HRIS & Payroll Excellence presented by HR.com July 2023 1 Submit Your Articles 18 13 23 28 How To Deal With Payroll Fraud And Security - Pavel Shynkarenko, Solar Staff How HR Professionals Should Be Thinking About Their Tech Stack - Saad Siddiqui, Telstra Ventures Minnesota Employment Law: Legislative Reforms And Their Implications - Daniel G. Prokott, Charles F. Knapp, Nicole A. Truso, Rhiannon C. Beckendorf and Zoey A.Y. Twyford, Faegre Drinker 3 Tips For Managing Complex Tax And Compliance Issues For A Global Workforce - Katherine Loranger, Safeguard Global HOW HR CAN DODGE PAYROLL FRAUD - Tamas Kadar, Co-Founder, SEON Fraud Fighters JULY 2023 • Vol.10 • No.07 (ISSN 2564-2030)
How HR Can Dodge Payroll Fraud Minimize payroll fraud with strong HR security - Tamas Kadar, Co-Founder, SEON Fraud Fighters 07 On the Cover INDEX HRIS & Payroll Excellence JULY 2023 Vol.10 No.07 (ISSN 2564-2030) Articles 09 The Tech Hyping Up Hybrid Teams Emerging tools and platforms HR professionals can utilize to optimize their workplace - Lexi Jones, Chief People Officer, OfficeSpace 16 Life-Planning Accounts Help HR Meet Diverse Workforce Needs LPAs allow HR teams to personalize and expand benefits - Rob Whalen, Co-Founder and CEO, PTO Exchange 21 The Impact Of AI On HR: Opportunities, Risks, And Best Practices Balancing human-AI collaboration for productivity and innovation - Chandler Aragona, Associate and Emily Mack, Partner, Burr & Forman
How To Deal With Payroll Fraud And Security
How to promptly detect payroll fraud and protect your business
- Pavel Shynkarenko, Founder, Solar Staff
3 Tips For Managing Complex Tax And Compliance Issues For A Global
Workforce
Balancing global standards with local regulations
- Katherine Loranger, Chief People Officer, Safeguard Global
How HR Professionals Should Be Thinking About Their Tech Stack
The top strategies for building a successful HR tech stack
- Saad Siddiqui, General Partner, Telstra Ventures
Top Picks 13 18 23 28
Minnesota Employment Law: Legislative Reforms And Their
Implications
Check out the transformative impact of Minnesota's 2023 legislative session on employment law
- Daniel G. Prokott, Charles F. Knapp, Nicole A. Truso, Rhiannon C. Beckendorf, and Zoey A.Y. Twyford, Faegre Drinker
INDEX
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Safeguarding Businesses: Combating Payroll Fraud and Enhancing HR Security in 2023
Inthe fast-evolving world of business, where digital technology rules and automation is becoming the norm, payroll fraud has emerged as an increasingly prevalent and insidious threat. Unscrupulous individuals exploit vulnerabilities in HR systems to commit payroll fraud, causing substantial financial losses for organizations and damaging their reputations.
Payroll fraud encompasses a wide range of fraudulent activities, including ghost employees, unauthorized changes to employee records, falsification of hours worked, and manipulation of direct deposits. With sophisticated methods and tools readily available on the dark web, fraudsters can exploit even the slightest loopholes in HR systems. Therefore, businesses must act proactively to safeguard their payroll processes and instill confidence in their employees.
In this edition, we will be discussing various topics, ranging from how human resources (HR) departments relate to payroll fraud and what
measures your company can take to protect employees from fraudsters’ schemes, the most common types of payroll fraud, as well as ways to identify them so that HR can safeguard the integrity of an organization and its finances, how technology is fundamentally changing the role of HR professionals, and tips for managing complex tax and compliance issues for a global workforce, among others.
As payroll fraud continues to evolve, so must our approach to combat it. The HR landscape is not immune to the advancements in technology that fraudsters exploit. By staying proactive, vigilant, and adapting to the latest security practices, businesses can effectively mitigate the risks associated with payroll fraud in 2023 and beyond.
We hope this edition of HRIS & Payroll Excellence will help you achieve excellence in your core HR and payroll processes.
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How HR Can Dodge Payroll Fraud
Minimize payroll fraud with strong HR security
By Tamas Kadar, SEON Fraud Fighters
Payroll fraud is a common problem that HR professionals can counter with risk-based management of employee data and processes. A sophisticated security system is also vital, as it makes it easier to safeguard data and tackle fraud. Here’s everything you need to know about how human resources departments relate to payroll fraud and what measures your company can take to protect employees from fraudsters’ schemes.
Understand Payroll Fraud and its Impact on HR
When an employer or employee exploits their company’s payroll system for their own gain, they commit fraud. Some HR staff members themselves often commit such crimes.
There are six types of payroll schemes to be aware of:
● Ghost payroll — Someone creates fake staff or doesn’t remove members who have left the organization. The fraudster then cashes in their paychecks.
● Misclassification — A worker classifies their job role and other details wrong in order to earn the perks of a better position. Companies also do this to reduce their expenses on things like staff benefits and taxes.
● Timesheet fraud — An employee logs and get paid for more hours that they’ve worked. Someone might also change their pay rate in the system to illicitly boost their income.
● Compensation fraud — A worker tries to claim compensation by faking an injury or lying about it happening at the workplace.
● Commission fraud — When someone profits from loopholes in commission schemes.
● Third-party scams — External bad actors manipulate a company’s workers to steal their paychecks or file false tax returns.
With a sound strategy and the help of digital tools, HR can make sure nobody can take advantage of any payroll system or individual. As demanding as it seems, neglecting fraud detection is far more dangerous.
Take a 2021 payroll-related criminal case in Texas, for example. Two transportation companies lost over $1.4 million to six fraudsters, one of them an existing employee in charge of payroll processing. The scheme involved overpaying other workers and adding ghost employees for a share of their extra income.
