How CUs Can Manage Staggering Cost Of Compliance
Regulatory demands - they affect all of us, but the impact varies dramatically depending on the size of the organization. The regulatory burden falls disproportionately heavier on smaller credit unions than it does on larger CUs. This is especially true for credit unions with less than 20 employees. The Office of Advocacy, a part of the Small Business Administration (SBA), suggests in a 2005 study that smaller businesses spend approximately $7,650 per employee complying with all federal regulations. Larger businesses, those with 500 or more employees, in comparison spent approximately $5,280 per employee.
These costs represent the full regulatory burden as the SBA can best determine it, and it is clear that they place a substantially greater strain, 45% greater, on small to medium-sized businesses and these costs, in most cases, are unavoidable. These costs fall in four major categories: economic, workplace regulations, environmental, and tax compliance. Looking more specifically at the service sector, we find that the cost per employee is even higher at $7,953 per employee.
Facing a staggering regulatory burden, companies must find ways to improve their efficiencies and lower their costs in other areas if they want to prosper, or in some cases, even remain a viable business entity.
Accepting the costs of regulatory compliance as inevitable, one area worthy of examination for improving efficiencies and reducing costs is human resources. Finding and keeping quality employees is a continuing challenge, as is managing the pre-employment, employment, post-employment records. Add to that the salary and benefit administration, employee registrations and questions, and you quickly find that most HR departments are at the least very busy and at the worst, overwhelmed.
All businesses, credit unions' included, are facing a new reality in which flexibility in the workplace is valued greater than employment security and approximately one third of the workforce is actively seeking a new job.
One of the ways employers can offset some of these challenges is through the use of technology. There are many web-based options available that can manage employee information from pre-hire through retirement.
Imagine a single, well-organized repository for an employee's letter of application and resume, his or her pre-employment screening results, training, salary, benefits, vacation, sick leave, and more.
Imagine the same system providing self service capabilities for the employee, so HR has only to direct an employee to a specific website so that employee can obtain and register for, his or her own health care, dental, life insurance and other benefits. The employee would be able to view his or her current salary information, their pay stubs, and deductions. The system could even act as a time clock providing an accurate record of when an employee starts and ends work and takes his or her breaks, streamlining payroll administration.
The same system could allow HR to scan in letters of application and resumes and to convert them via OCR (Optical Character Recognition) to text. The system could scan the document for keywords and save them, full indexed for a time when a search is launched looking for an employee with specific job experiences. The applicants could then enter their official employment application on a computer at the credit union and use a digital signature pad to sign it, instantly storing it in their personal record.
There's no need to imagine these systems, as they exist and are in use today in many different industries and market segments, including credit unions. These systems can help HR departments create employee incentive programs by creating individual accounts for employees and then tracking their accomplishments, such as completing training, referring new staff, or attracting new members. The options and capabilities of these systems are wide spread and can be tailored to the needs of the specific credit union.
These solutions exist as stand-alone or network software packages and as web-based solutions. Although a credit union would have more control over the more traditional "in-house" software packages, serious consideration should be given to the Web-based solutions.
Web-based solutions provide even more advantages for HR departments. Systems maintenance and support becomes easier and in many cases more cost effective as an outsourced solution. In addition, these systems are frequently only accessed by HR and the company providing the service, eliminating the need for the credit union's technology department to support or even access the system, adding a greater level of confidentiality to employee records.
HR professionals are able to access their systems from anywhere in the world that has an Internet connection, further improving the efficiency of these systems allowing, HR managers and payroll staff the ability to review and approve information 24 hours a day whether they are in the credit union or remotely from a conference across the United States.
There are no shortages of these systems available to a credit union's human resources department, and the capabilities are widespread and complex. If a credit union is seriously considering a web-based HR solution, they should consider contacting a Professional Employer Organization.
These groups can help cut through the complexity of the various systems and offerings available by either providing a menu of links to various resources and providers and many will package a custom solution that specifically meets the needs of each individual credit union.
Lester Warby III is the vice president and chief information officer at Firstmark CU. He can be reached at lester.warby