Operations Insights
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February 22, 2018

The compliance factor: How small businesses address compliance challenges today

Findings from a new report reveal that when it comes to compliance, small- and medium-sized businesses (SMBs) want to reduce complexity, but rely on inefficient methods. Here, key takeaways from the report, including how SMBs can leverage technology to solve their compliance challenges.


In today’s ever-changing regulatory landscape, businesses of all sizes face a wide range of compliance challenges. The resulting rules, regulations and laws designed to address certain problems often add additional layers of complexity to small businesses.

A new report, The Compliance Factor, reveals how small- and medium-sized organizations (SMBs) address issues related to employment and labor laws, and payroll compliance. The report, sponsored by Ceridian and conducted by HR.com, surveyed HR professionals from SMBs in Canada and the U.S.

Key takeaways? The survey reveals that North American SMBs struggle to stay on top of changing compliance information, and HR leaders want to reduce complexity, and make the process less time-consuming and confusing. The research points to untapped opportunities for SMB leaders to both invest in HR tech solutions to deal with their pain points, and make use of payroll and HR compliance experts.

Complexity is a major compliance obstacle

According to the survey, complexity – noted by more than half of respondents – is the biggest obstacle to compliance for SMBs. Lack of time and pace of change were also noted as key barriers. Only one-fifth of respondents strongly agreed that their organization does a good job of keeping up to date with compliance information.

Further, many rely on inefficient methods of staying current with employment-related laws and regulations, which we explore further below. Respondents said their go-to sources of information are industry websites and relevant magazines, highlighting an opportunity for SMBs to work more closely with compliance experts, or leverage HR technology to do the work for them.

What factors make it most difficult to stay in compliance? Download the guide

SMBs are concerned about fines and audit preparedness

When it comes to failure to comply with laws and regulations, SMBs are more concerned with associated fines, while larger organizations are more concerned with reputational damage and impact on the organization’s future.

Why the difference? Because smaller firms may have more to lose from large fines. A severe fine could literally put a smaller company out of business, whereas a larger organization is generally more capable of absorbing even a heavy fine. Among the organizations responding to our survey that had suffered tax-law related penalties, 55% identified the impact as costly or very costly.

One quarter of respondents said they do not feel prepared for a government audit, and fewer than half of smaller organizations conduct payroll audits at least once a year. However, the report suggests that more frequent payroll audits are linked to greater preparedness for government audits. Notably, firms using an HR technology solution are somewhat more likely to feel prepared for an audit.

Related: How to survive your small business payroll audit

Current methods of keeping up aren’t working

The survey also revealed that although participants stay up-to-date enough to continue doing business, few organizations are highly confident that they’re staying current. This probably explains why over a quarter cite compliance as a major challenge.

Why do so few organizations strongly agree that they are staying abreast of employment laws and regulations? One possible answer is that they are choosing inefficient, hit-or-miss sources of information. Nearly two-thirds of the survey participants cited websites and relevant magazines or written materials as two of their “go-to” sources of information.

SMB employers need to leverage technology for compliance

Compliance is complex and requires a sustained effort, and the effort is frequently beyond the capacity of HR teams and practitioners in smaller organizations. For SMBs to achieve greater compliance preparedness and success, it’s critical that they approach it strategically, versus in an ad hoc manner.

This means there is an opportunity for SMBs to increasingly leverage HR technology solutions to get guidance and advice about changing laws and regulations. According to the report, less than a quarter of participants use these solutions to stay up-to-date, indicating that they are under-using a valuable resource.

High-quality HR solution providers must stay up-to-date to deliver effective services. Since these partnerships are already in place in many firms, it makes sense to turn to and/or rely on a trusted partner for information, advice and help.

Where do SMBs access compliance expertise? Download the guide

Learn how HR and payroll cloud technology helps Canadian and U.S. SMBs stay in compliance.


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