The criminals were caught, but the affected businesses suffered massive losses. The stolen money was one thing, but their trust both in and from their employees was damaged, too. If that’s not enough, their HR systems came into serious question.
To dodge such disasters, take care of your company’s HR department and provide the best possible resources to protect it and, consequently, your whole organization.
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COVER ARTICLE
Fraud Monitoring in HR Needs a Proactive Approach
The key to combating fraud in business is tactical preparation. You need to be in control of the situation before a bad actor can even try anything.
This doesn’t mean, however, that HR is responsible for everything security-related. Robust monitoring systems are a plus, but smooth collaboration between departments, especially HR, Finance, and IT, is vital to your company’s defenses.
With a comprehensive and proactive approach such as this, you can ensure the integrity of your data, finances, employees, and reputation in the corporate landscape, defined more than ever by smart threats and countermeasures.
Key Factors in HR’s Payroll Data Protection
Accurate worker classification is a good first step to creating an efficient security system: one that allows real-time fraud monitoring, behavior tracking, risk-based authentication, fraud scoring, and other functions that don’t work very well with incorrect employee details.
So, follow the example of companies that generated a 5-times boost in fraud management investment by 2022. Besides improving your recordkeeping, apply the measures below, if only to avoid adding to the
$5.1 trillion that the global economy loses to fraud each year.
Role-based Access Controls
Once you know who is classed as what, you can better control what information each staff member is allowed to access. Then, when you see an unauthorized login, you can immediately investigate it under the suspicion that it’s dubious behavior.
It could be a clerical error or a bug, but the likelihood of internal fraud or identity left is high enough that thorough checks are warranted.
According to identity and access security studies, 79% of businesses had their data breached in 2022 and 2023, while 61% of all breaches were committed with credentials stolen through social engineering and brute force.
You can’t be too careful, especially when protecting sensitive payroll information. Make sure your access protocols are strict and based on risk analysis and clear-cut roles.
Secure Authentication Methods
Your HR department’s fraud monitoring should also use sophisticated authentication methods. When it comes to setting up your system, start with strong passwords and ID checks.
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Next, incorporate processes like data enrichment for more detailed user profiles, custom rules to tailor algorithms to your needs, and alerts that instantly spot and report noteworthy activity.
For even better results, make the most of machine learning, too. Automated tools can streamline data, behavior, and risk analysis, while completing tasks and making suggestions for greater efficiency.
Encryption and Data Protection
There must be end-to-end encryption when transmitting and storing employee payroll data. Any information that internal or external bad actors might want to target should have robust data protection backing it.
At the very least, this means keeping sensitive details under lock and key, implementing cybersecurity software and policies that can handle any fraud and hacking attempts, and ensuring your identity and access management (IAM) is up to scratch.
Regular Software Updates and Patches
One of the most common methods criminals use to access resources is by exploiting vulnerabilities in companies’ programs.
If your HR is to stave off payroll fraud or any other threat, their systems’ software must be updated and patched up on a regular basis.
Whether you noticed a flaw in your anti-malware’s performance, or you just installed a new program that might affect others, take the time to update your system’s components – even those that seem insignificant. The slightest crack in your defenses is an asset to hackers.
Embrace Fraud Monitoring Solutions in HR
Don’t underestimate the positive impact that technology can have on your workflow and security. HR already benefits from it in several ways.
60% of companies surveyed about AI in HR claim to personalize their recruitment procedures and employee experiences with the help of artificial
intelligence. Other popular uses include matching candidates to roles, answering questions via chatbots, mapping out career paths, and training.
When it comes to data protection, you can leverage advanced analytics and AI tools to monitor activity in real time, detect anomalies in payroll data, flag up and report fraudsters, and more.
But there’s a final and essential step to successfully integrating fraud monitoring software with your payroll management system: Supply your staff with adequate training.
To do their part in detecting fraud and responding in accordance with protocols, your HR personnel must be able to work well with their digital system as much as other departments.
Minimize Payroll Fraud with Strong HR Security
Managing and securing employee data and processes are part of HR departments’ responsibilities. It’s just as important to apply the best possible methods to combat threats like payroll fraud and data breaches.
Keep sensitive information safe by understanding the risks attached to payroll data and maintaining a security system with advanced fraud monitoring solutions. Above all, build your worker’s skills and trust.
Once again, try to look past the complexity of all these steps. Their outcome is bound to be worthwhile: You’ll see a stable and financially secure organization.
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Tamas Kadar is Co-Founder of SEON Fraud Fighters Would you like to comment?
How HR Can Dodge Payroll Fraud
The Tech Hyping Up Hybrid Teams
Emerging tools and platforms HR professionals can utilize to optimize their workplace
By Lexi Jones, OfficeSpace
Strategic human resources (HR) tech investments are skyrocketing and with good reason: it makes good business sense.
A smart selection of HR technology can make businesses more efficient and profitable. Whether your goals are to improve talent acquisition and retention, build culture, facilitate
learning and development, or increase transparency in the hybrid workplace, deploying great technology is a powerful way people operations teams can unlock potential in the business.
To help leaders make cost-effective decisions that move the needle, here are some HR solutions that can drive results with your team.
Attracting and Retaining Top Talent: Simplify the Hiring Process
The cost of attracting, training, and retaining top talent is significant, and the cost of losing those people is staggering. Turnover costs U.S. businesses over $1 trillion annually, and employers need to spend several months of salary to find and train their replacements. Fortunately,
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HR tech has introduced powerful tools that streamline recruiting, provide a good candidate and hiring manager experience, and get teams staffed out with the resources they need faster.
Having a solid applicant tracking system (ATS) is key to effective recruiting. When determining the right service, it is important that the technology is intuitive, integrates easily with other systems, and has culture-building features that support critical diversity, equity, and inclusion (DEI) initiatives and remove bias from the hiring process. Your ATS also needs to be easy for hiring managers and finance teams to operate as they review candidates, leave feedback, and facilitate the offer and approval process.
