37% of small and mid-size businesses were hit with an employee lawsuit in 2024. HR compliance isn't just about following rules — it's about protecting your business.
💡Quick fact: On average, it costs employers around $75,000 to work with an employment lawyer to settle a claim before it reaches trial.
But it’s not all bad. If you follow the steps in this HR compliance checklist, you’ll not only protect your business, you’ll create a safe, inclusive workplace that draws top talent and drives success.
HR compliance checklist
1. Understand federal, state, and local laws
Businesses are regulated at the federal, state, and local levels. While federal laws set the standard, state and local laws can be stricter. It's important to understand regulations at every level to avoid legal pitfalls. Keep in mind that some of the laws can overlap with one another. Here's an overview of the key legal areas and specific laws at each level.
2. Develop and communicate policies
Effective policies are your organization's roadmap to compliance. They translate complex legal requirements into clear, actionable guidelines for both managers and employees. Start with core policies covering equal employment opportunity, anti-harassment, workplace conduct, and leave management. Remember that policy development is an ongoing process.✅ Essential policies to develop:
- Equal Employment Opportunity (EEO)
- Anti-harassment and discrimination
- Code of conduct
- Leave policies
- Disciplinary procedures
3. Follow transparent hiring practices
Fair and compliant hiring practices are crucial for building a diverse, talented workforce while avoiding discrimination claims. Implement standardized procedures for job postings, candidate screening, interviewing, and selection.✅ Common compliance pitfalls to avoid:
- Discriminatory job postings
- Illegal interview questions
- Inconsistent hiring practices
- Incomplete documentation
4. Develop employee lifecycle procedures
From onboarding to exit interviews, every stage of the employee lifecycle presents unique compliance challenges. For example, some actions must happen within specific timeframes (like I-9 verification), while others are more flexible but still need tracking. Create comprehensive procedures for each phase.✅ Critical lifecycle elements:
- Standardized onboarding checklists
- Regular compliance training schedule
- Clear performance evaluation processes
- Documented termination procedures
5. Closely monitor compensation and benefits
Payroll and benefits compliance violations are among the most costly HR mistakes. In 2023, the Wage and Hour Division recovered $274 million in back wages and damages for more than 163,000 workers nationwide. Establish robust systems for tracking time, calculating overtime, managing benefits, and ensuring tax compliance. Regular audits can help identify and correct issues before they become problems.✅ Critical areas to monitor:
- Minimum wage compliance
- Employee classification (exempt vs. non-exempt)
- Overtime calculations
- Benefits administration
- Payroll tax requirements
6. Establish workplace safety protocols
According to the National Safety Council, the average cost of a workplace injury is $44,000. However, workplace safety isn't just about OSHA compliance — it's about protecting your most valuable asset: your employees. Develop comprehensive safety protocols, conduct regular training, and maintain detailed incident records.✅ Safety program components:
- Written safety policies and procedures
- Regular workplace safety assessments
- Emergency response plans
- Injury and illness prevention programs
7. Document employee performance
Effective performance management goes hand in hand with compliance. Implement systems for tracking performance reviews, disciplinary actions, and workplace incidents. Remember, in HR compliance, if it isn't documented, it didn't happen.✅ Essential documentation checklist:
- Performance reviews
- Disciplinary actions
- Training completion records
- Incident report protocols
- Employee handbook acknowledgments
8. Protect private data
With data breaches costing companies an average of $4.88 million, protecting employee information is more critical than ever. Comply with relevant data protection regulations (GDPR, CCPA) and implement robust security measures. Regular audits and employee training can help prevent data breaches and privacy violations.✅ Stay compliant with:
- Secure data storage systems
- Access control protocols
- Employee privacy training
- Data breach response plans
Feeling overwhelmed?
That's okay. It's unrealistic for one person to be an expert on every single employment and labor law. That's why many businesses partner with HR companies like PRO Resources. Get the expertise of an entire team for a fraction of the cost. You can get started by scheduling a free consultation with one of our PROs.