HR Compliance: How Can Startups Use HR Automation Tools

What is HR compliance?

HR compliance means adhering to all applicable labor laws and regulations that impact the rights and protections of workers. While labor laws typically govern employee and employer relationships, regulations are also in place to determine contractor and client relationships. These laws can differ between countries, states, provinces, and territories.

Laws for employees

The primary labor laws present throughout the world that impact employees include the following:

• Minimum wage
• Overtime pay
• Work hours
• Rest breaks
• Employment agreements
• Employee benefit entitlements such as PTO, parental leave, and pensions
• Probationary periods
• Background checks
• Payment methods
• Payment periods
• Payment schedules
• Payroll taxes
• Payroll records
• Termination

Laws for contractors

The primary laws and regulations impacting independent contractors are significantly different from those impacting employees since contractors are self-employed, which means they control their work schedule, pay their own taxes, and aren’t entitled to statutory benefits by law.

Laws for contractors include the following:

• Right to a contractor agreement
• Right to control their work
• Right to intellectual property
• Right to work when and where they want
• Right to market their services 
• Right to negotiate payment and choose the payment method
• Right to work with other clients and contractors
• Right to challenge their work classification 
• Right to file their own taxes and claim deductions

Independent contractor laws and regulations are changing partly due to increased remote workers, misclassification, and unemployment benefit issues.

Which HR processes can your startup automate to remain compliant?

Startups can automate the following HR processes to remain compliant. 

Data collection

Automating data collection ensures you retain all the required data in one place should an audit or legal dispute arise.

Many country-specific laws require the employer or client to collect important personal data to prevent future litigation when hiring a new employee or contractor. The data collected can range from basic demographic data and personal details—such as the worker’s name, address, age, and gender —to more in-depth employment details such as job performance reviews, salary history, and leave records

In the US, for example, federal law requires every employer to keep a record of the following information:

• Employee’s full name and social security number
• Address, including zip code
• Birth date, if younger than 19
• Sex and occupation
• Pay details (e.g., direct deposit information)

When engaging independent contractors in the US, client companies must collect and retain similar data such as a social security or tax identification number and their banking information. 

Without proper human resource management software, HR teams must collect data manually, which requires a significant time investment, and can result in potential errors and data security and compliance risks.

Contract creation 

Automating contract creation for employees and contractors accelerates the hiring process, ensures your startups comply with country-specific hiring laws, and can help avoid misclassification risk. 

Employment contracts and independent contractor agreements are a legal requirement in many countries. They help lay out the work arrangement’s terms and conditions and can be used as a guide to ensure that the company treats its workers correctly. 

Creating these contracts can be time-consuming, particularly when hiring workers from multiple countries since the terms, conditions, and clauses will differ depending on where you hire. 

Startups can do their own country-specific research to include all the necessary clauses or use a template. The disadvantage of templates is that you must ensure you’re using the latest versions and that they’re constantly updated and vetted by local legal experts. 

Templates can also be difficult to customize if you want to add non-standard features, and you’ll need to download, send, and store a new contract every time you want to make an update.

Background checks 

Automating background checks for eligible workers will ensure your candidates are screened in accordance with compliance standards, streamline the hiring process and provide you with a complete picture of your candidate. 

Running a manual background check on all employees, especially when you hire globally, is virtually impossible. Manual research would involve visiting courthouses or calling past employers, which would take too long, costing you precious time and potentially great candidates.

Compliance document collection

Using HR automation for collecting and retaining compliance documentation reduces the possibility of human error and protects your startup in case of government audits.

Three categories of compliance documentation should be maintained when hiring an employee, depending on their country of residency. These can include: 

• Pre-employment documents such as job descriptions, job applications, resumes, offer letters, medical records, immigration and work authorization forms, employment contracts, data protection, and non-disclosure agreements, tax withholding forms   
• Employment documentation such as job performance records and appraisals, compensation, attendance records, training completion, warnings, disciplinary notices, benefits claims forms
• Separation of employment documents such as exit interviews, resignation letters, unemployment documents, reference statements

When hiring a contractor, client companies may also need to collect and retain the following documents: 

• Independent contractor agreement 
• Non-disclosure/confidentiality agreement
• GDPR and data protection agreements
• Intellectual property agreements
• Tax forms and exemptions 
• Invoices 

Collecting, organizing, and storing compliance documentation without an automated HR system requires you to:

• Get familiar with employment laws everywhere your startup hires
• Use manual processes to track all paperwork through spreadsheets
• Manually send reminders to employees who haven’t submitted the required documents

Onboarding and offboarding

Compliance is crucial in every stage of the employee lifecycle, and onboarding and offboarding are two areas where it can be particularly challenging. During onboarding, companies must ensure that new hires complete mandatory paperwork, receive necessary training on workplace policies, and understand regulatory requirements related to their role. Failure to address these steps can lead to compliance gaps, such as incomplete employee records, missed tax documents, or a lack of acknowledgment of company policies. An HR software solution simplifies this process by automating workflows, ensuring that every new employee follows a standardized, compliant onboarding path.