Collaboration Technology & Culture: Create a Workplace with a Purpose
In the hybrid workplace era, we need to “earn the commute.”
Post pandemic, “offices will be necessary for three functions: to be social, to learn and to learn intergenerationally, and to disagree, argue, and work out tough stuff,” according to Julia Hobsbawm, Founder of the Nowhere Office Project, who presented her research at the 2023 World Economic Forum in Davos.
Creating connected and collaborative cultures will be key to drawing employees into offices in the future.
Here are 3 kinds of tools that can revolutionize the way your teams work together:
1. Collaboration Apps
When looking into collaboration apps, it is essential you look for a platform that integrates seamlessly with other work tools. This combined with key features like projection coordination, task assignment, etc., can allow your team to optimize its performance and project management.
2. Instant Messaging Platforms
While there are many messaging apps and platforms to choose from, companies need to find one that fits their needs. From the ease of use to allowing for secure
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The Tech Hyping Up Hybrid Teams
The Tech Hyping Up Hybrid Teams
external communications, the list of features across vendors is endless. Some companies are also using instant messaging platforms as an innovative, cost-effective solution to facilitate communities like the CMO Coffee Talk community bringing together B2B marketing leaders.
3. Workplace Management Software
Trying to get the most out of your office and connecting the people in it can be a tricky task in a hybrid workplace. One solution that can assist companies is workplace management software. With this software in place, companies can properly plan their space, allow employees to reserve rooms and desks, manage visitors, and more. Some platforms also give employees access to see which one of their colleagues is coming to the office, offering more visibility and chances to collaborate.
Learning and Development Technology: Empower Employees for Success
Learning and development technology is vital to retaining top talent and can pay dividends toward retention targets, especially for Gen Y and Z workforces who want employers to invest in their development. With these investments, organizations can bridge skill gaps, improve workplace performance, and increase employee loyalty for long-term return on investment.
When shaping your company’s skill-building landscape, look for programs with personalized learning paths. All employees’ strengths are different, and a successful program should adjust to this. Another component to consider is how the skill-building tools are furthering your company’s purpose. Look for platforms that go beyond the minimum requirements and instead create a culture of learning in your space.
Create Transparency in the Workplace: Trust and Openness
Transparency is a cornerstone of a healthy work culture and one of the best ways to empower employees. One of the most vital areas where team members appreciate transparency is in their payroll, benefits, and performance management system.
Look for an HR and payroll solution that makes it easier for employees to access information about their pay, benefits, time off, and other HR-related data. Some tools to seek out includes those with features for managers, such as employee scheduling and time tracking. This increased transparency can help employees feel more valued and engaged, leading to greater job satisfaction, productivity, and retention.
The Future of Work: Embrace Technology’s Potential
As someone who has built my career on challenging the status quo in the name of progress, I am
excited that the future of work is being shaped by HR technology. Embracing cost-effective HR tech tools is helping businesses not only address but also solve our biggest workplace challenges.
With the global human resource management market size expected to reach 56.15 billion USD by 2030, the right question to ask is not, “Can you afford to invest in this tech, but how can you not?”
Lexi Jones, SPHR, serves as Chief People Officer at OfficeSpace, where she leads the people operations team and is responsible for advancing the company’s talent lifecycle, driving company culture, and enhancing employee experience. With over two decades of experience in building global teams, Lexi has worked with SecureLink, Campus Advantage, WellAware.us, and HTC. Lexi holds a Bachelor of Science from the University of Texas at Austin, in addition to a variety of professional certifications.
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How To Deal With Payroll Fraud And Security
How to promptly detect payroll fraud and protect your business
By Pavel Shynkarenko, Solar Staff
Defined by the Association of Certified Fraud Examiners as “any scheme in which an employee causes his or her employer to issue a payment by making false compensation claims,” payroll fraud is challenging for all businesses. When left unattended, it can bring an entire organization down.
In some recent notorious cases, the former payroll director of a hospital in Atlanta, Georgia, altered information regarding vacation pay and severance pay to pocket more than $500,000. In a different case, a former company owner in New York City used over $1.7 million due in payroll taxes to fund his lifestyle.
This shows that payroll fraud comes in different shapes and forms and is also perpetrated at various levels within the organization. A report by the ACFE showed that over half of all occupational frauds happened in these four departments: operations (15%), accounting (14%), executive/upper management (12%), and sales, 11%. The same report also disclosed that, while owners and executives were only responsible for 20% of the frauds committed, they were guilty, by far, of the largest financial losses.
If controlling payroll fraud in businesses that conduct their operations in person is difficult, the complexity increases when dealing with international workers who render their services online and even more when these cross-border hires are contractors. Furthermore, this fraud can happen in both directions, and
it has caused substantial losses for companies and freelancers alike
Here are some of the most common types of payroll fraud, as well as ways to identify them so that you can safeguard the integrity of your organization and its finances.
Fake Workers and Contractors
There are many cases where managers will create “ghost employees or ghost contractors”. According to the ACFE, “a ghost employee is someone recorded on the payroll system, but who does not work for the business.” In Florida, a ghost worker scheme defrauded an airport operator for over $900,000.
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TOP PICK
This can happen with contractors, too. For example, we have seen cases where managers who are assigned a budget to work with freelancers created a separate profile as a contractor, and they assigned the task to themselves, pretending that they were hiring a freelancer.
While some people took the fraud committed very seriously, going as far as creating detailed contractor accounts with descriptions, emails, and reference files, there are ways to mitigate this risk. One of them–and perhaps the most important–is to conduct peer-to-peer audits every reporting period. This needs to be done at least quarterly. Also, when working with contractors, it is recommended to only work with those service providers that can give an itemized report, which must include: the services rendered, the dates in which the service was performed, and how much each service was.
Poor Compliance: Circumventing Rules and Regulations
Companies that hire cross-border freelancers often can unknowingly violate local rules and regulations, which can be considered fraud by some countries’ authorities.
