What are the Different Types of Compliance in Business?

5 min

Understanding compliance in business is essential for business owners and HR managers alike....

JCW Resourcing

By JCW Resourcing

Understanding compliance in business is essential for business owners and HR managers alike. In essence, company compliance can prevent your brand from falling foul to financial penalties, reputational damage and legal action. Failing to acknowledge compliance altogether can even result in the closure of your organisation. But how many business owners and HR managers truly know the different types of compliance?

Thankfully, to ensure you understand compliance, we’ve developed this guide to detail the different types of compliance and outline what compliance is. 

In this guide, you will discover the following:

  • What does compliance mean in business?
  • The different types of compliance in business you should know
  • Regulatory Compliance 
  • Corporate Compliance
  • HR Compliance
  • Data Compliance
  • Health and Safety Compliance
  • Financial Compliance

What does compliance mean in business?

HR managers and business owners should know what compliance is and understand how it affects their daily operations. In essence, compliance in business applies to any and every sector, from finance to healthcare. It involves abiding by various rules, laws and regulations, whether internal or external. When we say internal and external compliance, we’re referring to the following:

Internal compliance involves adhering to the rules, protocols, and codes of conduct a business sets internally. These internal policies may cover a broader range of topics, such as the company's ethical values, how it handles customer data, how it deals with internal conflicts, and its stance on how it avoids violating legal and regulatory standards to protect its reputation with shareholders and stakeholders.

External compliance refers to complying with the rules, regulations, and industry standards set by government agencies and other external bodies. External compliance can differ from industry to industry but can include tax compliance, employment law compliance, data protection and health and safety. This type of compliance is mandatory for companies of all sizes, and a failure to comply can result in fines, penalties, reputational damages or even closure.

Business compliance is vital for a whole host of reasons, from building trust and transparency with shareholders and stakeholders, maintaining the health and safety of your employees to mitigating the risks of data breaches to reducing the risk of unintentionally violating rules and regulations that could put your organisation in reputational and financial peril.

There are also various types of compliance in business. Our next section will highlight the key ones that any HR manager or company owner should know.

The different types of compliance in business you should know

Now that you understand what compliance in business means, it’s time to turn our attention to the different types of compliance. From regulatory, corporate, HR, data, health and safety and financial compliance, whether you’re an HR manager or business owner, these are the types of compliance you should know about.

Corporate Compliance

Kicking off our list of the different types of business compliance you should know about is corporate compliance, otherwise referred to as internal compliance  - something we touched on earlier. Corporate compliance is, therefore, the internal policies and procedures a company sets out to adhere to, revolving around a standard of behaviour each employee should align themselves to.

Establishing this type of company compliance involves the business defining the standards it wants to operate by. These standards can have the input of HR managers, business owners and compliance experts such as an internal or outsourced Chief Compliance Officer. 

Often woven into regulatory compliance and the company culture, these standards act as strategic solutions that embody how the organisation strives to behave within its industry, from recognising and reporting on potential violations such as unethical conduct or data breaches to how it avoids internal conflicts. 

Additionally, corporate compliance policies oversee aspects of business compliance, such as adhering to industry standards, how staff training and development is handled, how internal regulatory audits and risk management are carried out, and how often. These standards also include consequences for individuals who violate the policies, with disciplinary actions such as dismissals being the most serious.

Corporate compliance in business is essential for many reasons, such as:

  • Protects consumers and stakeholders: By ensuring your business operates in an ethical and responsible manner, corporate compliance can protect your consumers and stakeholders from harm. For example, this includes protecting consumers from unsafe products or services, unfair practices, and misleading information. It also protects stakeholders, such as staff, investors, and the environment, from harm caused by unethical or illegal business practices.

  • Mitigates legal and financial risks: Non-compliance with regulations can lead to legal and financial risks, whether it be fines, legal penalties, or reputational damage. By complying with internal regulations, businesses can avoid these risks and protect their financial well-being.

  • Enhances brand value: If your business is known for implementing solid internal compliance policies, it can enhance a company’s brand value and reputation. This can strengthen employee, customer, and investor loyalty and create a stronger competitive advantage. In turn, this can facilitate growth as your brand value attracts more business.

On the other hand, non-compliance or a lack of internal standards can damage your reputation, making it more challenging to attract and retain employees, customers and investors.

  • Promotes ethical business practices: Corporate compliance encourages organisations to act ethically and responsibly, which can lead to a positive and productive workplace where a greater sense of corporate social responsibility is present, and staff morale is increased.

  • Improves operational efficiency: A well-thought-out internal compliance policy can improve your business's operational efficiency, as it often helps eliminate risks such as data and financial breaches that could lead to costly disruptions or legal problems.

Regulatory Compliance

Next on our list of the different types of business compliance you should know about is regulatory compliance. Unlike corporate compliance, which is internal, regulatory is otherwise known as external compliance. Therefore, regulatory compliance involves specific rules and regulations set out by the government and external bodies that an organisation must adhere to from a legal perspective. 

These regulations can be local and international and vary for different businesses depending on the organisation's size and the sector and location in which your company operates. As regulatory compliance is legally binding, failing to abide by the necessary regulations can lead to fines, reputational damage, business closure and legal action.

