Don’t Take Risks. A Guide to HR Compliance Peace of Mind for Business Owners

January 22, 2025

Don’t Take Risks. A Guide to HR Compliance Peace of Mind for Business Owners

By Margaret Bailey

Senior HR Consultant, AugmentHR Consulting

While HR compliance may not be the most interesting subject, organizations must ensure they are up to speed. Your company must follow all labour laws, rules, and regulations or you could face serious repercussions.

Are you in compliance with all your industry regulations? If not you could face fines and even legal action. Luckily an HR compliance audit from an HR consulting firm can help you identify any issues and help you quickly get back on track.

Below, I’ve summarized my 25 years of experience as an HR leader helping companies small and large avoid HR risk into an overview of HR compliance and what you need to know about including

7 reasons why HR compliance is important
Examples of what not being compliant looks like
HR policies required by law
How to tell if you’re compliant with HR regulations
7 Steps to take to ensure you’re compliant
7 tips to explain compliance to your employees
6 Ways to measure HR compliance

Why is HR compliance so important? 7 reasons

To put things bluntly, if you’re not compliant, you’re going to have serious issues to deal with. HR compliance is important because it ensures that an organization adheres to laws, regulations, and ethical standards related to its workforce. This compliance is crucial for several reasons:

It’s the law: ensuring the company follows provincial and federal laws protects the organization from legal disputes, lawsuits, and penalties.
You could face significant financial penalties: Non-compliance can lead to significant monetary fines.
It helps protect your employees: HR compliance ensures that proper safeguards are in place to protect employees against discrimination or harassment and that employees are treated fairly, receive their entitled benefits, and work in a safe environment. This fosters trust and respect between the organization and its workforce.
Protect your reputation as an employer: An organization known for ethical, fair, consistent HR practices builds trust and credibility with employees reducing turnover while becoming more likely to attract top talent, customers, and partners.
Reduces the likelihood of legal issues: Compliance helps identify and mitigate potential risks related to discrimination, harassment, wage disputes, and other workplace issues. This reduces the likelihood of conflicts or crises.
It creates operational efficiency: Structured HR policies and adherence to regulations create a well-organized workplace, improving productivity and reducing misunderstandings or conflicts.
Adaptability: Staying compliant requires staying updated on changing laws and regulations. This ensures the organization remains competitive and responsive in a dynamic business environment.

What’s an example of NOT being compliant?

Being non-compliant means your company is not acting in a way that is required by law. This could be because you do not have up-to-date documentation or it could mean you are taking certain actions that are not in alignment with regulations. Regardless, this puts you at HR risk.

Here are some examples of being non-compliant:

Asking employees to perform tasks that do not adhere to workplace safety standards
Failure to keep proper documentation up to date
Discriminating hiring practices
Not properly compensating employees for overtime hours
Failure to securely store employee information or follow privacy laws
Unfair or unethical workplace practices

What HR policies are required by law in Canada?

There are five HR policies that employers must have:

Workplace Health and Safety Policy: Canada Labour Code, RSC 1985, c L-2.
Anti-Discrimination, Harassment and Violence Prevention Policy: Canada Labour Code, RSC 1985, c L-2.
Privacy & Confidentiality Policy: Personal Information Protection and Electronic Documents Act, SC 2000, c 5.
Pay Equity Plan: required in workplaces that employ 10 or more employees, by the Pay Equity Act, SC 2018, c 27, s 416.
Accommodation Policy

In addition, employers may also be required to adhere to provincial laws and regulations. Federally regulated industries may be subject to additional employment laws related to industry operations.

How do I tell if I am compliant?

To assess your compliance, review your policies and procedures and compare them with applicable regulations and industry standards. Even with your best efforts, knowing if you are fully compliant with all laws and regulations can be a challenge. This is particularly the case for companies that don't have full human resources departments or the owner-operator also handles all HR functions.

So, how do you know if we are following all the Canadian rules?

You get an HR compliance audit. This is the most common type of HR audit and it is completed to ensure you comply with all laws and regulations.

We can help. As one of Canada’s most experienced HR outsourcing companies, AugmentHR compliance services include expert guidance to help your organization effectively navigate, monitor, and maintain compliance with federal, provincial, and local employment regulations. Our HR compliance services include:

What do I need to do to ensure I am compliant? 7 steps to follow

Staying on top of compliance regulations can be challenging. Here’s a checklist of steps you can take to ensure you are compliant with all Canadian employment laws:

1. Understand relevant laws and regulations: Research federal, provincial, and local labour laws that apply to your industry and workforce. Things change, so, stay up to date about regulations covering wages, benefits, workplace safety, discrimination, harassment, and termination. Subscribe to relevant newsletters, attend HR compliance workshops, or consult legal professionals.

2. Develop clear policies: Create an employee handbook outlining company policies, procedures, and expectations. Ensure policies comply with legal requirements and are clear, consistent, and easily accessible.

3. Maintain accurate records: Keep detailed and organized records of employee contracts, payroll, benefits, and performance evaluations. Store records securely and retain them for the legally required period.