An example of this is India, where the freelancing boom has attracted teenagers, who, eager to make money, have learned skills such as website design, graphic design, and SEO writing–all talents in high demand in the freelancing marketplace. However, if a company hires a freelancer that is, let’s say, 14 years old, the contract would not be legally binding. Even if it is an e-contract, an agreement would lose validity if it was signed by someone under 18 without explicit consent from a parent or guardian. If, despite the illegality of the agreement, you decide to proceed and hire a freelancer, you will likely face problems when paying them. This will also generate banking issues for the contractor in the region, and could land the local team and the country’s company office in trouble.
Prepayment and Ghosting
Especially in sectors such as content creation, social media management, and others–where freelancing has boomed in recent years–there can be the problem of prepayment and ghosting. This can affect both, contractors who prepay a freelancer for their services and then get ghosted, or freelancers who, over-trusting their client, choose to work for them even if they haven’t been paid yet. Then, the service provider gets ghosted, and does not receive payment in return. In worse cases, freelancers have also been the victim of fake offers and payments
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Here, the solution is to work with platforms that offer the escrow mechanics service. Essentially, escrow provides the role of a neutral place for funds to be held, and the funds get released once a milestone is reached or the project is completed. Relevant milestones and the payment structure are agreed upon between freelancer and contractor prior to commencing work. This way, the risk for both parties is eliminated. The hiring company knows that its money is safe, and the freelancer knows that they will get paid as agreed.
Worker Misclassification
Worker misclassification is one of the most common ways in which payroll fraud is committed, and employers often commit it.
For example, in what is called “fake freelancing,” companies enter into an employment contract with an employee directly–a full-time employment agreement–but use a freelancing platform to pay them out and classify the worker as an independent contractor, even though the contractor has no other clients and commits all of their working hours to the hiring company. This is fraud. Worker misclassification is very harmful because by treating workers as contractors, employees avoid certain legal obligations and financial responsibilities, such as payroll taxes, minimum wage laws, overtime pay, and other benefits. This leaves employees unprotected.
How to Deal with Payroll Fraud?
There are many things a company can do to prevent payroll fraud. One of them is establishing internal controls. There are many ways in which this can happen. For example, an ACFE study mentioned that having a code of conduct reduced losses by 51%. Other factors that contributed to reducing losses are having an internal audit department (50%), management certification of financial statements (50%), having a hotline (49%), fraud training for employees (38%), and having employee support programs, with 33 percent.
And while all of these internal initiatives are of great help, working with a trusted payroll and compliance services partner can reduce losses even further and even mitigate the risk of fraud entirely. This is particularly important when hiring international contractors and benefits freelancers and hiring companies. These partners eliminate the risk of unknowingly being involved with fraud because they understand all the relevant rules and regulations in the country where you plan on doing business. At the same time, strategic partners provide all the technological infrastructure in place so that payments, receipts, contracts, and assignments are managed through the same platform, ensuring the legal validity of the agreements in place and eliminating the risk that one of the parties will breach the contract or commit any type of payroll fraud.
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Pavel Shynkarenko is Founder of Solar Staff. Pavel is an entrepreneur with over 20 years of experience in financial, HR and legal technologies.
How To Deal With Payroll Fraud And Security
Life-Planning Accounts Help HR Meet Diverse Workforce Needs
LPAs allow HR teams to personalize and expand benefits
By Rob Whalen, PTO Exchange
The past several years have prompted HR teams to fundamentally reconsider their approach to employee benefits. A stubbornly tight labor market, a greater emphasis on diversity, and the rising demand for flexibility among employees have all made traditional benefits less desirable. Companies are moving beyond one-size-fits-all benefits packages to give employees the individualized financial and wellness support they need.
As HR teams explore ways to expand and personalize their benefits packages, life-planning accounts (LPAs) have emerged as a useful tool for addressing employees’ individual concerns and demands without additional spending. LPAs allow companies to reimburse employees for a range of covered expenses – from emergency savings to personal wellness benefits – and they don’t require upfront funding or compliance documentation. This makes LPAs simple and effective resources for employers to serve diverse workforces with their existing budgets.
LPAs are all about customization; they allow companies to reallocate spending toward benefits that meet the evolving needs of their workforce while giving employees greater control over the benefits they receive. This makes LPAs a cost-effective solution for companies that want to provide greater flexibility,
improve engagement, and increase employee retention. Additionally, companies can customize how the LPA is set up, from the mode of disbursement to how employees qualify and which benefits to offer.
How LPAs Meet Employees’ Unique Needs
Employees should always be treated as individuals with their own financial constraints, professional aspirations, and personal circumstances. While employees have long accepted static (and widely underused) benefits like traditional PTO, the status quo is changing;they now expect companies to offer flexible options that align with their specific concerns and priorities. Companies can use LPAs to meet employees’ diverse needs.
LPAs can be deployed in many ways, from addressing an HR issue that affects just one segment of the workforce (remote employees who aren’t receiving in-person wellness benefits such as gym access, for instance) to company-wide initiatives such as courses on financial management. The versatility of LPAs allows HR teams to engage directly with employees about their priorities and pain points, which will help them craft more targeted benefits packages. For example, three-quarters of employees say they want financial wellness education, a benefit HR teams may not be aware there is demand for.
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Payroll
Over the past few years, employee demands and expectations have undergone a radical and permanent shift toward flexibility, personalization, and engagement. This means HR teams need to think more creatively about the benefits they offer, and LPAs give them ample opportunities to do so.
Traditional Benefits Aren’t Getting the Job Done
PTO is among the most ubiquitous benefit, but it’s also one of the most under-utilized (and in many cases, wasted) benefits by employees. At the end of 2021, just 27 percent of U.S. workers said they had used all their PTO, and the average employee had 9.5 unused vacation days. Almost a third of employees say these unused days didn’t roll over into the next year, which means their hard-earned time off went to waste. Even when employees did take advantage of their PTO, almost half said they worked at least an hour per day while on vacation.
