5 HR Liabilities To Watch Out For in 2024

5 HR Liabilities To Watch Out For in 2024

HR is a critical department in any organization, saddled with the never-ending responsibility of sourcing, interviewing, hiring, onboarding, training, and managing employees. In general, certain risks come with managing people, but there are best industry practices for navigating these HR liabilities. Generally, successfully managing HR liabilities allows a company to navigate and take advantage of growth opportunities while keeping the risks as minimal as possible.

For small and mid-sized businesses, HR concerns typically include costs, hiring, employee retention, benefits packages, administrative issues, and managing a team of diverse individuals from different backgrounds. The same goes for startups, especially if they lack a solid in-house HR team to oversee HR affairs accurately. But don't worry. In this article, we’ll discuss the most common and critical HR liabilities that small businesses need to pay extra attention to, as well as what can be done to mitigate the risks.

Let’s dive in already.

What are HR Liabilities?

According to Law insider, HR Liabilities refer to the different obligations and liabilities for wages, bonuses, variable compensations, workers' compensation, workers' compensations benefits, pension, and other benefits or any other employee claim, which includes vacation pay, in respect of any transferred employee or former employee. It also refers to all liabilities that arise out of, because of, and/or the termination of the employment of, any employee.

HR liabilities generally describe every cost associated with recruiting, managing, retaining, and losing or letting go of your employees.

HR professionals also have individual liability, referred to as "personal liability." It is a situation where an individual's asset is used to satisfy a financial obligation. This is applicable when an HR professional is found to be personally responsible for an employment-related judgment.

Critical HR Liabilities to Watch Out for

Certain HR liabilities shouldn't be overlooked because, when neglected, they can cost your business so many expenses. As already mentioned, HR liabilities arise from the employment or the termination of any employee in a company. Employees may file a legal action against a company for many different reasons. So, it's important for a business to carefully consider the various rights of their employees to avoid violating them.

The United States Department of Labor has some rules that protect employees from employment discrimination, retaliation, and several other infringements. So, to begin with, you want to make sure that you address the challenges your employees are facing in the workplace. With that said, here are critical HR liabilities that can be costly if neglected.

1. Data Privacy and Cybersecurity Threats

With the increasing digitization of HR functions, data privacy and cybersecurity have become top concerns. Employee records contain sensitive information that, if compromised, can lead to severe legal and financial consequences. The key risks to watch out for are:

• Data Breaches: Cyberattacks targeting HR databases can expose employee Social Security numbers, bank details, health information, and other confidential data.

• Non-compliance with Privacy Laws: Laws such as the General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act (CCPA) in the U.S. impose strict requirements on how companies handle employee data. Non-compliance can result in heavy fines.

Implement strong cybersecurity measures, including encryption, multi-factor authentication, and regular security audits. Also train your HR staff on data privacy best practices and ensure they are aware of the latest regulations. Finally, limit access to sensitive employee information to only those who need it for their job functions.

2. Employee Mental Health and Well-being

Employee mental health has become a critical issue in the workplace, exacerbated by the ongoing effects of global economic uncertainty and societal changes. Employers are increasingly expected to take a proactive role in supporting their employees' mental health.

With the help of a PEO, you can implement mental health programs that offer resources such as counseling services, stress management workshops, and mental health days. Build a workplace culture that prioritizes well-being, where employees feel safe discussing mental health issues without stigma or fear of repercussions. In this case, be mindful of:

• Legal Liability for Mental Health Issues: Employers may face lawsuits if employees claim that workplace stress, harassment, or lack of support contributed to their mental health issues.

• Burnout and Turnover: Poor mental health can lead to decreased productivity, increased absenteeism, and higher turnover rates, all of which can negatively impact the company's bottom line.

3. Punitive Employment Actions

HR management also involves risk management. If you want to take punitive actions against an employee, specific measures should be considered. Actions such as demotion, pay reduction, disciplinary action, or termination can pose a risk to your business and organization if not done right.

An employer should take certain measures to protect itself, and specific methods should be adopted to manage HR risk and liabilities. However, in most cases, there’s nothing employers can do to avoid allegations or lawsuits of wrongful employment acts. There are certain ways to mitigate HR risks and liabilities.

To avoid this risk, employers need to be proactive and consider the potential consequences of their actions before moving forward with the decision. You shouldn't only be bothered about being sued. Rather, you want to also consider the implications of your actions and seek better ways to treat your staff.

Also, an important way to protect your business is to have proper documentation of every important process in the organization. HR can prevent certain risks and issues with proper documentation alone. These documents will serve as a defense for your action. Documents such as employee handbooks, policies, procedures, and forms can help your case.

Documentation can clarify and may justify why the employer took the punitive action. If an employee insists that an employer took action against them unjustly, your company will have sufficient evidence to show why it took action. An excellent option for managing these kinds of risks is by outsourcing your HR services to a professional employer organization.

4. Remote Work Compliance and Management

The shift to remote and hybrid work models, which was accelerated by the COVID-19 pandemic, is now a permanent fixture for many companies. However, managing a remote workforce presents unique HR challenges, particularly in ensuring compliance with labor laws across multiple jurisdictions.

Key Risks:

• Cross-Jurisdictional Compliance: Remote workforces often span multiple states or even countries, each with its labor laws regarding wages, overtime, benefits, and tax obligations.

• Employee Well-being and Productivity: Ensuring that remote employees remain engaged, productive, and mentally healthy is an ongoing challenge, with potential legal implications if not managed correctly.

To avoid these issues, employers should establish clear remote work policies that address compliance with local labor laws, data security, and employee expectations and invest in tools and technologies that support remote work, such as project management software, communication platforms, and cybersecurity solutions.

5. Compliance with Evolving Wage and Hour Issues

Wages and salary payments are critical areas of HR concerns. If not handled carefully, things may get complicated. Also, hire the services of HR professionals who can provide your business with excellent Payroll and HR solutions.

Employers need to ensure that their pay practices strictly align with state and federal regulations. Wage and hour laws exist to protect your employees and ensure they earn their work hours. The following are things that may lead to trouble for your business:

1. Misclassifying employees as exempt from overtime when they were not, hence resulting in unpaid wages.

2. Not counting all work as "hours worked" when calculating the hours worked in a week, hence not paying the employee their full weekly wages.

3. Deducting money from a worker's wages for unjustifiable reasons. The worker may take action against the company. Various states and federal levels have different provisions and guidelines on how deductions from pay should be made.

4. Assuming that since you pay someone a salary, you don't need to pay them for working overtime.

Following HR best practices can help small businesses avoid cases of litigation and the costs that come with it. For small and medium-sized businesses without the structure of fully-fledged HR services, partnering with a PEO company can help you navigate several compliance issues easily, access comprehensive health insurance benefits for your employees, and manage workers' compensation claims when they arise.

A PEO Partnership Can Shield You from HR Liabilities

A PEO co-employment relationship is an ideal solution that relieves you of your most bugging HR issues. With a PEO partnership, businesses can focus on core business goals, while the PEO company handles all HR matters related to compliance, tax filing, employee benefits administration, and so on. Download the Ultimate Guide to PEO free ebook to learn more about how a PEO can help you.

At The Mission, we provide small businesses with top-notch HR solutions and best HR practices to scale their businesses and help them avoid HR liabilities. We bring our years of experience and rich insight to the table, helping you easily navigate top HR issues, especially if you’re looking to expand your business. The Mission also provides your business with answers to all your bugging HR outsourcing questions. Don't hesitate to get in touch with us if you have further questions about partnering with a PEO company or mitigating HR liabilities.