Pharma: achieving compliance piece of mind with HRO

by Marianne Langlois

All industries have had to evolve in some form over the past decade – and the pharmaceutical and bioscience industries are no different. Globalization coupled with an influx in expiring patents, and long research and development cycles have caused many pharmaceutical and medical companies to focus on increasing efficiencies and driving cost savings in order to ensure prosperity.

However, while reducing costs may be a top priority, bioscience, pharmaceutical and medical device companies cannot do it by weakening their focus on compliance. Compliance is a key issue for the pharmaceutical industry and non-compliance can result in billions of dollars in fines, audits and recalls. Despite the dangers of non-compliance, recent research found that compliance team budgets dropped or remained flat for pharmaceutical organizations. With fewer resources devoted to compliance, companies in these industries must leverage all tools available to ensure they are adhering to regulations.

One way that many pharmaceutical and bioscience organizations can focus on compliance while saving money and resources is by leveraging human resources technologies and outsourcing. Many pharmaceutical companies already employ HR technologies and outsourcing to streamline administrative tasks and cut costs in payroll, talent management, benefits administration and other HR functions. HR technologies and outsourcing can also help companies focus on compliance related to human resources management, compensation and financial reporting. By understanding what to look for in the right HR process provider partner, pharmaceutical, bioscience and media device companies can build strong infrastructures for managing HR that also provide immense gains in compliance.

Achieving Payroll and Compliance Harmony

Human resources should be top of mind when companies think about compliance as human capital expenses can account for 40 to 60 percent of a company’s expenditure – resulting in HR departments managing a large percentage of an organization’s finances. With HR transactions so inextricably linked to a company’s financials, the operations and costs of HR can have a huge impact on compliance.

The focus on compliance is especially important in payroll as at all times companies must focus on both local compliance and global implications if they wish to succeed in the global marketplace and provide their employees with quality services. Organizations must ensure they are compensating their employees according to local law, while being mindful of the impact this can have on their global workforce. Global trends can affect local laws and vice versa, reinforcing the importance of having a command of both types of regulations.

HR technologies can play a pivotal role in helping pharmaceutical companies manage local and global compensation regulations. By leveraging outsourced payroll solutions, pharmaceutical companies can gain visibility into the compensation landscape of their entire workforce. This is particularly valuable for companies with a multi-country employee base, as organizations can then compare salaries and compensation across the entire workforce to ensure consistency, fairness and adherence with the company’s payment standards.

In addition to granting visibility, outsourced payroll solutions and HR technologies can also help organizations stay abreast of legislative changes that impact their workforce. Supporting any outsourcing solution is a dedicated team of global compliance consultants who stay informed on legislative and regulatory changes. These consultants monitor legislative changes throughout the governmental, legal and pharmaceutical industries all over the world. When new laws or regulations arise, this team leverages the company’s HR technologies to implement the necessary processes and procedures into the payroll system without intervention from the company.

Examples of the importance and usefulness of compliance oversight related to payroll is illustrated in legislative changes regarding the minimum wage increase and older worker support measures. For companies with these workforces, ensuring that their payroll processes accommodate these regulations is key, as well as understanding how these changes affect their overall global employee base. For this reason, outsourced payroll technologies are vital as they marry legal compliance expertise and compensation needs to help companies manage local changes in an effective and efficient manner.

Not only do HR technologies allow for stronger compliance controls as they relate to financials and legislative changes, they also support a company’s HR and compliance activities with employees. For example, data resulting from these technologies can be used to ensure all employees are participating in the compliance activities and training, as the data can reveal which employees have confirmed their knowledge of the code of conduct and participated in compliance learning events. Additionally, these tools provide a “one stop shop” of resources related to compliance, empowering employees to take ownership in their understanding of and activities regarding compliance. Analyzing HR data can also help quantify the makeup of a workforce (percentage of employees in sales, for example). By comparing this information against data on compliance breaches and SLA, companies can better understand which departments may need stronger oversight and avoid fines and fees related to late payroll and tax filings.

Certified in Compliance

In addition to remaining compliant to local pay regulations, pharmaceutical companies must also be aware of requirements regarding financial reporting to avoid hefty fines or additional audits. Compliments of the Sarbanes-Oxley Act – which requires a company’s annual confirmation that its internal controls over financial reporting are effective – accuracy and transparency around financial reporting continues to be critically important. Underestimating or overlooking human resources expenses can lead to extremely skewed financial reporting – a major risk for those in the pharmaceutical industry. As such, it is vital that organizations have an accurate picture of their workforce and the expenses related to the outsourcing of human resources.

When selecting a HR outsourcing provider, one of the first things that pharmaceutical companies should inquire about is the provider’s Service Organization Control Reports or SOC1. The SOC1 report verifies that a service organization (HRO provider) has completed an in-depth audit of its internal control processes, including IT and enterprise wide controls, related to its outsourced services. This report assures outsourced services are being properly performed and monitored in order to ensure the successful presentation of the client’s financial reports. The audit specifically:

  • provides an independent, third-party assurance around the adequacy of internal controls
  • demonstrates a sound internal control environment over financial reporting data
  • establishes an avenue for identifying opportunities for improvement in business processes and management of information technology operations

Ensuring your provider has successfully completed the SOC1 is key to a compliant HR outsourcing engagement. Other certifications pharmaceutical companies should look for include:

  • SSAE 18- the more advanced audit evolution of SAS 70, which requires a written assertion regarding operating effectiveness and better aligns with international standards
  • ISO 9001- to ensure efficient and effective quality management processes are in place
  • ISO 27001- regarding information security to validate that an employee population’s personal data is safe
  • BS 25999- focused on business ensure the resiliency of service operations despite disruptions beyond our control

Keep an Eye on Compliance

Pharmaceutical, bioscience and medical device companies face a number of challenges including a tough economy, continual changes in the healthcare space and a rise in generics. The last issue they need to contend with is compliance. With so many challenges to tackle, companies must manage compliance in a streamlined and efficient way, to allow time and resources to be spent on addressing marketplace and industry changes. By leveraging HR technologies and outsourcing, organizations can efficiently manage numerous functions of HR while keeping a close eye on compliance.