Cloud HR can help manage global employee data, regulatory compliance

Liz Garnand, Contributor

Your company is moving to the cloud, and human resources (HR) data is targeted next for migration. Figuring out how best to make the transition to cloud HR systems, including Software as a Service (SaaS) HR applications, is well worth the consideration, especially for multi-location and international companies. That’s because SaaS HR software is often adaptable, modular and cost effective. But here’s a new reason to consider the cloud: managing employee data is getting similar to managing supply chain data. For many companies, employee data covers significant numbers of non-employee workers, and a company’s workforce is constantly changing. 

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Companies seek applications that are modular and configurable (versus customizable) and cloud HR applications are often better than on-premises applications at flexing and growing in response to company dynamics.  Employee data that spans the globe exacerbates such data’s inherent complexity.

Organizational trends are making employee data behave more and more like the data in complex supply chains:

  • Companies are relying more on external workers from sales and service partners, individual contractors, and temp agencies. For onboarding, these workers often need nondisclosure agreements (NDAs), background checks, contracts, W-9 tax withholding forms, security access, equipment allocation and drug tests.  These external parties may each have unique contractual relationships with the company in the same ways that raw material and component suppliers do. Once the work starts, contractual elements must be tracked.  For each step -- from onboarding, to contract work, to termination -- good workflow processes are needed.
  • Employee turnover continues. Tenures are now shorter for younger workers than for older workers, according to the U.S Bureau of Labor Statistics. HR must shoulder more processing work to keep up with the revolving door.
  • Reorganizations, mergers and acquisitions continue to be a normal part of many companies’ mode of operation.
  • Workers’ easy access to social media adds complexity.  New-employee handbooks should now include social media policies, and the social media activities should ideally be tracked based on the function and responsibility level of each employee. Social media increases the need to govern employee profile information by specifying allowable activities and access to applications. Social media governance may also be needed for contract workers.

With so much ebb and flow inside and outside the organization -- possibly across locations and countries -- it is important to find solutions that can flex and change. It appears that cloud HR providers are the ones leading the pack for developing non-customized solutions that are more adaptive to HR-specific changes and workflow expansions.

Paper-based HR systems holding on

Change comes slowly for many HR organizations, especially when the documents are of great importance and legal in nature.  In our consulting practice, we have often seen a deep reluctance in clients to move toward paperless environments. However, with paper documents, it only takes someone lifting a file out of a cabinet and not putting it back for it to be gone forever. If digitizing and archiving are done using a consistent process by providers who have deep technical expertise and use up-to-date legal and regulatory resources, employee records can have stronger, more lasting security and be easier to access.  And if the company is spread across regions or countries, having centralized, corporate-wide HR access to employee records and tying it into workflows can enable stronger governance of policies and practices across the enterprise.

But how would a cloud HR system be different from the in-house version?  Here’s what, at minimum, stays the same or grows in importance:

  • The need to track local payroll taxes and labor laws
  • The organization’s legal responsibility for employee data 
  • Having clear electronic archiving and retention processes that ensure the company can prove the authenticity of documents for legal purposes 
  • Knowing how to gather and present data from disparate systems and repositories -- while increasing scrutiny of such processes
  • User authentication and access becomes even more important than before

What’s causing reluctance to move to cloud HR

Moving human capital management (HCM) data to the cloud is a hot topic, and it appears everyone is doing it. But that’s not exactly true, as many CIOs remain concerned about security, and HR managers in European companies, especially in places like Germany, express strong reluctance to outsource to cloud HR providers.

Why the reluctance?  HR data is extremely confidential to begin with, and security issues -- not to mention country-specific regulations -- increase the need for due caution.

So take the time to assess a cloud HR system provider’s qualifications in security, legal compliance across regions and countries, service performance and longevity.  Although the cloud may provide more options to centralize and manage numerous moving targets across multiple locations and entities, having the corporate crown jewels safeguarded by an outside company certainly calls for due diligence.

ABOUT THE AUTHOR
Liz Garnand is a principal at Newport Consulting Group (Clarkston, Mich.). She works in the strategy and operations practice, focusing on marketing and business growth. Email her at lgarnand@newportconsgroup.comor follow her on Twitter (LizGarnand).

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