As you read on, you’ll notice that regulatory compliance weaves itself into some of the other types of compliance we’ll discuss in this guide. However, before we move on, here are some key examples of the kinds of regulatory compliance bodies you should know about include:

  • The Financial Conduct Authority (FCA) regulates the financial services industry, including banks, investment firms and insurance companies.

  • The Information Commissioner's Office (ICO) helps regulate the use of personal data, including data protection and privacy laws.

  • UK employment law refers to many legalities regulating employee and employer relationships. This type of regulation compliance covers aspects such as hiring and firing, pay, recruitment, contracts, working hours, health and safety and more.

  • The Health and Safety Executive (HSE) supports the regulatory compliance of health and safety in the workplace, including environmental protection.

  • The Environment Agency (EA) looks after environmental protection regulations, including air pollution, water pollution and waste management.

Data Compliance

Data compliance is another of the most significant types of compliance you should know about. This type of business compliance refers to following the standards and regulations surrounding the security and storage of sensitive data and information. 

The forms of data relevant to this compliance can include any personal information a company stores about its customers and employees, such as:

  • Contact information, including names, phone numbers and email addresses
  • Demographic information such as age, gender, race and marital status
  • Location data such as addresses
  • Financial details such as bank and credit card information
  • Biometric data, such as fingerprints and face ID

In accordance with data compliance, organisations are responsible for keeping these types of data secure and free from exploitations such as identity theft, fraud, corruption and other misuse of personal information. Failing to adhere to data compliance regulations can lead to a complete loss of trust from a company's employees and clients, damaging the business's reputation whilst possibly leading to legal action. 

Regarding data compliance, the regulatory standard that typically comes to mind is GDPR - the General Data Protection Regulation - part of the UK's Data Protection Act 2018. GDPR, through the Data Protection Act, is a statutory legislation on how a company uses an individual's data. It even applies to the government. 

The purpose of GDPR is to help build transparency between businesses and their employees and customers, allowing staff members and customers to be aware of how a business stores their information and how it is used. For example, a company must ask for consent before using a customer's email to send them information, such as marketing and newsletters about their products or services.

There are six lawful bases for processing personal data under Article 6 of the GDPR. Whenever personal data is processed by a business, at least one of the six legal bases must be applied. These six lawful bases include the following:

  1. Consent: The person has clearly consented to having their data processed for a specified purpose.

  1. Contract: The data being processed requires a contractual agreement to be drawn up, perhaps at the specific request of the individual whose information is being processed. 

  1. Legal obligation: The processing of the individual's data must comply with the necessary laws and regulations.

  1. Vital interests: The processing of the data is essential to protecting the vital interests of a person - perhaps even safeguarding their life.

  1. Public interest or official authority: Data processing is required to complete a task conducted in the public interest or by an official authority in line with necessary laws.

  1. Legitimate interests: Data processing is required for the legitimate interests pursued by the business or associated third parties. This cannot apply if interests are overruled by the rights and freedoms or interests of the individual the data is coming from.

HR Compliance

Another of the different types of compliance in business you should know about, especially if you’re an HR manager, is HR compliance. HR compliance refers to adhering to the various standards laid out by employment laws, from payroll, workplace safety and discrimination to hiring and firing. It also covers workplace aspects such as contract creation, ensuring all permanent and contract agreements meet legal and regulatory requirements, from hourly wages to legal working hours.

HR managers are essential for ensuring this type of compliance is followed by the business but also by each employee. Here, HR compliance must be shared with the wider organisation so that each staff member has an awareness and understanding of HR compliance and ultimately abides by the employment laws and the company’s stance on compliance. 

While dealing with recruiting and onboarding to training and development, amongst other responsibilities, an HR department will also ensure the company remains up-to-date with the latest compliance updates, legal requirements, and industry best practices.

Below is a summary of the things an HR manager should consider including in an internal policy to support their company’s efforts to remain compliant:

  • Establish a definition of what compliance means to the business
  • Develop a commitment to creating a culture of compliance 
  • A list of employment laws and regulations - including those most relevant to the business
  • Implement a process for identifying and reporting violations
  • Training and education schemes 
  • Hiring and firing policy 
  • Payroll and benefits
  • Workplace safety
  • Discrimination and harassment
  • Data privacy

HR managers should also have a system for monitoring and auditing compliance, ensuring the policies are effective, understood and followed across the business. They should also be updated in accordance with the latest laws and regulations.

Businesses should also provide training to their staff on HR compliance topics. Doing so can help ensure that employees are aware of their rights and responsibilities and know how to report any violations of HR policies.

HR compliance is important to any organisation's overall risk management strategy. By ensuring they comply with all necessary laws and regulations, companies can protect themselves from legal liability, create a positive and productive work environment, and protect their reputation.

Health and Safety Compliance

Health and safety compliance is next on our list of the different types of compliance in business. It involves abiding by the necessary standards and regulations that govern the health, safety and well-being of employees in the workplace. This type of company compliance consists of implementing various procedures to foster a culture of a safe working environment where potential accidents, injury risks and hazards are mitigated. 

