Although regulatory compliance isn't the easiest task, it is arguably one of the most important for small business owners. With limited time and resources, it can be easy for small business owners to overlook the importance of compliance. Failing to comply with legal requirements can have severe consequences for your business. This can lead to costly monetary penalties, legal liabilities, reputational damage, and more. There are many types of non-compliance, including, but not limited to, misuse of funds, unethical business practices, fraud, corruption, and bribery.
Understanding Regulatory Compliance
Regulatory compliance refers to an organization's adherence to federal, state, and local laws, standards, and regulations. The specific regulations a company must follow depend on a business's industry and location. Regulatory compliance is a broad topic and touches a wide range of areas, including data protection, ethics, financial reporting, and workplace safety. Maintaining compliance involves staying up-to-date on legislative changes, implementing proper protocols, and providing educational training opportunities for employees to ensure compliance.
Importance Of Compliance
Laws and regulations are enforced for many reasons, from ensuring workplace safety to protecting employee data and beyond; regulatory compliance can make or break a business's reputation and bottom line. In fact, 87% of organizations indicated negative outcomes as a result of low compliance maturity. Continue reading to discover why business owners should make regulatory compliance a priority.:
Avoid monetary penalties
Failing to comply with laws and regulations can lead to costly monetary penalties. Fines can quickly add up, effectively lowering available funds to improve workplace efficiency and afford quality employee benefits.
Long-term financial impact
Non-compliance can often lead to expensive long-term costs that negatively impact your business. The cost of legal counsel, high insurance premiums, and consistent workers' compensation claims can affect your company's long-term appeal and revenue. In most cases, the best practice to lower these fees is to identify compliance problem areas and then work from the ground up to install a viable long-term solution. Solutions can range from conducting quarterly audits to managing important employee information through a (HRIS).
Legal liability
If your business is non-compliant, it can expose your company to legal risks and liability. In the event of a lawsuit or workers' compensation claim, your company may be liable for violations, leading to expensive legal fees and reputational damage.
Reputational damage
When your customers or potential clients view your company as unsafe or untrustworthy, your bottom line will suffer. A lack of compliance can also negatively impact consumer confidence, market share, and growth opportunities.
Employee safety and morale
In most cases, a complaint workplace is a safe workplace. When businesses follow and enforce safety laws and procedures, not only are employees more cautious and protected, but they also feel safer. By working in an environment where they feel safe and valued by their employer, their morale and productivity may improve.
Educating employees on how and why they should focus on compliance is also essential. It can be beneficial to hold a seminar, attend a webinar, or conduct compliance training with your employees to ensure they understand what regulations to follow and why it's crucial.
Indirect costs
While there are many direct costs to non-compliance, such as workers’ compensation claims and Internal Revenue Service (IRS) fines, there are also many indirect costs. After an incident occurs, employee turnover may increase. When employees don't feel safe or feel like they are expendable, they are less likely to trust their employer and may depart from the company. High turnover also means you'll have to focus on hiring and training new talent. Training new employees can take time and resources away from your dwindling workforce.
How GMS Can Help
Regulatory compliance can be an overwhelming and confusing topic. Keeping track of hundreds of laws can be exhausting, as the laws are constantly changing. While it may seem daunting, know that you're not alone.
With a professional employer organization (PEO), like Group Management Services (GMS), you'll have a dedicated partner to help ensure compliance with federal, state, and local laws. GMS can conduct compliance audits, help you stay current on legislation, and provide employee training. Simplify your compliance efforts with GMS! Contact us today to learn more.