4. Conduct regular HR audits: Periodically review HR processes, employee classifications, payroll practices, and benefits administration to ensure compliance. Address gaps or inconsistencies immediately. You can outsource HR compliance to an HR consulting firm to stay on top of things.

5. Train your people: Train managers and employees on workplace laws, harassment prevention, diversity, and safety protocols. Update training regularly to reflect changes in laws and company policies.

6. Have a thorough complaint resolution plan: Create a system for employees to report complaints or concerns confidentially. Investigate issues promptly and take corrective action where necessary.

7. Work with legal and HR experts: Consult with HR professionals or legal advisors to ensure policies and practices are legally sound. Consider hiring an HR compliance officer or outsourcing compliance tasks if needed.

7 tips to explain compliance to employees

Leader explaining HR compliance to employees

Photo by Pavel Danilyuk

At its core, HR compliance ensures that labour laws are followed and that employees are treated fairly and consistently. In my 25 years helping companies transform their HR from simply minimizing risk to becoming an employer of choice I’ve learned how crucial it is for employees to grasp their role in this process—specifically, understanding the workplace policies and reporting any issues. Employees should feel empowered to ask questions and raise issues, knowing that compliance is in place not only to protect the organization but also to protect them. Here’s how to go about it:

1. Explain why compliance is important: Help employees understand the benefits of compliance for both them and the organization: For employees, it protects their rights, ensures fair treatment, and creates a safe work environment. Address why it's important for the company - for example, it avoids legal issues.

2. Connect compliance to everyday work: Provide specific examples of how compliance relates to their roles, such as reporting workplace safety concerns or adhering to anti-discrimination and harassment policies.

3. Discuss key compliance policies: Highlight the company’s most important compliance policies and how they affect operations.

4. Use real-life examples: Share relatable examples to illustrate compliance in action. For example "If you notice a safety hazard, reporting it ensures the issue gets fixed and helps prevent accidents."

5. Emphasize employee responsibility: Explain that every employee plays a role in maintaining compliance. Encourage questions and feedback. Create an open environment where employees feel comfortable asking questions or raising concerns about compliance.

6. Provide training and resources: Offer regular training sessions and provide access to resources like the employee handbook, compliance helplines, or HR contacts.

7. Highlight the consequences of non-compliance: This is an important one to address. Explain the potential risks of non-compliance, such as legal issues, workplace conflicts, or reputational damage.

How to measure HR compliance? 6 ways to track your progress

There are many ways you can approach measuring and monitoring your level of compliance.

When you measure compliance efforts, it enables you to see how well an organization adheres to legal, regulatory, and internal policies. It ensures that the company is meeting its obligations and identifying areas for improvement. Here are the best ways to track compliance key performance indicators (KPIs):

1. Conduct compliance audits: This is number one on the list. A systematic review of policies, procedures, and practices is needed to check if they align with legal and regulatory requirements. Use checklists to evaluate specific compliance areas, such as payroll, workplace safety, or employee classifications. As a cost-efficient provider of outsourced HR services, we conduct compliance audits regularly for companies ranging from smaller, entrepreneurial growers to more established larger companies that need to re-check their policies.

2. Define and track key compliance KPI’s: Determine and monitor measurable indicators that are relevant to your business. This can include things such as the percentage of employees completing mandatory training, the number of incidents reported and resolved and the timeliness of policy updates in response to regulatory changes.

3. Review reporting systems: Evaluate the effectiveness of systems used for reporting issues, such as hotlines or online platforms. Look at the volume of reports, time to resolution, and employee satisfaction with the process.

4. Review training effectiveness: Track participation rates in compliance training programs. Assess employee understanding through quizzes, tests, or scenario-based evaluations.

5. Benchmark against industry standards: Compare your compliance practices to industry standards or peer organizations to identify gaps or areas for improvement.

6. Hire external HR auditors: Periodically involve third-party auditors to conduct an unbiased review of your compliance practices.

A final word on HR compliance

Ensuring your company is compliant with HR regulations is not just a legal obligation but a cornerstone of responsible and ethical business practices. By following labour laws and implementing fair policies, organizations protect themselves from financial penalties, legal disputes, and reputational damage. HR compliance promotes trust, efficiency, and adaptability, positioning businesses for long-term success. While navigating compliance requirements can be challenging, HR audits, training programs, and expert consulting services from HR firms make the process manageable.

Connect with us today to find out what you’re missing and achieve greater peace of mind for you and your business.

Margaret Bailey is a seasoned HR Consultant with AugmentHR, a Toronto-based HR outsourcing company advising North American clients. With a 25-year track record in human resources, Margaret has successfully spearheaded HR transformations across diverse industries including high-tech, scientific services, and manufacturing. As Vice President of HR in her previous role, she led a team of 30+ HR professionals across North America and the UK doubling its size by hiring over 2,000 high-tech employees. Her leadership was instrumental in establishing the company as a "Best Employer."