When HR teams see that employees aren’t taking full advantage of their PTO, it’s important to figure out why. One of the main reasons is the lack of flexibility offered by many PTO policies. Employees are often given a predetermined allotment of time off, which is used unevenly by different groups of people. For example, our research found that there are significant racial, gender, and socioeconomic gaps between employees in how much PTO they use. “Unlimited” PTO doesn’t solve this problem, because it tends to exacerbate the cultural and economic factors that already lead to these discrepancies.
It’s no surprise that 63 percent of employees say flexibility would make them feel empowered in the workplace. LPAs allow HR teams to immediately offer a wide array of flexible benefits without wading through a morass of compliance requirements, tax
documents, and other logistical hurdles. This helps companies meet the needs of all their employees more efficiently and effectively than ever before.
Maximizing the Value of LPAs
Despite the advantages offered by LPAs, a mere 10 to 15 percent of mid-size and large employers offer them. This is surprising given the ease with which LPAs can be deployed – they require no upfront funding, reimbursements are provided to employees on an after-tax basis, and eligibility is fully customizable (and alterable) by the employer. However, there are several best practices companies should observe as they develop and implement LPAs, and HR teams may not be aware of them.
First, HR teams need to determine how much the company will contribute to each employee’s account – a figure that should be high enough to incentivize participation without straining the budget. Second, it’s essential to provide a range of flexible options to meet the diverse needs of employees. Third, HR teams must engage with employees (via focus groups, surveys, and direct outreach) to inform them about how LPAs work and determine which reimbursements will be the most helpful. And fourth, companies can’t overlook program administration. The management and disbursement of LPAs have to be streamlined to avoid costly headaches for employees and inefficiencies for the company.
At a time when the labor market is tight and employee demands have undergone a sweeping transformation, HR teams need to be capable of setting their companies apart with flexible benefits packages that meet the diverse needs of their workforces. LPAs can help companies accomplish this goal, which will improve recruitment and retention in an economically sustainable way.
Rob Whalen is the Co-Founder and CEO of PTO Exchange
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Life-Planning Accounts Help HR Meet Diverse Workforce Needs
3 Tips For Managing Complex Tax And Compliance Issues For A Global Workforce
Balancing global standards with local regulations
By Katherine Loranger, Safeguard Global
Employees in the post-pandemic world have consistently expressed a preference for more flexibility in where and how they work. Companies that embrace remote and hybrid work can attract and retain great employees, and teams that receive the right support from human resources (HR) can be more productive working remotely.
North America-based employers that allow employees to work remotely can also dramatically expand the pool of available candidates, which helps them address persistent skills gaps that result from a tight domestic labor market. At the same time, they can reduce labor costs by up to 40%, which is why the number
of remote workers in Central America and the Caribbean rose 300% between 2020 and 2023.
While the prospect of achieving higher employee satisfaction, better productivity and a larger labor pool are all excellent reasons to consider hiring staff outside the U.S., it is critical for HR leaders who are thinking of hiring offshore talent to plan carefully and fully understand the tax and compliance implications. Here are three tips to help you prepare to welcome a global workforce:
1. Be familiar with all applicable local accounting laws: Business accounting and reporting practices vary by tax jurisdiction, and the correct approach is often
a moving target since laws can change over time. That is why it is essential to familiarize yourself with local accounting laws and follow them to the letter. For example, in some jurisdictions, governments require offshore employers to maintain accounts in local language and English. Setting accounting systems up to comply with local rules from the first day can help you avoid being out of compliance down the road.
Conducting a transfer pricing study before you hire abroad is also a good idea. A transfer pricing study is a detailed economic overview of your company, service, products, and related intangibles, and it functions as a planning tool you can use to create your offshore
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COVER ARTICLE
business structure. A transfer pricing study provides useful information on the tax implications of an overseas operation by region, helps facilitate tax efficiency, and can protect your business in case of a tax audit.
2. Create global workplace policies and customize them for each region: One mistake employers make is implementing workforce policies from their home country in offshore regions when expanding globally. That does not work well because, like business accounting practices, employment legislation varies considerably across regions. A
better approach is to develop a new global policy that meets the baseline requirements for policies like paid time off for illness, parental leave, etc., in all regions and then create custom variations for each region to comply with local rules.
In addition to factoring in baseline requirements for local regulations, you will also need to evaluate the competitiveness of your policies in each market so you can attract and retain employees. This assessment will directly impact the formulation of a standard global policy since you will want to ensure your
company can compete effectively everywhere you operate.
3. Tap the expertise you need to expand globally: Creating a structure for a global workforce requires setting up banking, payroll, tax withholding and reporting systems, which takes time and money. Many HR leaders determine that working with experts who have the experience and know-how to create compliant policies and accounting practices is a better option since it allows the HR team to focus on core competencies while reducing risk overall.
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3 Tips For Managing Complex Tax And Compliance Issues For A Global Workforce
Keep in mind that companies that run into conflict with local regulations can incur penalties and harm the brand’s reputation, so tapping outside expertise may be the best solution. Working with a global employer of record (EOR) is one option that can reduce risk. An experienced global EOR can establish an overseas entity so you can bring employees on board quickly, with the EOR handling labor,
payroll, tax, banking and work contract requirements.
Whether you decide to work with an expert or go it alone, keep in mind that planning is the key to successfully setting up a global workforce. You will need to establish a legal business entity in the countries where employees are based and put systems in place to handle business accounting and reporting according to the rules in each jurisdiction.
You will also need a policy framework for your global workforce that ensures you are competitive in the marketplace and compliant with all local regulations. That can be a daunting task, but if you are familiar with each country’s accounting rules, create customizable policies and get the expertise you need in-house or by working with an experienced partner, you can access the talent you need — anywhere in the world.
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Katherine Loranger is the Chief People Officer at Safeguard Global. She strives to align the human resources strategy with the strategic goals of the organization and promote a culture of innovative, accountable, ethical, and high-performing team members.
