DSP HR Compliance Termination: 10 HR Threats to Your DSP Contract
HR Compliance Pitfalls: Why Amazon DSPs Are Losing Their Contracts
A Go HQ Industry Report
Amazon's Delivery Service Partner (DSP) program has seen a recent wave of contract terminations, according to industry observers. Human Resources compliance issues appear to top the list of reasons DSPs are losing their contracts.
Industry analysts have identified a clear pattern emerging as Amazon increasingly enforces its HR standards across the delivery network. Many DSPs aren't equipped to handle the complex HR requirements, resulting in sudden terminations that leave business owners struggling to recover.
This report focuses specifically on the HR-related reasons for termination, distinct from operational issues that would fall under different compliance categories.
Labor Law Violations
Perhaps most alarming for DSP owners is the compressed timeline for addressing compliance issues. Amazon audits for "compliance with wage, hour and benefits requirements" give partners just two weeks to implement corrective plans before facing potential contract termination.
These audits typically occur during onboarding, at 90 days, and periodically throughout the contract term. Many DSPs lack the HR expertise to respond effectively within this narrow window.
Program and HR Compliance Requirements Strictly Enforced
The DSP Program Agreement states that failure to meet the Program and Compliance Requirements may result in loss of incentives/bonuses, route reductions, and/or termination of your company's Program Agreement.
HR compliance aspects include proper employment documentation, policy management, and workforce administration practices that have become increasing focus areas for Amazon's audit teams.
Insurance Requirements Non-Negotiable
Amazon requires specific insurance coverage for all program participants, with no exceptions granted. DSPs must maintain worker's compensation policies that meet Amazon's detailed requirements – a technical area where many smaller operators struggle.
When coverage lapses or falls below required thresholds, Amazon views this as a contractual breach warranting immediate action.
Related Article: Insurance Solutions for Amazon DSPs
Insurance experts recommend working with specialists who understand Amazon's specific requirements. OVD Final Mile, backed by Go HQ, positions itself as an advocate for DSPs in this area, offering to represent partners to the marketplace and drive competition "where it really counts: on the desk of underwriters."
Employee Working Conditions Under Scrutiny
Reports of poor working conditions, including inadequate breaks and unreasonable schedules, have led to terminations across the DSP network. This is supported by the recent implementation of Meal Break Audits, ensuring DAs are taking adequate Meal Breaks per state and federal mandates. The DSP program is increasingly sensitive to labor practices as public scrutiny intensifies.
Industry data indicates that high driver turnover often triggers deeper reviews of DSP HR practices, as Amazon views excessive turnover as a red flag for problematic workforce management.
Documentation and Records Management Failures Closely Monitored
DSPs are increasingly facing termination for inadequate documentation and records management practices. Amazon requires comprehensive recordkeeping as outlined in their Program Agreement, covering everything from employee qualifications to training certifications.
The DSP Program Agreement explicitly states that failure to maintain proper documentation can result in loss of incentives/bonuses, route reductions, and/or termination. Recent audits have reportedly focused heavily on personnel files, training records, and compliance documentation.
Amazon's compliance team can request records with minimal notice, and the inability to produce required documentation promptly is treated as a serious program violation according to industry observers.
Accumulated HR Policy Violations Add Up
The accumulation of multiple minor HR policy violations over time can lead to termination, even when no single issue would warrant such action. Amazon tracks patterns of compliance failures across its network.
Amazon states on their website that where they find repeated violations, or an inability to correct labor violations, they terminate contracts with DSP program participants.
Worker Classification Issues Non-Negotiable
Amazon's requirements state that all individuals providing services must be classified as employees rather than independent contractors. This non-negotiable requirement reflects increased regulatory attention to worker classification nationwide.
DSPs attempting to reduce costs through misclassification face swift termination when discovered during audits.
Injury Rates and Workers' Compensation Management
High injury rates among delivery personnel have become a major focus area for Amazon's HR audits. Research indicates DSP drivers experienced injuries at a rate of 18.3 per 100 workers in 2021 – a concerning 38% increase from the previous year.
Proper workers' compensation management, injury reporting protocols, and safety training programs all fall under HR responsibilities that Amazon monitors closely.
Nonsufficient Funds to Payroll Provider
Amazon DSPs are not widely aware of a programmatic policy, and subsequent consequences of being flagged for Nonsufficient Funds (NSF) by a payroll provider (i.e. ADP/Paycom).
An NSF occurs when not enough funds are available to draft from a particular bank account to cover the 'Total Debited' amount for payroll, inclusive of: Net Wages, Payroll Taxes, Benefits/Retirement deductions, and other withholdings.
ADP and Paycom report directly back to Amazon on occurrences of NSFs. One single NSF will result in (1) calendar year of 'non-compliance'. Meaning a DSP will not be eligible for TCO, Pinnacle, or growth opportunities. Further, (3) occurrences over the life of the DSP contract will result in contract termination without remediation.
Employee Benefits Administration Failures
Amazon requires DSPs to provide specific benefits to full-time employees, including healthcare coverage meeting minimum standards and paid time off. Improper benefits administration, including failure to properly track eligibility or process enrollments, has led to contract terminations.
DSPs must maintain meticulous records demonstrating compliance with these benefit requirements across their entire workforce.
Industry Response: Go HR's Specialized Support
The wave of HR-related terminations has made specialized HR support essential for DSPs looking to maintain their Amazon contracts.
At Go HQ, we've developed dedicated Go HR compliance solutions specifically for Amazon delivery partners. Our data shows that a typical DSP using our onboarding services can save up to 40 hours per week through streamlined digital processes, while our payroll services save customers approximately 40 hours per month by reducing administrative overhead.
As Amazon continues expanding its delivery network, we expect HR compliance requirements to become increasingly stringent. For current and aspiring DSP owners, developing robust HR systems is as essential as operational excellence for long-term program success.
This industry report is published by Go HQ, specialists in compliance solutions for Amazon Delivery Service Partners. For more information, visit go-hq.com/go-hr/