Similarly, offboarding comes with its own set of compliance obligations. For example, when employees leave, it’s essential to revoke system access, recover company assets, and handle final paychecks according to labor laws.

HR software can automate offboarding checklists, ensuring that every step is completed to protect sensitive data, avoid legal risks, and maintain a positive relationship with departing workers.

Benefits enrollment

Automating benefits enrollment ensures employees are added to the correct benefit plans upon hiring to receive their entitlements in line with statutory requirements.  

In countries and jurisdictions worldwide, it is typical for governments to require employees to receive the following mandatory benefits as part of their employment:

•  Health insurance
• Retirement plans
• Paid time off (PTO), including vacation, sick leave, parental leave, and national holidays
• Disability insurance
• Life insurance

Manually enrolling employees in these plans require your startup to design benefits packages, build an enrollment process, meet eligibility periods, provide the correct forms, answer any questions, send out reminders, and provide educational resources so employees know how to process claims. For companies with globally dispersed teams, this task is even more complex since you'll need to develop a country-specific package wherever your employees reside.

Deel partners with top benefits providers worldwide to give your startup exclusive discounts, rewards, and perks to support your employees and contractors around the world.

Equipment supply and expenses 

Automating equipment supply and expenses ensures your workers have everything they need to complain and competently commence their role on their official start date.   

In many jurisdictions, employers have a duty to ensure staff have the appropriate equipment to perform their roles. For example, in the US state of California, Labor Code requires employers to reimburse their employees for the reasonable and “necessary” expenses they incur as a direct consequence of discharging their job duties.

Manually authorizing reimbursements requires a lot of back and forth over email or Slack, receipt filing, and expense tracking. With Deel, your employees and contractors can file expense requests through their Deel dashboard, attach receipts, and await your approval. Your team also gets a clear view and status of their expense requests and a record of paid items.

Manually sourcing equipment is a huge undertaking for many businesses, large and small. Sourcing equipment requires making equipment requests through project management platforms, searching local stores and websites to find the right equipment, and tracking down orders with different suppliers. For a distributed team, this task is even harder since availability varies from country to country, and equipment must pass through customs.

Time tracking and attendance, and time off management  

Automating time-tracking, attendance, and time-off is not only important for saving time, reducing payroll errors, and gauging the efficiency of your team, it’s actually a legal requirement in many jurisdictions to ensure workers and governments have a record to check that workers are paid accurately and receive the appropriate time off allowance.

Manually tracking time and attendance or asking team members to log time entries in spreadsheets is inefficient and can result in inaccurate reflections. While time-tracking software can be useful, it may not be practical for dispersed and international teams and can be difficult to integrate with your existing payroll software.

Payroll, compensation, and tax reporting 

Automating payments and tax reporting lowers payroll processing costs, ensures accurate calculations, and, most importantly, ensures your startup remains compliant with local payroll compliance and tax filing requirements. 

Local payroll laws govern your payroll obligations to ensure you pay your employees in line with local currencies, payment schedules, and payday requirements. Local tax authorities also impose strict deadlines for filing payroll taxes that cover social security and income taxes. 

Manually fulfilling these payroll obligations requires hours of repetitive HR admin and leaves your business vulnerable to errors and penalties. 
Alternatively, startups can outsource payroll management to a local payroll provider or utilize payroll software. Using local payroll providers can result in relinquished control, long delays, and inconsistent experiences for workers. HR software, on the other hand, doesn’t integrate well with other HR systems, is often designed for single geographies, and doesn’t allow employees and contractors to get paid in the same system.

Immigration support 

Automating immigration support ensures your employees and contractors obtain the necessary visas and permits to work legally in a particular country. 

When a startup wishes to hire or relocate an employee, they must consider whether they have the right work authorization documentation, and if they don’t, whether they’re prepared to facilitate sponsorship and visa procurement. Very often, top talent is denied a work opportunity because the company does not have the knowledge, time, or resources to support the visa and immigration process.

Automate HR compliance with Deel

Entrepreneurs have enough on their plates without worrying about local and international hiring compliance. With Deel’s intuitive HR platform, you can eliminate repetitive compliance admin and HR tasks. Deel even goes a step further with a custom Compliance Hub, which automatically keeps you informed about the latest and upcoming regulatory changes in over 150 countries.

Automate core HR functions from contract generation to document collection, background checks, immigration support, payroll, offboarding, and everything in between.

Learn more about Deel for Startups, or book 30 minutes with a product expert to get your questions answered.