All businesses must follow certain government-set corporate compliance requirements to do business legally. There are additional regulations companies often set internally to ensure they’re creating a safe, positive, and ethical work environment too. Below, we’ll explore some basic corporate compliance guidelines, how internal and external requirements vary, and what to consider as you create your own.
What is Compliance in Business?
Corporate compliance refers to having standards, processes, and procedures in place to ensure a business behaves ethically and responsibly.
- External/ Regulatory Compliance: External compliance references meeting the expectations of your industry as well as following all local, state, and federal laws.
- Internal Compliance: Internal compliance references policies and procedures set by your company.
Why is Corporate Compliance Important?
Both external and internal compliance are essential to doing business today.
- Ability to Operate: Complying with certain laws is a requirement of doing business. If your company misses the mark, the government may force your business to dissolve.
- Money Savings: Businesses that don’t address certain requirements can get hit with fees and tax penalties.
- Fewer Legal Issues: Following laws naturally protects your company from trouble with governing bodies. Many internal policies you might set make legal compliance easier too.
- Greater Ability to Work: Companies that accept government contracts or work with many large companies are expected to have and follow corporate compliance policies. They won’t work with any entity that doesn’t have them.
- Improved Safety: The Occupational Safety and Health Act (OSHA) provides specific requirements businesses must follow to create a safe work environment.
- Ethical Operations: One aspect of corporate compliance is equality and ethical treatment of employees. While this is a legal concern, the policies you set internally will help you meet requirements and create a culture of diversity.
- Increased Employee Happiness: Employees are happier when they feel safe and included at work. Retention gets a boost too.
- Better PR/ Reputation: When your business nails corporate compliance, there’s less room for public relations disasters and more opportunities for your organization to shine as an ethical, conscientious entity that other businesses want to partner with and people want to work for.
4 Examples of External Government Requirements (Regulatory Compliance)
You’re required to comply with a number of external corporate compliance requirements set by the government. A few common examples are highlighted below.
1. Annual Statement or Report
Depending on your business structure and state, you may be required to file an annual report or biennial statement. The document is generally sent to the body that approved your business, typically the Secretary of State. It includes important details like the structure of your business and information on the people involved.
2. Franchise Tax
Corporations, partnerships, LLCs, and other business types in some states are required to pay a “franchise tax” or levy based on the net worth of capital held by the business.
3. The Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) sets requirements related to minimum wage, overtime pay, recordkeeping, and more.
4. Business Licenses/Permits
License and permit requirements impact a variety of industries and professionals. For example, teachers, lawyers, doctors, and financial professionals are required to be licensed, while restaurant workers may need food handler’s cards, and many businesses may need permits or licenses to operate.
10 Internal Corporate Compliance Areas Every Business Should Address
Most business owners are familiar with the laws and regulations governing their industry and local requirements, but identifying which internal policies should be implemented to aid in corporate compliance is a bit more challenging. The ten areas covered below can serve as a guide whether you’re starting from scratch or want to shore up your corporate compliance.
1. Clearly Defined Job Descriptions and Designations for All Employees
It can be difficult to nail down a job description when you’re hiring for a new role, or your company is in the startup phase, and employees may be responsible for areas outside the norm. However, it’s impossible to meet expectations if none are given. Employees may start to flounder between burnout and silent resignation when they’re not really sure what to do or where their efforts belong. The same is true of titles and pay scales. Even your most motivated employee will begin to lose heart when they don’t know what their efforts will bring.
2. A Code of Conduct
Some companies create a code of conduct to provide a route to termination for problematic employees or for unprofessional behavior. While this is certainly one way they can be used, a code of conduct will serve your organization better if it encompasses your ethos and makes your team feel like a part of something great. Consider creating a code of conduct that gets people excited and introduces them to your company culture.
3. Working Hours, Leave Time, and Absences
One of the biggest movements being seen today is flexible work arrangements and even unlimited paid time off. Even if your organization offers these benefits, employees should understand what constitutes as abuse of the policies and what’s expected.
If you do have hard limits, these should be outlined as well. Not only should employees know when they’re expected at work and how time away is handled, but they should be aware of how requests are handled, how conflicts are addressed, and what happens when policies are violated.
4. Remote Work Policies
Every organization handles remote work differently. Ensure the team knows when remote work is acceptable and any special rules that apply to remote workers. Think beyond the time at the keyboard and include details like purchasing equipment, monitoring policies if applicable, and how the company plans to bring people back on-site.
5. Policy on Equality
Your company has a legal obligation not to discriminate against protected classes, but the guidelines you set that lead to this goal are largely up to you. Similar to how a code of conduct can introduce people to your company culture, your policy on equality can too. You can also include verbiage for internal use that highlights how you ensure equality through mentorship, employee resource groups (ERGs), internal surveys, or other means.
6. Workplace Discipline
We often think of “discipline” in terms of how breaking a company policy is handled, and your policies should certainly address that. It goes a bit deeper than this, though. For example, consider how it should be handled when employees simply don’t follow the established code of conduct by missing meetings or turning in assignments late.
7. Policies Regarding Employee Training and Appraisals
Just as employees should fully understand their job responsibilities, they should know what training will be coming their way and when to expect it. This not only helps them feel like valued members of the team worthy of training investments but helps keep them in a growth mindset that benefits your business.
8. Privacy Policies
Just about every business today relies on technology and credit cards. Both these areas have corporate governance rules that must be followed regarding privacy. Additional privacy safeguards will apply if you’re in the medical industry too.
However, privacy policies should extend beyond these areas. It’s also good practice to cover what types of data you collect from your employees. For example, if you’re using monitoring software, let employees know what you look for and why you look for it. If you have a policy against using social media on company time, simply letting your employees know there’s a system looking for this will encourage positive behaviors from them. It goes a long way toward building trusting relationships with them too.
9. Workplace Health and Safety
All organizations are subject to OSHA guidelines, though many businesses go beyond the minimum requirements. It’s helpful to explain how certain OSHA guidelines apply within the business too.
10. The Protection of Intellectual Properties, Data, and Company Information
Most employees will get insider information at some point in time. An elite few will learn additional details, such as information about products that have not yet been released, upcoming shifts in leadership, and other proprietary knowledge. There should be policies discussing this to protect your business.
Get the Cash You Need to Improve Your Corporate Compliance
It doesn’t necessarily take a lot of cash to create and follow policies, but if your organization is deficient in more than one area or is lacking in an area that can have legal penalties, it’s important to make adjustments quickly. Invoice factoring can provide you with immediate payment on your B2B invoices, so you can put the cash toward what matters most. Unlike loans that create debt your business must pay off, your factoring balance is cleared when the client pays their invoice, so there’s nothing to pay back. If it sounds like invoice factoring can help you meet your corporate compliance needs, request a complimentary quote from Viva.
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