Review your HR processes to remain legally compliant

It’s too easy to forget about gaps in a process until it’s too late. Employment contract weren’t signed or are missing. Annual leave is not recorded. An employee left but their visa hasn’t been cancelled. Beneficiary for life insurance have been left blank or not updated. Don’t let your HR processes cause your organisation financial or reputational damage! Conduct an HR audit!

For many, however, the word audit brings back dreaded images. External auditors requiring explanations about the state of the organisation, while HR teams are already overworked. Using the summer to create your own internal HR audit, you can get ahead of the curve, identify any gaps and take corrective actions.

Unless already part of the regular business procedures, an HR audit would need to be drafted to evaluate the current state of organisation’s HR policies, processes and practices covering

  • Recruiting and onboarding
  • Learning and development
  • Performance management
  • Total rewards
  • Employee relations
  • Offboarding

Discrepancies between policies, processes and practices can help your team can be become the basis for any enhancements. Any shortcomings can also be addressed and adjusted according to their requirement: compliance, best practice, strategy, operational execution.

The process for an HR audit generally follows these steps:

  1. Define the scope
  2. Draft the questionnaire
  3. Collect the data
  4. Identify any gaps
  5. Report the findings
  6. Take corrective actions

Draft the questionnaire

You can take a pre-defined audit checklist from the internet, create your personalised form or engage with an external consultancy.

Collect the data (legal requirements)

The UAE Labour Law Federal No. 8 of 1980 as amended provides you with the foundation for your HR audit. Any of your policies need to be aligned to it to be valid.

The law also defines in “Chapter III Employment Contracts, Records and Remuneration” what records a company must keep in a personnel file for each employee, if employing 5 or more:

  1. Showing the employee’s name, profession, age, nationality, place of residence, marital status, effective date of service, pay and whatever changes effected on the pay, penalties invoked against him, injuries and vocational diseases sustained by him, date of service termination and causes of that, and
  2. A card, divided into three parts, showing 1) annual leaves, 2) sick leaves and 3) other leaves.

As a company, you may need to review each personnel file and check all documents. Any missing documents need to be added, potentially requiring the employee to sign the document again. You can find more information keeping your personnel files up-to-date in our previous newsletter.

If employing 15 or more employees, companies need also to keep these registers:

  1. Register of wages, showing the dates for joining of service, and fixing the amount of daily, weekly or monthly pay, along with its benefits, or piece-meal pay, or the commission to each one of them, his working days, and the date for his final departure from work, and
  2. Register of work injuries, showing all work injuries accidents and vocational diseases sustained by the employees as soon as they’ve been brought to the knowledge of the company, and
  3. Regulations of the work, showing the daily working hours, weekly holiday, other holidays, necessary measures and precautions to be taken for avoiding work injuries, and fire hazards, which must be approved by the labour department and displayed visibly for anyone on company premises, and
  4. Penalties sheet, showing the penalties that may be invoked and citing the conditions and cases for putting them into operation

While the registers can be kept centrally, the owner may be outside of HR. For example, if Payroll belongs to Finance, they may keep the “register of wages” and given the inter-dependency, need to be part of the audit. The same would apply to any work injury documentation which may be kept by EHS and not HR.

Identify gaps

An HR audit requires more than just a tick on a checklist. It will reveal any gaps between the current state and the law, benchmark and organisational strategy.

Report the findings

Once the audit has been collected and the gaps have been identified, the audit team should summaries its findings and present them to the overall HR leadership team or even the company’s management team. Together, questions as to why certain gaps exist need to be asked and answered.

Take corrective action

This may then create the list of corrective actions. Legal compliance is a must and recommendations for corrective action need to account for these first and foremost. The audit team may prioritise any other corrective actions by importance (high, medium, low) and/or impact (high, medium, low) before determining owners and timelines for these.

The audit findings and action plans need to be documented. This can be used as a continuous improvement activity, working towards becoming more effective, efficient and innovative HR.

While HR audits can be perceived as expensive due to the time and resource commitment required, it will be less than the financial and/or reputational damages suffered by unscheduled labour inspections or court cases.

Stay legally compliant. Review your current policies, procedures and practices, identify any gaps and create an action plan to be consistent and compliant. Contact us and find out how we can support you and your team in conducting.

HR documentation – Why you need to take it seriously

For many companies, February/March is the time when HR teams are supporting management with the reviewing the annual salary adjustments, setting performance goals and identifying actions for low performers. Unfortunately, it’s also the time when HR teams are asked to terminate a low performing employee.

While local legislation provides employers with different options to terminate the employment relationship, companies are open to financial and legal risk if no or insufficient documentation is in place. And yet, HR teams are underestimating the importance of keeping complete and up-to-date personnel files and HR documentation.

Legal requirements. UAE Federal Law No. 8 of 1980 (as amended) or, in short, the Labour Law prescribes content an employer needs to keep in the employee’s personnel file. It’s mainly basic personal information, the salary history as well as any penalties, injuries/vocational diseases and details around the termination. In addition, the employer needs to keep records of 3 different leave types (annual leave, sick leave and other leave). The legal requirements can easily be fulfilled, although there are still HR teams that don’t have these fundamental records in place.

