Get HR working for your regulatory obligations

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The words regulation and compliance conjure up thoughts of the FSA and impending regulation in January 2005. And let’s not forget that, the new regime apart, employment legislation continues to become more complex and potentially more costly.

At the moment we are busy with FSA applications and thinking ahead to becoming fully compliant by the end of the year. The next few months are going to be crucial for reviewing our business policies and procedures. This is the perfect time to make business decisions at senior level not only to comply with regulation but to include some other considerations.

Unless you have the luxury of a dedicated Human Resources (HR) professional in your organisation this is an area that can prove a headache to get right and is potentially very costly if incorrect. Human Resources (HR) is an area of expertise in its own right and involves keeping up to date with an ever increasing amount of employment legislation. But an examination of the various FSA sourcebooks such as the Prudential Requirements, Senior Management Arrangements, Systems and Controls, and Training and Competence, reveal that those businesses that follow good HR practise are already well on the way to meeting the requirements.

Ensuring that your staff are of good repute is referred to in PRU 9.1.8 and 9.1.10. Careful consideration of this is needed when recruiting new employees regarding the information that you gather on them as part of the checks you do prior to confirmation of offer, or their start date. TC 2 makes specific reference to the recruitment of staff advising retail clients, which means you need to take into account the knowledge and skills of the individual in relation to the role and also take reasonable steps to obtain sufficient information about that individual’s previous relevant activities and training. These aspects need to be incorporated into your selection process. SYSC 4 presents guidance notes on whistle-blowing. A good way to communicate what this means to staff is to introduce a Public Interest Disclosure policy and ensure all employees have read and understood it.

There are other implications too.

• What if one of your employees cannot demonstrate their competence in line with the T&C requirements? For example, cannot pass the required knowledge ‘tests’ or cannot prove themselves to be competent in a role play or observation scenario? What do you do?
• You find a member of staff has breached a company procedure, which in turn means you are in breach of FSA regulation. You are furious and want to dismiss them immediately….but can you?
• A new member of staff is refusing to attend the training workshops they are required to as part of their T&C training plan. They say it is not in their contract. What can you do?

Don’t forget, your employees are as affected by change resulting from regulation as you are. They will see changes in company policy, procedures, they way they do things, the monitoring of their work, the training and assessment of their competency. They may feel quite unsettled. What if they don’t like what they see? What if they don’t want to do what you require? Where do you stand?

So, out of all this comes the need for a good Disciplinary Policy, a Public Interest Disclosure policy (or an alternative way to explain whistle-blowing to employees), up to date contracts of employment that make reference to industry regulation and T&C, and a very thorough recruitment process to complement FSA, employment law and the Data Protection Act.

Employment law is designed to protect the employee. Unless you take some positive steps to protect you, as an employer, then you may well find yourself in a disadvantaged position, and one that requires a lot of work on your part to solve.

Yes, having a dedicated human resources function ensuring the company complies to the ever increasing employment legislation, may be a luxury. But getting it wrong will cost time, money and add to the number of pressures you have to deal with. It is unfortunate that a good employer doesn’t make headline news, but you can be sure that an employer who gets it wrong and finds itself at an Employment Tribunal will do. And now, with FSA around the corner it is a great time to consider what HR disciplines you need to get right as a management team.

It could be that this forms part of someone’s role – they don’t necessarily have to be HR experts, but they could be the person responsible for ensuring HR practices and procedures are implemented and followed within the organisation. Expertise can be bought in from a many number of willing suppliers. However, make sure you choose one that understands our industry and FSA regulation as well. If employment law and FSA regulation don’t work together in order to produce your HR policies, you may find that when you need to rely on them they may not do the job as well as you had hoped….or indeed as well as you need them to!

This article was written by Elizabeth Mills, Director, Broker Network
An edited version of this article was published in Insurance Times