3 Tips For Managing Complex Tax And Compliance Issues For A Global Workforce
The Impact Of AI On HR: Opportunities, Risks, And Best Practices
Balancing human-AI collaboration for productivity and innovation
By Chandler Aragona, Burr & Forman and Emily Mack, Burr & Forman
Artificial intelligence (AI) has revolutionized many aspects of various industries, and the human resources field is no exception. AI applications are being utilized in many areas of the workplace, including recruiting, training, onboarding, employee wellness and talent acquisition.
However, this new and emerging technology does not come without risks and pitfalls. As AI technology advances, it is important to be cognizant of the potential negative implications for human resources and employers in general.
The Hiring Process
AI algorithms can quickly screen and evaluate resumes, cover letters, and other job application materials to determine if applicants meet basic job requirements, saving time and allowing human resource professionals to focus on other tasks. But while AI can increase efficiency and objectivity in employment selection procedures, employers using AI in this regard must be mindful of possible disparate impacts on job applicant pools.
Employers are prohibited from discriminating against job applicants based on race, color, religion, sex, or national origin, pursuant to Title VII of the Civil Rights Act of 1964 (Title VII). Thus, as the Equal
Employment Opportunity Commission (EEOC) recently highlighted, the implementation of AI in employment selection procedures raises concerns about potential challenges to the principles of equal opportunity protected by Title VII. For example, if AI algorithms rely on biased data or are programmed with flawed instructions, they could perpetuate existing discriminatory practices or amplify inherent biases in larger quantities.
To mitigate the risks of inadvertent discrimination and to ensure compliance with Title VII, employers should be proactive when implementing AI in employment selection procedures. It is essential that AI algorithms use diverse and representative datasets in their review and selection procedures. Additionally, continuous monitoring and auditing of AI systems should be conducted to identify and remedy any unintended biases that may have emerged over time.
Human oversight is also crucial in interpreting the selections generated by AI algorithms and making final decisions in recruitment. With the right safeguards in place, combining the efficiency of AI with human judgment can strike a balance that respects the legal obligations of employers while simultaneously streamlining the hiring process.
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Automation of Jobs
Another significant and commonly discussed effect of AI on the workplace is the automation of job functions, which has the potential to replace certain jobs entirely. AI-powered systems can certainly streamline repetitive tasks, increase productivity and optimize efficiency. However, as automation expands, concerns arise regarding the displacement of jobs and unemployment. Some roles may even become obsolete, dictating a shift in the skills required for employment.
The increasing use of AI in the workplace may also result in reduced human interaction and personalization. While digital assistants are efficient in handling routine inquiries, they may not provide the same level of empathy, understanding and nuanced responses that humans would. This lack of personalization may impact employee satisfaction and engagement, resulting in retention issues. Decreased interaction can also weaken the quality of
customer interactions, particularly in industries where personal communications and relationships are vital. Consumers are likely already experiencing both the efficiency and frustrations caused by AI technology in their customer service interactions.
Data Privacy
The increased use of AI technology in the workplace also raises privacy concerns because of its heavy reliance on data collection and analysis. This data collection can create significant concerns about privacy and security in the workplace, as employees themselves may worry about the collection and storage of personal information, as well as the potential misuse or mishandling of their data.
Likewise, employers have reason to be concerned about employees disseminating confidential and proprietary business information into AI systems. It is critical for employers to implement robust data protection measures, ensure compliance with privacy regulations, and establish clear guidelines on data usage and retention to address these concerns. Employers should review and update their employee handbooks to ensure proper guidance regarding privacy and data policies.
AI technology brings both opportunities and challenges to the workplace and human resources professionals. The balance and collaboration between human beings and AI technology nevertheless hold promise for a future of increased productivity and innovation. By understanding and proactively addressing the impact of AI on employment issues, employers can reap the benefits while creating a foundation that prioritizes and protects the well-being and continued success of the human workforce.
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Chandler Aragona is an Associate in Burr & Forman’s Charleston office, where she’s a member of the firm’s Labor and Employment practice group.
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Emily Mack is a Partner in Burr & Forman’s Nashville office, where she handles employment law and complex litigation matters for businesses.
How HR Professionals Should Be Thinking About Their Tech Stack
The top strategies for building a successful HR tech stack
By Saad Siddiqui, Telstra Ventures
Relationships between companies and employees have undergone a sweeping transformation in recent years. From radical shifts in how and where employees work to the widespread deployment of AI, it’s difficult to think of a period in which workforce priorities and responsibilities have changed more rapidly or dramatically. Meanwhile, the competition for talent remains extremely tight, putting pressure on HR teams to innovate in ways that will help their companies attract and retain employees.
Building the right tech stack is a competitive necessity for HR professionals. This means adopting a centralized and streamlined digital platform for workforce management, making security integral to the hiring process with comprehensive background checks, offering more accessible and flexible benefits, using AI to improve productivity and data oversight, and providing high-quality onboarding and professional development opportunities. These are all critical priorities for HR teams, and there are powerful digital solutions to address each one.
When HR teams fully leverage emerging technologies like AI and data analytics, they will be in a much stronger position to build and manage their workforces. This will give their companies a significant competitive advantage in a tight labor market, improve employee engagement and morale (which will reduce
turnover), and increase performance. Let’s take a closer look at how technology is fundamentally changing the role of HR professionals.
Consolidate and Simplify Workforce Management
Disjointed processes are among the biggest causes of headaches for HR teams, especially as workforces become more distributed. One way to alleviate this problem is to adopt a single centralized platform which allows HR professionals to efficiently manage workforces of all sizes and in many different places at once.
HR teams need the ability to onboard employees from around the world, automate compliance, and manage core functions such as payroll and benefits in a single place. Over the next several years, we will see the emergence of third-party platforms that meet these needs in a streamlined and cost-effective way.
