Compliance Is a Pain. How to Outsource It.

It might not be all on you.
Compliance Is a Pain. How to Outsource It.
Image credit: Getty Images/ Alex Williamson
This story appears in the October 2016 issue of Entrepreneur. Subscribe »

Hold on there. Let’s back up and talk about what “compliance” is.

Industries can be divided into two categories: the heavily regulated and the less heavily regulated. We all know the ones buried under the most paperwork: healthcare, manufacturing, food, transportation, financial services and energy. For those companies, compliance is core to their very survival. But even if you’re not working in one of those industries, you still have a lot of laws and regulations to follow -- submitting employee taxes, generating W-2s, staying on the right side of wage and health insurance rules, workplace safety and more. That’s all “compliance,” too. Compliance covers nearly every aspect of your business.

Related: Avoid These 3 Employment Compliance Mistakes or Risk Fines

You can’t outsource all of it, because that would require outsourcing the very operation of your company. But you can do this: Ask your insurance broker or agent if their company has a certified risk-management specialist on staff, or if they know where to find one. Then pay for an assessment. You’ll find out where your compliance structure is weakest -- or at worst, nonexistent. 

One area that deserves special attention is HR compliance. In my own experience as a CFO for hire, I’ve almost never arrived at a new client and not found many HR violations. (Employee classification -- such as hourly versus salary, or wage and hour violations—are the most common.) When I do a deeper investigation, I usually find out that this is because HR is the very last function that every new business figures out and systematizes. And good news: HR is also a rare compliance issue that you can outsource. There’s an entire ecosystem available to help businesses of all sizes manage HR at a reasonable cost. Some will even help you lower your health insurance premiums. Within your industry, look for professional employee organizations (PEOs), administrative service organizations (ASOs) and HR consultants who can get and keep you in HR compliance. 

Related: 17 Great HR Resources for Entrepreneurs

Whatever you do, don’t dismiss compliance. What may seem trivial to you in terms of a regulation can come back to bite you in the form of costly fines and lawsuits from employees or customers. And it can happen in ways you’d have never anticipated. (Data theft of customer information? Guess what could have solved that?) Compliance is a pain, yes, but it’s just another cost of doing business. 

Edition: October 2016

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