Employment Regulation Looming: RegTech Takes Center Stage

The USA is experiencing a period of legislative overhaul for businesses as the country seeks to kickstart growth, and employment is next on the agenda. According to a Harvard Business Review profile in April, three key laws will soon start impacting businesses of all sizes, requiring stricter governance over contracts, equitable pay, and keener measurements of the intangible asset, which is human capital.

With these new demands on the needs, there will be fresh calls for businesses towards the regtech sphere as they look to shore up their own regulation and ensure they’re meeting those demands. That third requirement, over human capital, is the most interesting and perhaps an area of innovation for regtech.

Understanding Human Capital

The source of the new rules on ‘human capital’ comes from the SEC, interestingly. The Harvard Business Review found that up to 90% of share prices come from intangible measures and primarily human input; the SEC seeks to put a number on that to aid financial compliance and monitoring.

As Bloomberg has analyzed, that isn’t necessarily an easy task. Building a prescriptive approach to rating the value of a workforce is quite difficult, but it is a challenge that regtech can meet.

Relationships With Third Parties

An interesting way to observe this is by considering business trust. Building trusted relationships with suppliers and other third parties will result in greater confidence in the train and a boosted stock price; it improves relationships between businesses and instills confidence.

Observing the workforce as a partner in this sense is one way to measure value. Where regtech can play a role is in monitoring this. Using workforce management software that uses a regtech component to ensure compliance with workers’ rights measures, and using data from this, is a great place to start.

Closing Out Contracts

The Federal Trade Commission is at the heart of the push towards the banning of noncompete contract clauses. According to their analysis, these clauses, which allow employers undue power over their hires, are resulting in $300 billion of lost wages every single year as employees are unable to capture their ambition.

This is an area of clear improvement in which regtech can become involved. Sophisticated monitoring of contracts and the use of regtech tools to ensure that such clauses are highlighted and removed from prospective contracts, as well as perhaps similar but compliant wording devised, will be important. This is especially true for notoriously noncompete-friendly industries like finance and tech.

Improving Wage Equality

Despite attempted improvements in wage equity, Pew Research shows that not much has changed in the past two decades. Women earn around 80% of what men earn within the same grade bracket, and there are still far more men in senior grades within their businesses. This is unacceptable and is why legislation is stepping in to act.

Regtech once again has a strong role to play here, and perhaps one in which it must innovate. It is fairly routine to use personal data to create blunt comparisons of salary and wealth distribution within the business. This is even compliant with modern data rules.

Regtech Helping With The Finer Details

What requires more finesse is where job grade, seniority, wage structure, and history come into the mix, and regtech can help to ensure these comparisons are made while still obeying regulatory requirements over data protection and how workers of all demographics should be treated.

There’s also another opportunity here – to start looking at the measurement of human capital against wages. Again working within the regulatory framework, the comparison of data from the first regulatory change against data on gender will help to present a fuller picture. This will help in ascertaining why women within the business earn less and perhaps where they should earn more.

Employment Regulation And The Regtech Sphere

Lots to work on in regtech, then, in terms of business employment law. The interesting thing for professionals within the regtech sphere is that it’s all constructive and innovation-leading changes that are afoot. All of the stated goals of new federal legislation chart unknown waters, but regtech, with the expert view of compliance and how new law can operate within that, will be at the forefront.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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