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What is the true cost of compliance?  - blog post image

What is the true cost of compliance?

Chelsea Perry - Monday, November 10, 2014
Posted 3 years ago

We just proposed our services to a company with 200 employees. Our fee is significantly less than a minimum wage employee, yet the company felt it was too expensive. Really? We are talking about a cost per employee of less than 30 minutes of their hourly wage per month. Clearly this manager did not consider this. My bad for not explaining it well enough. So, in an effort to never have this discussion again, I am going to make my argument right here and now.

According to the Bureau of Labor Statistics study the following administrative costs affect business each year.

Forms Management. The average employee completes at least three forms each year. Forms such as vacation request forms, W-4, and some form of acknowledgement. According to the BLS, it takes employees at minimum 15 minutes to complete each form – 45 minutes. If we apply an average wage and overhead of $24.53 (BLS) then we have a cost of $18.40. Why so long to complete a form? When two employees interact, discussion takes place. Example, an employee who requests a vacation request form from a manager or HR is invariably going to be asked “Where are you going”? This results in a discussion of the merits of where the employee is going to spend their vacation.

Employee Handbook Updates. Most handbooks need to be updated at least once a year. The Employer has to have the new or updated policies written, reviewed by an expert, printed, distributed and signed for. According to the BLS this process costs approximately $28.00 per employee per update. For this reason, employers are slow to update handbooks and as such, their management team is following outdated policies and procedures that could very well land them in court.

Compliance Training. According to OSHA, all employees need to be trained on prevention of workplace hazards on day one. Training on topics such as emergency evacuation, hazardous materials, and equipment operation need to take place. In addition, employees need to be trained on workplace safety, harassment and discrimination prevention, safe driving, etc…. Managers need to be trained on how to handle complaints, how in hire effectively, interviewing, selection, how to avoid wrongful termination claims, and so on. Suffice to say, in today’s litigious environment, the average employee needs to be trained on at least 4 topics each year. Live training is very expensive and not very effective for many reasons which I will save for another blog. The average live training session is one hour, which turns into 90 minutes. People leave their work area early to get to the training and then stand around and talk after. Typically an employee loses 1.5 hours of productivity for every training. If we use the average hourly wage and multiply by 4 training sessions (which is ultra conservative) we come up with a cost of $98.12 per employee per year.

The average training time on the HRFix web portal is 15 minutes, including a test to prove comprehension (which live training rarely provides). If we add the cost of the web based training on HRFix, we get a cost of $24.53 per employee, as opposed to the $98.12 for live training.

Personnel File Management. Most companies have at least two people who manage personnel files for the company. With the MyFile system on HRFix, this process is all automated plus you have built in retention rules and access rights. This process will save those two employees at minimum 2 hours per month or 4 total hours and an additional savings of 98.12 per month or $1,177.44 per year and will result in better records.

All told, using the HRFix HRCS system will save companies a tremendous amount of money each year. On average it will save $125.49 per employee per month. Our cost is substantially less than that amount per employee per year.

In addition to the hard dollar costs, here is but a sample of the benefits provided by the HRFix HRCS:

  • Increased compliance within the company. We offer over 80 compliance training modules for your employees to select from based on your industry requirements. We provide tests to verify comprehension. Not only did we train our employees, they understood the rules….
  • Reduced unemployment costs through proper documentation of employee discipline (completed for you by our HR professionals at no additional cost).
  • Updated policies and procedures at all times, delivered on line in real time and acknowledged electronically by employees.
  • Significant reduction in risk of government fines for non-compliance or litigation by disgruntled employees. We use our workplace environment quarterly questionnaire to eliminate problems before they become problems.
  • Electronic personnel files complete with retention rules and access rights.
  • Access to seasoned human resource professionals, we are just a phone call away. Need a write up, we got it. Need to respond to an EEOC charge, we got it, need help with an unemployment claim – give us a call.

So how does HRFix cost an employer money? Only one way. If the employer is doing nothing, not having employees complete paperwork, not terminating anyone, not hiring anyone, not training anyone. If that is the case, we will cost you money – any other situation, we increase your efforts, and we save you money, lots of money!

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