Similar to other types of compliance in business, a failure to establish health and safety policies in your organisation can lead to financial penalties, reputational damage and legal action, negatively branding your company as being known for having an unsafe work environment. 

Developing internal health and safety policies within your business can lead to benefits such as increased productivity levels and reduced staff turnover and absences due to employees appreciating the efforts made by the employer to make them feel safe at work.

Companies must establish policies for identifying and assessing potential hazards and risks to ensure health and safety standards compliance. These policies should be communicated internally, and employees should be trained to understand the expected standards and how to remain safe in the workplace.  

Maintaining a proactive approach to health and safety compliance in business is supported by the Health and Safety Executive (HSE). The HSE is an independent regulator for UK work-related health, safety and welfare. Its mission is to prevent work-related injuries, illness and death. 

For companies seeking guidance on how to instil effective health and safety into the workplace, the HSE provides advice such as:

  • Develop an understanding of the Health & Safety at Work Act 1974
  • Appoint someone to manage your company's internal health and safety
  • Identify potential hazards and risks
  • Conduct risk assessments to mitigate hazards and risks
  • Plan and develop an internal health and safety policy
  • Offer information and training to your staff on your health and safety policies 
  • Maintain first aid standards
  • Report and document any accidents or illnesses

Financial Compliance

Our final entry to our list of the different types of compliance in business you should know about is financial compliance. Financial compliance can be defined as a company adhering to the necessary financial laws and regulations outlined by regulatory bodies. Company compliance in relation to finance applies to organisations of all sizes regardless of the industry they operate in. 

Financial compliance in business is something that continues to evolve, meaning organisations must have a deep knowledge of the laws that apply to their company to ensure they remain compliant. If a business is non-compliant and fails to adhere to the necessary financial regulations, it can lead to fines and reputational damage, which can limit or suspend the company from doing any type of trade. In some cases, this ultimately leads to the organisation going out of business. 

The Financial Conduct Authority (FCA) is the UK's primary financial services sector regulator. The FCA enforces financial compliance rules and investigates and prosecutes financial crimes. Additional regulators in the UK that have high prominence in the financial world include the Bank of England (BoE) and the Prudential Regulation Authority (PRA). 

Learn more about these regulators by reading our guide on why financial crime compliance is crucial for your business. This guide also offers valuable details about the key roles you could recruit for to ensure compliance is met within your company. These compliance jobs include: 

  • Chief Compliance Officer
  • Financial Crime Compliance Officer
  • Anti-Bribery and Corruption Officer
  • Fraud Analyst
  • Money Laundering Reporting Officer

Adhering to financial compliance laws and regulations can bring several benefits to your business, such as:

  • Reduces financial risks: Maintaining financial compliance can help your company identify and mitigate financial risks, such as fraud, money laundering, and market abuse. By establishing clear procedures and controls, your business can minimise potential losses and protect your assets.

  • Enhances your reputation: Building a strong reputation of financial compliance is key for attracting and retaining customers and investors. If your business demonstrates its commitment to ethical and legal practices, customers and investors will gain confidence in their long-term stability and financial health. They will, therefore, be more inclined to partner with you.

  • Improves customer trust and loyalty: Consumers are increasingly concerned about the safety and security of their financial information. So, by adhering to data protection and financial regulations, your company can build trust and loyalty, leading to increased customer satisfaction and retention. This can also transfer to the retention trust, loyalty and retention of your staff, who will appreciate your commitment to financial compliance.

  • Helps you access new business opportunities: Compliance with international financial standards can open doors to new markets and partnerships. So, if your business is compliant with global regulations, it can expand your reach and allow you to tap into new opportunities for growth.

  • Gives you a competitive advantage: Financial compliance can serve as a differentiating factor in today's competitive business landscape. Your business can achieve a competitive edge by demonstrating a strong commitment to compliance over those that do not.

Final thoughts on the different types of compliance in business

Understanding the diverse landscape of compliance in business is paramount for safeguarding against financial penalties, reputational damage, and legal repercussions. This comprehensive guide has shed light on various types of compliance, ranging from internal corporate compliance to external regulatory compliance, HR compliance, data compliance, health and safety compliance, and financial compliance.

Business owners and HR managers must recognise that these types of compliance are not a one-size-fits-all concept; it encompasses the establishment of various internal policies and adherence to external rules, regulations and laws. Having a thorough understanding of these types of compliances and implementing internal policies are integral to your company's overall risk management strategy, fostering a culture of transparency, responsibility, and ethical business practices.

For more information on compliance in business, discover our guide on the 5 reasons why you should hire a chief compliance officer. Alternatively, scroll below to see how we can connect you with the compliance specialists who can instil compliance into your business.  

Seeking support from a specialist compliance recruitment agency?

If you’re part of a fast-growing business and are searching for the market’s top compliance specialists to help implement compliance into your organisation, we can help. As a trusted compliance recruitment agency, we offer strategic solutions to support companies in key industries such as asset management, banking, consulting fintech and insurance. We take a tailored approach to enhance your search for the best compliance talent who can safeguard your organisation's future.

Contact us today to see how we can support your compliance recruitment needs.