HR Compliance Challenges When Starting a New Business

There are a myriad of regulations that you need to adhere to when running a business. At the top of the list are employment laws and regulations in the country that you are setting your new business. Failing to adhere to these regulations can result in hefty penalties and fines and possibly tarnish the reputation of your business even before it starts. However, ensuring HR compliance when starting a business isn’t without challenges, especially if it is your first business. Understanding some of these challenges beforehand helps you to avoid landing into legal problems early on in business or having to deal with it down the line. That being said, here are 5 challenges common to new businesses.

Understanding the legal requirements

When starting a new business, there are several legal requirements that you need to navigate before you can start operating. For instance, if you are setting up a business in the Netherlands you need to ensure proper company registration in the Netherlands, get the right licenses and register for taxation, among others.

Trying to understand HR compliance laws can get quite confusing at this stage when you have these other legal requirements to think about. Additionally, HR laws keep changing regularly. You have a bigger task of identifying the current regulations and standards set by different personnel regulating bodies. Finding adequate support such as outsourcing the HR function when starting a business can ensure that you are set up compliantly.

Creating compliance policies and procedures

As an employer, you will have a mandate to protect your employees from things such as harassment and discrimination. For this reason, many jurisdictions require employers to implement anti-harassment and anti-discrimination policies in the workplace. Failure to take the necessary steps to protect your employees can easily land you in trouble. You need to ensure that these policies are in place before you start hiring. However, creating a policies handbook can be quite challenging, but it can be done with a little dedication and guidance.

You can start by providing specific examples of conduct that employees must avoid. You can also include a clause of handling charges confidentially as well as the corrective actions to be taken against the guilty. Additionally, create a reporting system that employees must use to report cases.

Categorizing workers

You can have three types of workers in your business – an employee, an independent contractor, and temporary agency employees. These three categories of workers differ in terms of compensation, tax deducted, benefits, and more. An employee is entitled to statutory rights and benefits such as paid leave and holidays, sick and maternity/paternity leave, and more. Some countries also require employers to withhold a certain percentage of tax from an employee’s salary and file a report at the end of the year. These requirements don’t apply to independent contractors.

Unfortunately, most countries don’t have a defined definition of a contractor, which makes understanding workers’ classification a challenge when starting a business. However, it is important to make sure that you are getting it right to avoid penalties. You might want to consider the control that you have with each worker in terms of behavior and finances as well as the relationship that you have with the worker to know where each fall.

Eliminating discrimination in recruitment

Employment laws around the world take employee discrimination very seriously. In the U.S, for instance, the Equal Employment Opportunity Commission has put in place laws that protect job candidates from discrimination. If you are hiring for the first time, you might find it quite challenging to refrain from gathering certain information from job candidates, which can lead to discrimination charges.

You must keep in mind the questions to avoid in order to protect your business from discrimination lawsuits. For instance, restrain from asking about past convictions, religious holidays, disabilities, age, marital status, and other information not related to job qualification.

Work and pay requirements

Working hours differ from country to country. For instance, in the U.K, employees can work as many hours in a week as they want. This is different from the Netherlands where employees have a 60 hours a week threshold. However, there is a set length that employees in these countries must not exceed when averaged over a certain number of weeks. Likewise, paying overtime comes with confusing regulations in most countries and states. Work with a neobank to ease your transactions to different parts of the world, depending on where your workers are.

To avoid compensation errors, understanding these regulations is paramount. You might want to invest in payroll software. Integrate a time clock to correctly calculate work hours to avoid miscalculations in salaries and time worked.


Ensuring HR compliance when starting a business can be challenging owing to the different and numerous regulations that you must adhere to. Yet, it is paramount if you must set your business on the right foot from the start. Finding an HR expert to work with when starting a new business can be beneficial in avoiding common pitfalls that can lead to serious legal consequences.

About the Author:

Emily Martin is a Corporate Recruiter with more than 5 years of recruiting and HR experience. Currently supports full life-cycle recruiting, including proactive candidate searches, and interviewing. In her role, Emily assists in developing sourcing strategies for both short and long-term purposes, coordinates interviews and conducts candidate screening calls, and places candidates in positions across a wide range of functional areas and compensation levels. Emily is passionate about traveling and writing.

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