HR teams can work with external developers that create and manage these platforms so they won’t have to write their own code or invest in costly IT teams. This will provide an essential competitive advantage at a time when exceptional employee and candidate experiences are becoming more reliant on digital resources.
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Build Security into the Hiring Process
One of the most urgent challenges HR teams face is ensuring that the hiring process is secure and capable of fully vetting candidates. Over 55 percent of Americans admit that they have lied on a resume, while the cost of a bad hire is immense – beyond the immediate financial impact of wasting resources on training and onboarding, there are negative cultural consequences, productivity disruptions, and other harmful effects.
This is why more and more HR professionals are using objective and secure hiring methods like skills assessments. Beyond the protection these methods offer against fraud, they also reduce bias in the hiring process and enable more predictive decisions. Conventional hiring methods such as unstructured interviews have a poor record of predicting performance, and they’re prone to bias (as they rely on the subjective impressions of interviewers).
Assessments allow all candidates to compete on a level playing field and give recruiters a clear view of their skills and relevant behavioral traits. The demand for tech platforms that increase security and transparency in the hiring process will keep rising as
HR teams rethink traditional methods of evaluating candidates.
Provide the Flexible Benefits that Employees Want
There’s no one-size-fits-all approach to employee benefits – a fact that has become increasingly clear over the past few years. All employees have their own professional goals, financial constraints, and personal circumstances, which is why 63 percent say more flexible benefits would make them feel empowered in the workplace. Meanwhile, traditional benefits such as PTO are generally underused – just 27 percent of American workers say they used all their vacation time in 2021.
There are many alternatives to the static benefits packages many companies provide, from flexible HSAs and other spending accounts to financial wellness education – something nearly three-quarters of employees say they want. HR teams should have open discussions with employees about their unique needs and concerns, which will help them adjust their benefits plans accordingly. But they also need to update their tech stacks to design and administer these benefits more effectively.
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How HR Professionals Should Be Thinking About Their Tech Stack
HR teams are inundated with point solutions for siloed benefits, which leads them to be reactive rather than proactive. This causes challenges with integrations across the technology stack, multiple (and cumbersome) employee touchpoints, and a monolithic infrastructure that limits speed and agility. Companies can work with third-party HR tech advisory firms and benefits providers make this infrastructure more centralized and efficient.
Use AI to Securely Improve Data Analysis and Productivity
The AI revolution is here – according to Gartner, 70 percent of organizations are exploring generative AI while 45 percent say the headline-dominating publicity of ChatGPT has led them to increase their investments in the technology. Employees are already using generative AI to perform their jobs more quickly and effectively, which increases the pressure on HR teams to keep pace through their own deployments of the technology.
HR professionals are already using AI for a broad range of purposes: generating job ad templates, communicating with candidates, sourcing potential hires, identifying the right competencies among job-seekers, and so on. However, HR teams’ focus on AI goes well beyond hiring and retention – the technology
will permanently alter the nature of work, and it will lead to widespread job displacement and creation. A recent Accenture report predicted that 40 percent of all working hours will be affected by large language models like ChatGPT.
A central responsibility for HR teams in the coming years will be to prepare their workforces for the AI revolution, and one of the best ways to do so is through professional development and training opportunities. It’s encouraging that 77 percent of employees say they’re “ready to learn new skills or completely retrain” – they recognize that they need to keep pace with dramatic technological changes to remain productive. At a time when there are roughly two open jobs for every candidate who is actively seeking work, employee retention is vital. Employees are almost twice as likely to stay with companies that excel at internal mobility than those that struggle with it, which means training and professional development are crucial – especially when it comes to tech skills that are in great demand.
While HR teams will continue to face huge challenges like a competitive labor market and shifting employee expectations, rapidly emerging technologies will help them increase productivity, build healthier workforces, and gain an edge over their competitors. By observing the principles outlined above, HR teams will fully leverage their tech stacks and prepare for whatever lies ahead.
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Saad Siddiqui is General Partner at Telstra Ventures
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How HR Professionals Should Be Thinking About Their Tech Stack
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Minnesota Employment Law: Legislative Reforms And Their Implications
Check out the transformative impact of Minnesota's 2023 legislative session on employment law
By Daniel G. Prokott, Charles F. Knapp, Nicole A. Truso, Rhiannon C. Beckendorf and Zoey A.Y. Twyford, Faegre Drinker
Minnesota recently passed the Jobs and Economic Development and Labor Omnibus Budget Bill and other bills, bringing broad changes to Minnesota employment laws.
This article highlights some of the significant changes, including the non-compete ban, paid sick and safe time, wage disclosure protections, protections for pregnant and nursing workers, prohibitions on mandatory employer meetings, and recreational marijuana.
Employers should review their current policies and practices and develop a plan to revise them as necessary to comply with this expansive legislation.
1. Ban on Non-compete Agreements
Effective July 1, 2023, Minnesota law prohibits any post-employment non-compete agreement with an employee or independent contractor, regardless of a person’s income, with two limited carveouts for certain non-competes made (1) in connection
with a sale of a business or (2) in anticipation of a dissolution of a business.
Subject to those exceptions, the law prohibits an agreement between an employee and employer that restricts the employee post-termination from performing: (1) work for another employer for a specified period of time; (2) work in a specified geographic area; or (3) work for another employer in a capacity that is similar to the employee’s work for the employer. The new law does not prohibit confidentiality, trade secret or non-solicitation agreements, or restrictions on working for another business while performing services for a business.
The law also prohibits employers from requiring employees who reside and work in Minnesota to agree, as a condition of employment, to a provision in an agreement that (1) requires employees to adjudicate a claim arising in Minnesota outside of Minnesota; or (2) deprive employees of the substantive protection of Minnesota law for matters arising in Minnesota.
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The law creates ambiguity as to whether an agreement between a company and a former employee that includes a covenant not to compete (such as a post-employment separation agreement) is also void and unenforceable. Additionally, there is ambiguity as to whether the choice of law and forum provisions apply to any employee agreement, not just a covenant not to compete.
