Why Most HR Software Consultants Miss Critical GovCon Compliance Requirements

A well-configured HR system can feel like the backbone of a thriving organization by streamlining processes, enhancing employee experience, and offering powerful data insights. However, even the most advanced HR technology can quickly become a liability if one critical element is overlooked - compliance. Government contractors risk turning their greatest HR asset into a hidden source of vulnerability if they fail to consider compliance in their implementation strategy.

Implementing an HRIS is a complex initiative, and many organizations turn to consultants to guide them through the process. Many consulting firms specialize in HRIS technical functionality, system configuration, and hitting go-live expectations. While these implementation skills are a requirement for government contractors, compliance is the critical piece that is often overlooked.

In this article, we will explore the risks of standard HRIS implementations and why a “compliance-first” approach is not just beneficial, but essential for government contractors. Specifically, we will address the following:

• The Risks of Traditional HRIS Implementations: How skipping compliance considerations during implementation can lead to audit failures, inaccurate reporting, and contract jeopardy.
• Critical Compliance Areas Often Missed: We will discuss the essential areas of compliance that are often missed, such as OFCCP reporting, EEO tracking, DCAA-compliant timekeeping, and labor category alignment.
• What a Compliance-First Implementation Looks Like: Learn how to implement an HRIS that supports your people but also protects your business by aligning with the non-negotiable compliance landscape unique to government contractors.

Whether you are preparing for a new HRIS implementation or re-evaluating your current HR technology setup, this article will help you identify red flags and guide your team toward a smarter, safer HRIS strategy. For more on selecting the right system, read our article on how to choose a human resources management technology solution.

The Problem with Most HRIS Implementations

For many government contractors, implementing an HRIS is a significant step toward advancing their HR operations. Unfortunately, most standard implementation approaches fall short of delivering what these organizations truly need. Government contractors need a system that is not only efficient but also compliant with federal regulations.

Here is where the disconnect happens with standard implementation partners:

• Speed Over Specificity: Traditional implementation partners are often recognized for quickly delivering “go-live” dates, with systems configured just enough to meet basic functionality. The result can be a system that technically works but leaves compliance risks lurking under the surface.
• Lack of Federal Contracting Regulations Knowledge: Standard implementation firms may be well-versed in system functionality but lack an in-depth knowledge of the required regulatory processes for government contractors. Without this compliance knowledge, consultants may unknowingly implement an HRIS with gaps in data, reporting, or audit readiness. This lack of knowledge during an HRIS implementation can require retrofitting compliance after the system’s deployment, which is costly, time-consuming, and may be an audit risk.
• One Size Fits All Templates: Implementation firms commonly rely on standard templates and HRIS configuration packages that are designed for commercial clients but are not ideal for federal contractors. These templates often ignore necessary government contractor regulations in human resources compliance.

For government contractors, compliance is not a “nice to have” factor, it is non-negotiable. Agencies like the Department of Labor, OFCCP, and DCAA enforce strict rules around hiring practices, timekeeping, compensation reporting, affirmative action plans, and audit trails. To understand more about why aligning policies and systems is critical, read our article on why processes and policies matter more than software in your HRIS implementation.

The Compliance Details That Make or Break Your System

Key government contract compliance elements can be frequently overlooked in traditional implementations. HRIS consultants without government contractor knowledge may unintentionally not ask the right questions, such as:

• Is payroll set up to support the Service Contract Act (SCA) and/or Davis Bacon Act (DBA) wage and fringe benefits?
• Is time tracking aligned with DCAA timekeeping standards? Does the system support audit trail functionality for timesheet corrections, approvals, and payroll changes? For more on this critical issue, read our article on the timekeeping trap and how poor HRIS setup can derail compliance.
• Does this system support accurate labor category coding for contract compliance?
• Can it generate reports to satisfy OFCCP and AAP audits?
• How are employee classifications and job titles mapped for EEO-1 and VETS-4212 reporting?

The Risk to Government Contractors

An HRIS implementation without compliance in mind can create opportunities for noncompliance, failed audits, and even loss of government contracts. Imagine you work for a mid-sized aerospace contractor, and you have implemented a new HRIS with a standard partner. Six months post go-live, a DCAA audit flagged your company for noncompliant timekeeping workflows, and the result was a $75,000 remediation effort and delayed billing.

