Government contracting is one of the most highly regulated working environments in the U.S., and failing to comply can result in numerous consequences, ranging from reputational damage and contract termination to significant penalties. Unfortunately, even the most skilled government contracting executives sometimes struggle to stay on top of the complicated HR compliance regulations involved in federal contracts.
Compliance Requires Careful Attention
Although all commercial businesses face industry-specific regulations, government contractors must adhere to additional constantly changing rules. For example, the Office of Federal Contract Compliance Programs (OFCCP) enforces Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act, both of which do not apply to most commercial businesses and can be unfamiliar territory to those new to government contracting.
However, comprehending all the relevant regulations is essential, given the high-stakes consequences of non-compliance. Every year, the Department of Labor collects substantial back pay and damages from federal contractors who violate the regulations.
Financial penalties aren’t the only ramifications; contractors found to be non-compliant could face potential debarment, effectively losing their ability to compete for government contracts in the future.
Common Areas of Compliance Risks
One of the more challenging aspects of HR compliance for government contractors is affirmative action planning. Federal contractors with 50 or more employees and contracts exceeding $50,000 must develop and maintain written affirmative action plans. These plans must carefully record their efforts to recruit, hire, and promote qualified individuals from protected groups. The advanced data analysis involved in this task can be challenging for contractors.
Another area where many contractors are vulnerable is age determinations and prevailing wage requirements under the Service Contract Act and Davis-Bacon Act. These regulations require them to pay specific wage rates and fringe benefits according to their geographic location and job classification. Misclassifying employees or miscalculating their ages can result in substantial back-pay obligations and penalties.
Pay transparency and equity requirements have become more stringent in recent years, and government contractors must now carry out compensation analyses to identify and address disparities related to protected characteristics. However, many contractors do not possess the right analytical tools and expertise to evaluate their compensation practices effectively, which exposes them to claims of discrimination and compliance violations.
Another area that contractors might overlook is recordkeeping requirements. Federal contractors must keep detailed personnel and employment records, including applicant data, for lengthy periods. This is becoming increasingly complicated in light of the trend toward remote working and digital documentation, particularly for contractors that use multiple HR tech platforms.
Reducing Compliance Risks
Many forward-thinking government contractors have been turning to proactive strategies to help them meet compliance regulations.
One such approach is a complete compliance calendar that sends automated reminders for important deadlines for affirmative action plan updates, EEO-1 reporting, VETS-4212 reporting, and other regulatory requirements. This secures that they don’t miss any important filing deadlines.
Investments in specialized expertise are paying off for many contractors. Although in-house HR teams may be very good at providing generalist support, the nuanced requirements of government contracting mean that specialized knowledge is often needed.
Technology is increasingly being used to help contractors manage compliance. For example, specialized HRIS systems with built-in compliance tracking capabilities make it easier to keep track of the required documentation, analyze workforce data, and create the reports they are obligated to provide. In addition, these systems generate audit trails that can prove valuable in agency reviews.
It is also essential to conduct compliance audits regularly using the same criteria government agencies use. This allows contractors to spot vulnerabilities before they turn into bigger problems. Some aspects that should be considered in these audits include wage determinations, affirmative action, and job descriptions and classifications.
Making Compliance a Part of Daily Operations
Most importantly, successful government contractors understand that compliance is about much more than filing forms; it requires setting up an organizational culture that values and prioritizes these obligations and inspires everyone on the team to always keep them in mind.
This cultural commitment starts with leadership emphasizing compliance as a business imperative instead of an administrative burden. When leaders communicate the importance of compliance and allocate appropriate resources to it, the organization follows suit.
Training programs are another essential component of compliance culture. Managers who make decisions about hiring and compensation should undergo regular training on non-discrimination requirements, documentation practices, and other compliance matters, while front-line supervisors need to understand how their daily decisions influence the organization’s overall compliance posture.
Partner With Business Benefits Group to Simplify Compliance
At Business Benefits Group (BBG), our government contracting specialists have nearly three decades of experience helping guide contractors through all compliance aspects. Our team offers personalized advice on affirmative action planning, wage determinations, pay equity analyses, and other important areas of compliance.
Contact our benefits consultants today to schedule a consultation and learn how our strategic approach can help protect your organization while positioning you for continued growth in government contracting.