The non-compete ban law applies to contracts and agreements entered into on or after July 1, 2023.
2. Statewide Earned Sick and Safe Leave
Beginning January 1, 2024, Minnesota employees are entitled to accrue one hour of sick and safe leave (SSL) for every 30 hours worked, up to 48 hours per year. Employees will be able to carry over up to 80 accrued hours each year. Alternatively, employers may front-load 80 hours of SSL at the beginning of each applicable year.
The law allows for absences due to an expansive list of reasons, including for the care of a broad range of “family members”, such as nieces, nephews, aunts, uncles, children-in-law, siblings-in-law, other blood relatives, those whose close association with the employee is equivalent to a family relationship and up to one annually designated individual.
Employers are required to provide certain notices regarding SSL, including in handbooks and earned income statements. Existing employer policies, such as paid time off policies, may satisfy the requirements of the new law if the existing policies meet the accrual and usage requirements set forth in the new statute.
4. Modification to Wage Disclosure Protection
As of July 1, 2023, Minnesota prohibits employers from inquiring into, considering, or requiring disclosure of the pay history of a job applicant to determine the applicant’s compensation or benefits and prohibits employers from discriminating against an employee for asserting rights under the law (for example, refusing to provide past salary).
5. Added Protections for Nursing Mothers and Pregnant Employees
As of July 1, 2023, Minnesota increases protection for nursing employees by expanding the time period under which employees needing to express breastmilk may take breaks beyond a prior 12-month limitation. The law also now provides that break times used for expressing breast milk may run concurrently with other breaks but are not required to do so. In addition, the amendments also remove language that previously allowed employers to deny employees a break to express milk if it would “unduly disrupt operations.”
The law also includes increased entitlements for pregnancy accommodation by providing that accommodations not requiring a healthcare provider’s certification include longer (in addition to more frequent) restroom, food and water breaks. Notice provisions have also been added, requiring employers to inform employees of their rights under the law at the time of hire and when an employee makes an inquiry about or requests parental leave.
6. Changes in Employer Size and Service Requirements for Pregnancy and Parental Leave
Minnesota law requires any “employer” to grant up to 12 weeks of unpaid leave to any “employee”, who is a biological or adoptive parent in conjunction with the birth or adoption of a child or a female employee for prenatal care or incapacity due to pregnancy, childbirth or related health conditions.
Effective July 1, 2023, an “employer” for purposes of the Minnesota pregnancy and parental leave law means any person or entity that employs one or more employees (replacing the prior 21-employee threshold for being a covered employer), and an “employee” means any person who performs services for an employer (eliminating the prior requirement for an employee to have worked for the employer for an average number of hours equal to one-half the full-time equivalent during the 12-month period preceding the leave request).
HRIS & Payroll Excellence presented by HR.com July 2023 29 Submit Your Articles Minnesota Employment Law: Legislative Reforms And Their Implications
7. Employer-sponsored Meetings and Communications
Effective as of August 1, 2023, Minnesota bans employers from holding mandatory “captive audience” meetings to communicate the employer’s opinion on religious or political matters. Employers are prohibited from threatening to take or taking adverse action against employees who refuse to attend or participate in an employer-sponsor meeting or who refuse to receive or listen to an employer communication for which the purpose is to communicate the employer’s opinion about religious or political matters.
8. Paid Family and Medical Leave
Minnesota passed a paid family and medical leave law, which requires all Minnesota employers, regardless of size, to provide nearly all employees paid family and medical leave for up to 12 weeks with partial wage replacement related to a serious health
condition; for pregnancy, bonding, safety, family care; or certain military member’s active-duty service or impending call to active duty, with a total combined cap of 20 weeks per year.
Independent contractors, self-employed individuals, federal government employees and seasonal employees are excluded. The amount of weekly benefits is tied to the individual employee’s income level and capped at the state’s average weekly wage ($1,287.00 in 2023).
Similar to paid leave laws in other states, the program will be funded by payroll taxes paid by employers and employees. Employers that offer private benefits that meet or exceed the law’s requirements can apply for approval with a related registration fee to opt out of the state plan requirement.
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Minnesota Employment Law: Legislative Reforms And Their Implications
Benefits and the associated payroll tax will go into effect on January 1, 2026.
9. Recreational Cannabis: Changes to Minnesota’s Drug and Alcohol Testing
Minnesota’s recreational cannabis law includes changes to the Drug and Alcohol Testing in the Workplace Act (DATWA) that will take effect July 1, 2023. The DATWA amendments will generally exclude cannabis from the definition of a “drug” and create a separate category of “cannabis testing” with more limited permitted testing and discipline scenarios.
For example, under the updated law, employers are prohibited from relying upon pre-employment or random testing for cannabis in most circumstances, with exclusions for certain positions, including safety-sensitive positions, peace officers, firefighters,
positions requiring face-to-face care, training, education, supervision, counseling, consultation or medical assistance to children, vulnerable adults or healthcare patients, positions requiring a commercial driver’s license, or positions subject to federal or state motor vehicle regulations requiring testing, employment positions funded by a federal grant and positions for which state or federal law requires cannabis testing.
The DATWA amendments make clear that an employer is still permitted to discipline, discharge, or take other action against an employee for cannabis use, impairment, sale, or transfer that occurs while the employee is working on the employer’s premises or operating the employer’s vehicle, machinery or equipment, so long as the employer maintains a DATWA-compliant policy that incorporates the new rules regarding cannabis testing and use.
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Daniel G. Prokott is a Partner at Faegre Drinker
Rhiannon C. Beckendorf is Counsel at Faegre Drinker
Charles F. Knapp is a Partner at Faegre Drinker
Zoey A.Y. Twyford is an Associate at Faegre Drinker
Nicole A. Truso is a Partner at Faegre Drinker
Minnesota Employment Law: Legislative Reforms And Their Implications
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