Compliance Requirements- No Escape for Business Owners.

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Rod: My head-to-head partner this month is Dianne Gibert, founder and Managing Director of Certex International, which recruitment organisations will know as the provider of the RCSA's Service Delivery Standard and ITCRA's iDiagnostic. Dianne, your organisation must be at the leading edge of how increased legislation and compliance is impacting recruitment organisations. Dianne: Very much so, Rod. There is quite a significant shift in the level and impact of compliance requirements today than when I first started in this industry around ten years ago. Back then, recruitment agencies had little awareness about their legal obligations, and their practices and protocols did not place a great emphasis on complying with legislative demands. It was more about networking than procedures. This has certainly changed in recent times and generally I see very different behaviour across the recruitment culture today; the industry has clamped down on legal requirements across a range of different areas including safety, privacy, immigration, and superannuation, and recruitment agencies face much more severe penalties for non-compliance. The agencies themselves therefore, have had to become more astute and thorough in reviewing their procedures for compliance, and auditors have had to be even more comprehensive when conducting their audits. Rod: The consequence of all of these compliance requirements is that the barriers to entry to the recruitment industry have risen. There are two ways of looking at this change. The most immediate view is that it is a continuing source of frustration that every part of every business is subject to increasing red tape. And often the new compliance requirement is to satisfy minority interests and is a knee-jerk reaction to some recent event. It wears down owners and managers and stifles innovation because so much energy is devoted to these "internal" issues. The other view is that, at a macro level, increasing barriers to entry is great for the long-term health and viability of the recruitment industry. Even without direct regulation the industry is becoming far more structured and highly regulated. Clients know it is a regulated environment and it will be harder for fly-by-night organisations to gain credibility when the economic conditions become positive, as they will do. Other industries have shown that increased barriers to entry have led to a more professional industry that can brand, promote and lobby effectively. Dianne: Unfortunately one of the pressure points is on small businesses. Unless they have the business expertise and resources that they can dedicate to properly structuring and managing a business with the proper systems in place, it can be difficult for them. That is not to say that all small businesses suffer, though. Some I have seen perform remarkably well, and know exactly what needs to be done to remain sustainable. Rod: What are the changes that are having the most impact on recruitment agencies? Dianne: Recruitment agencies are now expected to thoroughly understand the impact of legal compliance and non compliance in the face of increased risk and harsher penalties. Equally, they are required to demonstrate this compliance and good service both in tenders with new clients as well as in services to existing ones. Also, clients themselves are more savvy. Whereas in the past they often assumed or were ignorant as to whether an agency was adhering to legislative principles, these days they are more knowledgeable about industry requirements and appraise an agency's compliance with necessary procedures. Often, too client and agencies share responsibilities. For example, in the case of safety, the recruitment agency's responsibility of ensuring on-hire worker safety is extended to the host employer who manages these workers on site. In another example, clients often ask for more information about the candidates than privacy permits, such as age and details of criminal records. This "sharing" process requires recruitment agents to be able to negotiate a delicate balance: they must work cooperatively and openly with their clients, but also carefully and firmly draw the line between accountability and information that the client needs to know and that which is unnecessary or prohibited on privacy grounds. Rod: We all hear stories of the penalties associated with some areas of compliance. Are they really that onerous? Are they really structured to be "guilty until proven innocent"? Dianne: If a client (or an auditing body) finds the recruitment agency in breach of these requirements, there is far more at stake than just the agency's reputation: they can be prevented from hiring further staff, can be fined upwards of $100 000, and even risk jail time. In areas like immigration and safety, ignorance about the law is inexcusable so it is imperative that an agency is well acquainted with any and all the changes to relevant legislative obligations. There are examples where agencies have been caught and penalised, but until now this is less common that one would expect. I think the change in the compliance climate is going to make a difference in future, though. It will no longer be acceptable to assume that no-one will find out because no-one really cares anyway. The risks and the consequences are much higher than they ever were. Rod: Thankfully, there is help available. One of the biggest reasons why we can discern such an improvement in agency compliance is due to the laudable support that the RCSA and ITCRA provide for agencies. Globally, the industry associations (APSCo, REC, ASA etc) are taking a leading role in ensuring the industry keeps up in each region. Dianne: They regularly host training programs and deliver information bulletins to improve an agency's skills and understanding about their duties in law - the most recent activity is around the change to immigration law, and more training is planned in relation to the Privacy amendments. There are "health checks" and certification programs which support agencies in meeting their obligations. This chain of regulation is a risk management strategy that limits the likelihood that a regulated agency will be found in breach of legislative requirements. Does all of this activity have an impact on the "saleability" of a business? Rod: Absolutely. There is a dramatic change in how business quality is perceived. The corporate reputation of an organisation is more transparent than ever before. It is relatively easy to see if an organisation has kept its house in order over the preceding years of operation. A few years ago certification to the recruitment delivery standard or the achievement of an appropriate quality standard was all that was available. Today when an organisation is being reviewed there is so much more. There continues to be a need to "do the right thing" but there is also an absolute need to prove that you are doing the right thing. That is a major change - the procedural systems that need to be in place will impact your organisation's ability to survive external review. Dianne: Completely agree with you here Rod. I often say that you need appropriate procedures in place and the records to show that you do what you say you do. The procedures need to be documented; the records need to be accessible; and you need to check this regularly. It is not enough to say that you told your staff once during induction that this is what you expect of them; that is not sufficient to show compliance. Certainly begs the question whether, at the very least, good compliance processes increase the value of your business? Rod: No, not today. It just becomes an area that you need to have in place to enable your business to gain a potential buyer's interest and then pass due diligence requirements. In the longer term, the multiple paid for recruitment organisations are likely to rise because of this increased barrier to entry. So what am I saying here: in the future, as the barriers to entry continue to rise, and legislative requirements become more onerous, fewer organisations will be able to abide by the necessary requirements to keep their business compliant with the law, and the cost of establishing a new business and investing to the required level of sophistication rises. On the other hand, agencies that diligently review and update their processes, ensuring that they tick all the right boxes with all the right people, become more and more valuable to potential buyers. The recruitment industry is at an interesting point in its evolution. Dianne Gibert is the founder of Certex International Pty Ltd (previously Fathom Business Architects). Certex is an accredited certification body providing certification services in the RCSA SDS and other recruitment industry standards, as well as the well known 9001 Quality Management, 4801 Occupational Health and Safety and 14001 Environmental Management standards. If you have any question about the RCSA Service Delivery Standard or certification standards relevant to the recruitment industry, please contact Dianne on (03) 9585 8241 or email info@certex.com.au.