Financial risks. HR teams without proper documentation for the statutory requirements or in case of any disputes expose their company to fines and compensation. Financial fines vary as outlined in the labour law, other laws and statutes.

Dismissed employees may be able to claim for compensation if their termination is perceived arbitrary. To prove the decision was qualified, HR teams needs to present supporting written documents to the court when such a dispute is heard. Verbal presentation of such is not permitted. Should there be no documents, it’s an easier decision for the court to award compensation to the dismissed employee, payable by the former employer.

Legal risks. In addition to the financial risks, the courts may suspend the company’s operations or even imprison the HR Manager if no adequate documentation is available. Previous cases have shown the extend of personal liability of an HR Manager and it’s not worth the risk.

In the case of a disciplinary procedure, the company may issue warnings. The first warnings may be given verbally and, upon repeat of the unacceptable behaviour and/or actions, in writing. By not documenting the verbal warning or filing the written warning in a timely manner, HR teams expose the company when the dispute is brought up to the court. The same risk exists if an internal hearing has been held but the decision has not been communicated to the employee in writing.

Best practices. A number of global companies like IBM and Google have altered their approach to performance management and are moving away from the 2-3 formal discussions per year. Instead, the trend is focus on forward-looking skills improvements and immediate feedback. Although these companies may no longer demand lengthy evaluation reports, they still require managers to document the “feedback chats” in a short, yet, precise paragraph, often entered into an electronic performance management system or sent to a specific email. Who remembers what feedback they’d given to one of their 8 direct reports 7 months ago?

Companies are also spending substantial amounts on increasing their HR services and reducing delivery times through cloud-based systems like SuccessFactors and Workday, which support the HR team’s e-filing efforts. While not every organisation has the budget or the need for such a system, HR teams need to identify the following for their record keeping:

  • What are you documenting? Besides legal requirements, consider performance, rewards and recognition, job changes, learning and development plans and outcomes, violations and warnings.
  • How are you documenting? It should be factual, non-judgmental, objective and fit for purpose. Don’t forget to date and sign it.
  • Where are you storing the documents? Consider whether it needs to be in paper-based personnel file or can be stored electronically, on company premises or in a secure offsite location.
  • When are you documenting? Consider not only when you are creating the actual document (e.g. timely to the actual event) but also whether you’re filing electronic documents immediately or batch file paper documents on a daily basis.

Do you want to improve your documentation standards and procedure, be compliant with the labour law and save valuable time? Call us on +971-50-5516322 and learn how an efficient process can reduce your risk of being exposed to financial and legal risks.

Time to audit your HR function

The beginning of a year provides a great opportunity to conduct an HR audit. New laws and regulations often take effect on New Year’s Day. While companies may have some time to update their documentation, policies and procedures, you’ll need to be compliant with legislation or risk being fined.

Your HR team can carry it out on its own or, preferably, work with the internal QA team or an external consultant to obtain objective results. Working with a checklist and predefined evaluation criteria, the findings from the HR audit offer unbiased results. You have the chance to identify the strong policies, processes, procedures and, more importantly, the areas in need for improvement. Simultaneously, it lets you step back and review how closely your strategy is reflected in your operational work.

As you prepare for the audit, define which areas you want to check. Examples can include:

  1. Personnel files: Is the electronic or hard copy personnel file complete? Do you have all required visa and work permit documentation? Do you have all contracts signed by all parties and filed? Have performance evaluations and any related documents, e.g. warning letters, been recorded and filed?
  2. HR policies: Are your policies in line with the latest changes in labour law, immigration law, data privacy law or civil law? Do any of your policies stand in contraction to each other? Have all policies been written and, as a next step, been communicated to the employees?
  3. HR procedures: Are your procedures in line with your policies? Do the written procedures reflect the actual execution of them?
  4. Payments: Working together with your Payroll team or provider, have salaries, allowances, bonuses and commissions been paid by the required dates and as per the applicable plans? Do the number of overtime hours match the hours worked as per the time keeping records? Has overtime been calculated in accordance with the legal requirements and internal premiums?

HR audits need to be carefully planned and the auditors require the appropriate training to define the current state. Due to the time requirements, it may only be conducted at one point once a year. Some companies prefer to audit throughout the year, focusing on one particular area in each month (e.g. HR policies in January, salary payments in February and so on), thus keeping the impact on the daily operations low.

Once the findings have been gathered and analysed, you can identify any gaps and prioritise the corrective actions, if and as needed. The most important actions are to correct violations of the law and health and safety. These two areas can attract financial fines as well as imprisonment. Address HR inefficiencies and implement best practices once a solid foundation has been put in place for your HR team. This may mean (re-)training your team on getting the job done right the first time by understanding the required steps in the process, leveraging technology and applying their strengths.

Are you concerned that your HR operations may no longer be compliant with the labour law? Don’t have the time to create an HR audit from scratch? Call us on +971-50-5516322 and find out how we can support you to reduce risks of being fined while increasing your HR team’s efficiency.