that most companies are operating in a manual or spreadsheet environment.

Those companies that rely on manual processes or spreadsheets to track, monitor, and manage workforce compliance are at the greatest risk of incurring financial penalties associated with workforce management non-compliance.

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