Below are common and costly government contractor risks when their HR system is not configured with federal requirements in mind:

• Inconsistent Labor Charging and Manual Data Corrections: Timekeeping labor charging errors are one of the most common compliance pitfalls for government contractors. If the HRIS is not configured to support accurate labor category mapping or project-based time tracking, there can be some significant compliance issues.
  • Employees may charge time incorrectly due to vague, missing, or inconsistent job codes.
  • Time and labor data requiring manual corrections increases the risk of human error and creates audit red flags.
  • Improper cost allocations can lead to billing discrepancies and potential disallowed costs during DCAA audits.
• Incomplete or Missing Documentation During Audits: Government contractor audits require detailed and consistent documentation from all systems. A generic HRIS implementation may lack the ability to:
  • Store historical changes to employee roles, compensation, and project assignments.
  • Generate required reports for OFCCP, EEOC, and DOL compliance.
  • Provide auditable records for human resource decisions for applicant tracking and compensation updates.
  • Appropriately administer and track SCA and DBA wages and fringe benefits.
  • Process, collect, and maintain key employee documentation requirements such as I-9 verifications, E-Verify checks, and employment eligibility identification.
• Disconnected Workflows Between HR, Timekeeping, and Payroll: In HRIS implementations, HR, timekeeping, and payroll should not be configured or operate in silos, especially if the system configuration does not account for how data flows between these departments. These disconnected workflows can result in:
  • Misalignment between labor charges submitted through timekeeping and paid through payroll.
  • Delays or inaccuracies in updating job codes or labor categories after job or department changes.
  • Difficulty coordinating employee classifications or hours worked across systems.

These compliance issues should not be discovered post-go-live, and especially not during audits or billing disputes with government agencies. When audit requests come in, you need the confidence to be able to pull accurate data and rather than having to scramble to gather data from disconnected sources, risk a noncompliant determination. To learn more about the pitfalls many companies face, read our article on common challenges due to poor implementation of HRIS.

For government contractors, compliance is essential to the ability to win, keep, and perform on federal contracts. When an HRIS implementation overlooks compliance needs, these issues can lead to serious consequences. Here are common and costly consequences when compliance is not built into HR systems from the start:

• Failed DCAA, OFCCP, or Wage and Hour Audits: Audits by the Defense Contract Audit Agency (DCAA) or the Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) or Wage and Hour (W&H) divisions are rigorous. Improper timekeeping, labor category assignments, or EEO data tracking can result in these audit findings:
  • OFCCP audits may uncover issues with hiring or other employment practices, exposing you to discrimination claims.
  • DCAA audits can lead to questioned costs and increased scrutiny on future cost submissions.
  • SCA and/or DBA audits can lead to significant back wages.
  • Audit failures can lead to contract suspension, fines, or even debarment.
• Delays or Rejections in Incurred Cost Submissions: Accurate and timely Incurred Cost Proposals (ICPs) depend on accurate labor charging, timekeeping, and payroll processes. Gaps in HRIS configuration can lead to:
  • Delayed or rejected ICPs due to inconsistent cost reporting or missing backup documentation.
  • Increased burden on finance and HR teams to reconcile data manually.
  • Greater risk of costs being refused, impacting cash flow and contract profitability.
• Costly Remediation Efforts After Go-Live: Fixing a noncompliant HRIS after go-live is far more time-consuming and expensive than getting it right from the start. Government contractors often face:
  • Rework of workflows, HRIS data structures, and reporting logic.
  • Hiring third-party compliance specialists to correct issues.
  • Temporary workarounds that drain internal resources and frustrate end users.

What a Compliance-Driven HRIS Implementation Should Include

A truly compliance-driven HRIS implementation requires a thoughtful strategy that integrates people, processes, and policies into the system from the ground up. Here are examples of what a compliance-focused HRIS implementation should include:

