Maintaining compliance on every facet of your organization isn't easy. It's especially hard for smaller organizations and start-ups who simply don't have enough revenue to be able to afford a compliance officer. However, the costs of being out of compliance can be far greater and bring more lasting consequences for companies. Below we've outlined some of the biggest costs associated with non-compliance.
1. GOVERNMENT PENALTIES
Government regulations seem to be changing on a daily basis, making it hard to keep up-to-date on both federal and state legislation. This can cause significant gaps in an organization's compliance policy which could lead to significant penalties.
Washington has started to increase its attention on immigration laws which has lead to more scrutiny on I-9 practices. Since 2016, fines for I-9 violations have doubled and audits are on the rise. For example, Hartmann Studios was hit with a $605,250 fine for failing to complete the paperwork for more than 800 employees. That fine alone is a larger amount than most small organization's yearly revenue.
Another regulation that has proven to be difficult to navigate through is the Affordable Care Act. The reporting requirements required to the IRS and employees can lead to up to $500 in fines per employee with a maximum of $3 million per company.
Fines dished out by the government can be detrimental to an organization, that's why it's so important to stay on top of all of the regulations that your organization deals with on a daily basis.
2. AUDIT COSTS
It's no secret, if your organization falls under noncompliance, you'll likely be subjected to an audit. Audits are a lengthy process that requires valuable time and employee resources in preparation and management. In the case of an audit, all three classifications of costs will be affected; direct, indirect, and opportunity.
3. COMPANY REPUTATION
Now that we've mentioned opportunity costs, if your company was found to be noncompliant or faced with an employee lawsuit, it will likely be picked up by some form of publication and announced publically. This exposure could damage your company's reputation, especially once it has been pushed to the internet. Bad PR hurts your recruitment capabilities by making it harder to attract new employees.
The impact from an employee or an employer's files usually won't surface until tax season. However, these consequences could potentially lead to conflicts with your employees or even lead to lawsuits.
After all of this, ask yourself this question, "can I afford noncompliance?" Odds are, your organization simply cannot afford the hefty fines associated with government regulations and audits. But don't worry too much because the cost associated with properly managing your compliance practices is affordable. Many cloud-based compliance solutions have been created to help your organization manage the intricacies surrounding compliance.