Managing Compliance in Recruitment

Those in recruitment often find themselves at the front lines regarding corporate compliance, faced with many competing regulatory obligations.

As the complexity and interdependencies of rules increase, it's no longer enough to do an annual tick-box training on these topics.

Those working in recruitment now need a more personalised approach to training and monitoring. The most forward-looking companies are using more progressive methods. These techniques range from microlearning, continual reminders, gamification and adaptive content to scenario-based assessment.

For instance, one regulation might require a company to obtain specific personal details for all candidates for senior positions. However, a second regulation may prevent the company from requesting these details without the explicit permission of each individual.

Most of the regulations that affect recruitment require companies to demonstrate that they've taken reasonable steps to prevent breaches. Many fines imposed were for the lack of compliance measures rather than legal or regulatory breaches. For this reason, companies must not only give managers compliance training but also confirm whether that training was online or in person.

Key Compliance Risks for Recruitment

We have identified six key regulatory training areas that those in recruitment need to pay closer attention to because of the increased levels of risk.

1. Modern Slavery

Modern slavery is a heinous crime against vulnerable individuals, forced to work for little or no money in appalling and dangerous conditions. You'd expect the government to stamp it out.

Yet, after decades of trying and failing to do so, the UK government finally passed the Modern Slavery Act in 2015. It holds companies responsible for modern slavery not only within their own operations but also in their supply chains.

By following a few simple steps, businesses can help to prevent modern slavery in recruitment:

• Conduct due diligence: This includes checking recruitment agencies' references and ensuring they have adequate safeguards to prevent modern slavery.
• Carry out thorough background checks: This should include checking all job applicant's identity documents, employment history, and criminal records.
• Pay attention to employment terms and conditions: This includes ensuring that wages are paid on time and that workers are not subjected to forced labour or other forms of exploitation.
• Provide modern slavery training: This should include information on identifying and reporting potential cases of modern slavery.

By taking these steps, businesses can help create a recruitment process free from modern slavery.

2. Bribery Act

Bribery and corruption are crimes that undermine democracy and civil society, especially in the developing world. However, it is difficult to investigate and prosecute. So, the UK government added a corporate offence in the Bribery Act 2010 to force companies to police their employees and all associated persons to prevent bribery.

The bribery risk in recruitment arises from not only jobs for cash but also non-monetary favours such as jobs or internships handed out to friends and family of public officials.

You can help prevent bribery in recruitment by following a few simple steps:

• Establish clear bribery and corruption policies and procedures. These policies should be communicated to all employees and should be strictly enforced.
• Implement bribery and corruption training. This training should help employees to identify and report potential cases of bribery.
• Conduct regular risk assessments. This should include reviewing the company's recruitment process and identifying any areas where bribery could occur to identify and mitigate risks.
• Use a transparent and objective recruitment process. This means that all candidates should be treated fairly and that there should be no opportunity for favouritism or nepotism.
• Keep records of all recruitment decisions. This will help to demonstrate that the recruitment process was fair and that no bribes were paid.
• Ensure you have a whistleblowing policy. This will allow employees to report any suspected bribery cases without fear of retaliation.

By following these tips, companies can help create a recruitment process free from bribery and corruption.

3. Data Protection

The UK has been a global leader in Data protection for many decades, but this regulation got a lot more complicated and stringent with the introduction of GDPR.

In addition to protecting personal data, those in recruitment now have to be sure that they have the legal basis for processing candidate data and that they're not collecting excessive amounts of data or storing it excessively long.

Special provisions must be made to obtain, utilise and store criminal record checks via the Disclosure and Barring Service (DBS) reports. Those in recruitment have to be aware of the rights of individuals to access and control their data. That includes opinions recorded by recruiters, the rectification of data, restrictions on processing and the ability to erase their data.

Finally, recruiters need to be careful not to share data internally unless there is a 'need to know' or transfer it internationally, for instance, to a colleague in the US.

You can mitigate data protection risks by taking a few simple steps:

• Have a strong data protection policy: This policy should set out how the company collects, stores, and processes personal data and how it is protected from unauthorized access, use, or disclosure.
• Train staff on data protection: All employees with access to personal data should be trained on the company's data protection policy, data breach risks and misuse.
• Use secure IT systems: Companies should use secure IT systems to store and process personal data. This includes using strong passwords, encrypting data, and keeping systems up-to-date with the latest security patches.
• Be transparent about data collection: Companies should be transparent about the personal data they collect from candidates and how data will be used. Candidates should be able to opt out of having their data used for certain purposes.
• Take steps to mitigate risks: Companies should take steps to mitigate the risks of data breaches and misuse, including conducting regular security audits and having a plan in place to respond to data breaches.

By taking these steps, recruiters can protect the personal data of candidates and mitigate the risks of data protection breaches.