• Regulatory and Business Process Discovery Phase: Before any configuration begins, implementation teams should conduct a discovery phase that goes beyond generic requirements gathering. This phase must:
  • Identify all applicable federal regulations (e.g., DCAA, OFCCP, SCA, ACA).
  • Understand your organization’s current policies, contract types, employee types, pay periods, managerial hierarchy, and workflows.
  • Discover pain points related to compliance and reporting gaps.
• Mapping Policies and Procedures to System Workflows: A compliance-focused HRIS mirrors your internal processes in a way that supports auditability and consistency. This includes:
  • Aligning job codes, labor categories, and time tracking policies.
  • Integrating onboarding and offboarding procedures that enforce I-9, E-Verify, and other required employee processes.
  • Automating policy enforcement through approval workflows and validations.
• Role-Based Access and System Audit Trails: Security and accountability are essential in a government contracting environment. Your system should be configured to:
  • Enforce role-based security profile access controls to protect sensitive employee and payroll data.
  • Maintain audit trails that track who made changes, when, and why. This is critical during DCAA or OFCCP audits.
• Integration Across HR, Payroll, and Timekeeping: Compliance needs to be incorporated into all company departments and modules of the HRIS. Seamless integration across your core systems is critical for:
  • Ensuring labor charging, hours worked, and wages paid are aligned.
  • Reducing errors from manual data entry or system disconnects.
  • Maintaining consistent employee records across functions for accurate cost reporting and audit defense.
• Built-In Reporting for Audit Readiness: HRIS configuration should include customized reporting capabilities that support compliance documentation. This includes:
  • Pre-built and ad-hoc reports for EEO-1, VETS-4212, and DCAA audits.
  • Alerts or dashboards to flag missing or noncompliant data.
  • The ability to easily export historical records for regulatory review.

A compliance-focused HRIS implementation embeds compliance into every phase, from discovery through deployment. This thoughtful implementation ensures your HRIS runs efficiently while also protecting your contracts, your workforce, and your bottom line.

The outcome of a successful, compliance-driven implementation delivers:

• A System That Reflects Your Business Structure and Compliance Obligations: Your HRIS should mirror your organization’s operation and processes. A compliance-focused implementation results in accurate alignment between system processes and employee lifecycles that support your internal policies and federal obligations. A government contractor’s HRIS is much more than an HR tool; it should be an extension of your compliance and operational framework.
• Fewer Manual Interventions and Workarounds: An advantage of a compliance-driven HRIS implementation is the reduction in manual workarounds. The implementation process should address this by incorporating compliance into the system’s core functionality, allowing your team to minimize manual processes. The result is a smoother, more reliable operation with less administrative burden that is audit-ready.
• A Stronger Foundation for Audits, Cost Reporting, and Accountability: Your HRIS should give you the confidence that your documentation and configured reports meet DCAA, DOL, and other regulatory standards. An implementation based on compliance builds a system where accountability is no longer optional, but automatic. Every employee knows their role, every process has a record, and leadership has the visibility to ensure compliance is maintained.

Compliance Is the Core, Not the Add-On

In government contracting, compliance must be the basis of your HRIS strategy and is crucial during an implementation. When compliance is treated as an afterthought, even the most advanced HRIS systems can leave your organization exposed to risk, inefficiency, and costly rework.

A truly effective HRIS implementation begins with compliance at its core by shaping workflows, permissions, data structures, and reporting to reflect your business obligations under federal regulations. Without compliance, even the best HRIS will fall short. Take a moment to reflect on your current HRIS:

• Was compliance intentionally built into your current HRIS?
• Do your workflows reinforce policy adherence or rely on manual oversight?
• Are your HRIS outputs and policies audit-ready, or do they require workarounds and manual corrections?

If you are unsure or if the answer is “no,” it may be time to re-evaluate your HRIS strategy. A compliance-first HRIS does not just support your people and processes; it protects your contracts, your credibility, and your business. For more insight on how HR can become a compliance asset, read our article on empowering your HR team with systems built for compliance and efficiency and read our article on compliance starting at setup with HR software.

How Redstone Government Consulting, Inc. Delivers Compliance-First HR Software Implementations

Redstone Government Consulting, Inc. combines extensive knowledge of federal compliance with hands-on HRIS implementation expertise. As an authorized UKG™ partner, Redstone GCI sells, implements, and supports UKG Ready while working closely with clients to ensure systems are aligned with regulatory expectations and operational needs. Our team conducts pre-implementation process reviews to identify compliance risks, helps document timekeeping, SCA, and labor charging policies, and configures systems to support internal controls, audit readiness, and long-term regulatory alignment. We also provide ongoing HR support to help organizations adjust their systems and processes as rules, policies, or business structures evolve. Redstone GCI’s approach ensures that your HR system is not only functional but also fully prepared to support compliance with agencies such as DCAA and OFCCP.