With advances in technology, businesses are increasingly transitioning from traditional paper-based human resources systems to digitized cloud-based systems. These platforms offer a myriad of benefits, including improved efficiency and accessibility, cost-effectiveness, and a streamlined workflow. However, the use of such digital systems comes with its legal considerations, especially concerning data protection, employee privacy, and compliance with employment laws.
Understanding Data Protection Laws
Data protection is a critical legal consideration when using cloud-based HR systems. The General Data Protection Regulation (GDPR) and the UK’s Data Protection Act 2018 are two key pieces of legislation you need to be aware of. They provide a framework for collecting, storing, and using personal data, and non-compliance can result in severe penalties.
The GDPR, despite being an EU regulation, still applies to UK businesses dealing with data of individuals located in the EU. The Data Protection Act 2018, on the other hand, is UK specific, and sets out the framework for data protection law in the UK.
Personal data, under these laws, refers to any information relating to an identifiable person. In the context of cloud-based HR systems, this would include information about employees, such as their name, email address, payroll details, and performance records.
As a business, you must ensure that any personal data you collect is processed lawfully, fairly, and transparently. You should also take appropriate technical and organisational measures to ensure the security of the data, including protection against unauthorised or unlawful processing and accidental loss, destruction, or damage.
Employee Privacy Considerations
Respecting and maintaining employee privacy is another legal consideration for UK businesses using cloud-based HR systems. Employment laws, such as the Employment Rights Act 1996 and the Human Rights Act 1998, give employees the right to privacy in the workplace.
This means businesses must be careful when monitoring employee activities through cloud-based HR systems. While monitoring can be necessary for various reasons – such as ensuring performance standards or preventing illegal activities – it must be done in a way that respects employee privacy rights.
For instance, before implementing a system that tracks employee activity, you should inform employees about what data will be collected, why it is being collected, and how it will be used. This should be clearly outlined in your company’s privacy policy.
In addition, any monitoring must be proportionate and not excessively intrusive. If you decide to monitor employee emails, for instance, you should only review the metadata (such as time and date of emails) rather than the content, unless there is a justifiable reason to do so.
Compliance with Employment Laws and Policies
Employment laws and company policies also need to be considered when using cloud-based HR systems. The systems should be used to support and enforce these laws and policies, not to infrive upon them. This includes laws and policies related to discrimination, harassment, and fair working conditions.
For example, the Equality Act 2010 prohibits discrimination in employment based on protected characteristics like age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. Therefore, any data collected and stored using a cloud-based HR system should never be used to discriminate against employees based on these protected characteristics.
Your company’s own policies on issues like harassment, bullying, and equal opportunities must also be upheld when using these systems. Any data collected should be used in a fair and unbiased way, and steps should be taken to ensure it cannot be used for malicious purposes.
Understanding the Role of Payroll in Legal Compliance
Payroll is a key component of HR systems, and it also comes with its own set of legal considerations. The legislation governing payroll in the UK includes the Employment Rights Act 1996, the National Minimum Wage Act 1998, and the Pensions Act 2008, among others.
As a business, you must ensure that your cloud-based HR system is capable of accurate and timely payroll processing, in line with these laws. This includes accurately calculating wages, tax deductions, and pension contributions, and providing employees with regular payslips.
You are also required to keep certain payroll records for a minimum period of time. The Employment Rights Act 1996, for example, requires employers to keep pay records for at least three years, while HM Revenue and Customs (HMRC) requires records to be kept for not less than three years after the end of the tax year to which they relate.
The Risks and Consequences of Non-Compliance
Non-compliance with the legal considerations when using cloud-based HR systems can have serious consequences for your business. This includes financial penalties, damage to your reputation, and even criminal prosecution.
For example, under the GDPR, businesses can be fined up to 20 million euros or 4% of their global turnover, whichever is greater, for serious data breaches. In addition, non-compliance with employment laws can result in employment tribunal claims, which can be costly and time-consuming to defend.
Therefore, to avoid these risks and consequences, it’s crucial to understand and address the legal considerations associated with using cloud-based HR systems in your business. This includes keeping up-to-date with changes in legislation, regularly reviewing your data protection and privacy policies, and ensuring your system is capable of accurate payroll processing.
Legal Aspects of Cloud Security and Data Breaches
As an integral part of the legal considerations, businesses need to be aware of the laws and regulations pertaining to cloud security and data breaches. The use of cloud-based HR systems necessitates the transfer and storage of data on remote servers, which opens up the possibility of data breaches. In the event of a data breach, both the Data Protection Act 2018 and the GDPR stipulate that businesses have a legal duty to report the breach to the relevant authorities and the individuals affected within 72 hours.
Moreover, the Network and Information Systems Regulations 2018, also known as the NIS Regulations, set out the measures that businesses must take to ensure the security of their networks and information systems. This includes measures to prevent data breaches, such as implementing appropriate technical and organisational measures to ensure the security of personal data.
Businesses must also ensure that their cloud-based HR system provider has robust security measures in place. This should be clearly outlined in the service level agreement (SLA) with the provider.
In addition, businesses must be aware of the legal implications of transferring data outside the EEA. The GDPR sets strict rules on data transfers to countries outside the EEA, and businesses must ensure they have adequate safeguards in place if they are transferring personal data outside the EEA.
The Role of HR in Ensuring Legal Compliance
The use of cloud-based HR systems has significant implications for the role of HR in ensuring legal compliance. HR departments are primarily responsible for ensuring that the business complies with the various legal considerations associated with using these systems. This includes understanding and applying data protection laws, respecting employee privacy, complying with employment laws, and ensuring payroll compliance.
HR should also play a leading role in educating employees about their rights and responsibilities under these laws. This could involve providing training on data protection and privacy, as well as ensuring employees understand the company’s policies on these issues.
In addition, HR should work closely with the IT department and the cloud-based HR system provider to ensure the security of the system and the data it contains. This could involve conducting regular security audits and risk assessments, as well as ensuring that any data breaches are reported and managed in accordance with the law.
In conclusion, the use of cloud-based HR systems presents a range of legal considerations that UK businesses must address. These include understanding and complying with data protection laws, respecting employee privacy, ensuring payroll compliance, and dealing with cloud security and data breaches.
While these considerations can be complex and challenging, the benefits of using cloud-based HR systems often outweigh the challenges. These systems offer improved efficiency, cost-effectiveness, and a streamlined workflow, which can contribute to the success and growth of your business.
However, it’s crucial that businesses take the necessary steps to understand and address these legal considerations. This includes seeking legal advice, keeping up-to-date with changes in legislation, regularly reviewing and updating policies, and ensuring that HR plays a leading role in promoting compliance.
By doing so, businesses can utilise cloud-based HR systems in a manner that is both legally compliant and beneficial to their operations. In an increasingly digital world, it is these businesses that are likely to thrive and succeed.