4. Equality Act

Equality and diversity is another critical consideration. The Equality Act 2010 makes it illegal to discriminate against individuals in hiring, training and promotion decisions based on nine protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.

However, equality compliance obligations are not limited to this regulation alone. Societal norms and pressure from regulators are forcing firms to reevaluate their hiring practices to include greater participation of women in their boards and more opportunities for BAME candidates.

To mitigate the risks of discrimination in recruitment, employers should:

• Be aware of the Equality Act 2010: Recruiters should familiarise themselves with the law and the nine protected characteristics.
• Train staff on equality law: All employees who are involved in the recruitment process should be trained on equality law and the risks of discrimination.
• Review recruitment procedures: Recruiters should review their procedures to ensure that they are fair and do not discriminate against any protected groups.
• Make reasonable adjustments: Recruiters should make reasonable adjustments for job applicants with disabilities so that they can participate in the recruitment process and, if successful, perform their jobs.
• Take steps to prevent future discrimination: Recruiters should take steps to prevent future discrimination, including conducting regular equality audits and having a plan in place to respond to complaints of discrimination.

By taking these steps, recruiters can help to ensure that their recruitment process is fair and compliant with the Equality Act 2010.

5. IR35 & Recruitment

IR35 is a UK tax law that determines whether a worker is an employee or a self-employed contractor for tax purposes. If a worker is considered an employee under IR35, the end client (the company that the worker is providing services to) is responsible for deducting income tax and National Insurance contributions from the worker's pay.

This can significantly impact recruitment agencies, as they often place contractors with end clients. If a contractor is considered an employee under IR35, the recruitment agency may be liable for any unpaid tax and National Insurance contributions.

To mitigate this risk, recruitment agencies should take steps to ensure that they are compliant with IR35. This includes:

• Understanding the IR35 rules: Recruitment agencies should understand the IR35 rules and how they apply to the contractors they place.
• Carrying out status assessments: Recruitment agencies should carry out status assessments for all contractors they place to determine whether they are employees or self-employed contractors for tax purposes.
• Obtaining status determination statements: Recruitment agencies should obtain status determination statements from end clients for all contractors they place, confirming whether the contractor is considered an employee or self-employed contractor for tax purposes.
• Informing contractors of their tax status: Recruitment agencies should inform contractors of their tax status and the implications of this for them.

By taking these steps, recruitment agencies can help ensure that they comply with IR35 and avoid any potential liability for unpaid tax and National Insurance.

6. AI & Recruitment

Within hiring, it is crucial to recognise that without careful design, implementation, and ongoing monitoring, AI has the potential to worsen the biases it aims to combat. Unchecked algorithms, powered by biased and unrepresentative data, can unintentionally magnify discriminatory practices in the hiring process and fall foul of the Equality laws.

Advantages of AI in Recruitment

The key challenge is to ensure that the training data is diverse and representative and that the results are carefully monitored for potential biases.

• Efficiency - AI can automate time-consuming tasks in the hiring process, such as resume screening and initial candidate assessments. This saves valuable time for recruiters and hiring managers, allowing them to focus on other strategic aspects of recruitment.
• Bias reduction - AI algorithms can help minimise unconscious biases that may influence human decision-making in hiring. By relying on objective criteria and standardised evaluations, AI systems can offer fair and consistent assessments, leading to more equitable outcomes. However, it's important to note that if the datasets used are unrepresentative and/or contain deep-rooted biases within them, then they can amplify these systemic biases, resulting in unfair and discriminatory outcomes.
• Enhanced candidate selection - AI can analyse large volumes of candidate data, including qualifications, skills, and experience, more efficiently than manual processes. This enables recruiters to identify top candidates with the desired skill set and qualifications, improving the chances of finding the best fit for a role.

Disadvantages of AI in Recruitment

AI itself is not inherently biased or discriminatory. Rather, it analyses and makes judgments based on large data sets. If these data sets contain underlying biases or reflect existing societal inequalities, the AI algorithms may unknowingly perpetuate those biases.

• Bias amplification - If AI algorithms are trained on biased or incomplete data, they can perpetuate or amplify existing biases in the hiring process. This can result in discrimination against certain groups or the exclusion of qualified candidates based on factors unrelated to job performance.
• Lack of context and subjective judgement - AI systems primarily rely on data-driven analysis, which may overlook important contextual factors and subjective qualities such as cultural fit, communication skills, or creativity. These aspects are often crucial in determining a candidate's suitability but can be challenging for AI to assess accurately.
• Technical limitations and errors - AI tools are not infallible and can make errors or produce inaccurate results. Technical limitations, such as language comprehension or understanding complex nuances, may impact the effectiveness of AI in evaluating candidates. Additionally, AI systems require regular maintenance, monitoring, and updates to ensure optimal performance.

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