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HR audits are a bit like a root canal. They are no fun and can be a bit painful, but you are always better when it is successfully over.

I have personally conducted over 1000+HR audits for companies and no matter how hard the company has tried to remain compliant, I always find a few compliance issues.

But with all of the various labor laws on the books, businesses still struggle to keep their business 100% compliant.

Before you know it, Compliance Creep kicks in.

• An I-9 with outdated identification

• Paystubs without proper line items

• An employee that should no longer be classified as salary exempt

The list goes on…

As a business owner, it's crucial to stay on top of your HR practices to ensure compliance with regulations and maintain a healthy work environment.

An HR audit is a comprehensive review of your HR policies, procedures, and practices to identify areas of improvement, ensure legal compliance, and optimize your operations.

Define the Scope and Objectives of the Audit

Determine which areas you want to assess, such as recruitment and selection, employee onboarding, performance management, compensation, and benefits, or employee relations. There are different types of HR Audits, so be sure to identify which audit is the focus.

We will focus on the HR Compliance Audit. Your audit should review 10 specific categories -

1. Employment Policies and Procedures:

   • Employee handbook and policy documents

   • Anti-discrimination and harassment policies

   • Leave policies (sick leave, vacation, parental leave, etc.)

   • Code of Conduct and ethics policies

   • Workplace safety and health policies

   • Confidentiality and data protection policies

2. Recruitment and Hiring Practices:

   • Job descriptions and specifications

   • Recruitment and selection processes

   • Background checks and reference verifications

   • Compliance with equal employment opportunity laws

   • Fair hiring practices and diversity initiatives

3. Onboarding and Orientation:

   • New hire orientation programs

   • Employee onboarding processes and checklists

   • Introduction to company culture, values, and policies

   • Completion of necessary paperwork and documentation

   • Provision of required training and resources

4. Compensation and Benefits:

   • Payroll practices and compliance with wage laws

   • Classification of employees (exempt vs. non-exempt)

   • Benefits administration and compliance (health insurance, retirement plans, etc.)

   • Overtime policies and calculations

   • Compliance with minimum wage requirements

5. Performance Management:

   • Performance evaluation processes and documentation

   • Goal setting and performance metrics

   • Feedback and coaching mechanisms

   • Performance improvement plans

   • Career development and training opportunities

6. Employee Relations:

   • Grievance and complaint procedures

   • Conflict resolution and mediation processes

   • Employee feedback mechanisms (surveys, suggestion boxes, etc.)

   • Communication channels and transparency

   • Employee engagement initiatives

7. Record-Keeping and Documentation:

   • Employee personnel files and records

   • Time and attendance records

   • Payroll records and tax forms

   • I-9 employment eligibility verification forms

   • Compliance with record retention requirements

8. Compliance with Employment Laws:

   • Federal, state, and local employment laws and regulations

   • Anti-discrimination laws (Title VII, ADA, ADEA, etc.)

   • Family and medical leave laws (FMLA)

   • Wage and hour laws (Fair Labor Standards Act)

   • Occupational Safety and health regulations (OSHA)

9. Training and Development:

   • Employee training programs

   • Compliance training (harassment prevention, safety, etc.)

   • Professional development opportunities

   • Succession planning and talent management

10. HR Documentation and Auditing Processes:

    • HR policies and procedures documentation

    • HR audit procedures and documentation

    • Documentation of corrective actions and policy updates

    • Regular HR compliance monitoring and reporting

I know this seems very overwhelming but when you have a system and a process, it is not as daunting of a task as it might seem.

We use an established framework to ensure that we have a step-by-step process and that we don’t miss any steps during the audit process.

Tackle the Audit One Step at a Time

As with anything that seems overwhelming, start with one bite at a time and systematically work through the process.

Begin your audit by reviewing your HR policies and procedures. Evaluate whether they align with current laws and regulations.

• Examine your employee handbook, job descriptions, code of conduct, and other relevant documents.

• Ensure that your policies cover important areas like anti-discrimination, harassment prevention, employee leave, and data privacy

• Check if the policies are clear, comprehensive, and effectively communicated to employees. Identify any gaps, inconsistencies, or outdated policies that need revision. By strengthening your policies, you establish a strong framework for HR compliance and best practices.

Shift your focus to assessing HR practices and processes.

Evaluate your recruitment and selection procedures to ensure fair and unbiased hiring practices.

• Evaluate your recruitment and selection procedures to ensure fair and unbiased hiring practices.

• Review your onboarding process to enhance the new employee experience and promote retention.

• Examine performance management practices, including goal setting, feedback mechanisms, and performance evaluations. Evaluate your compensation and benefits structure for competitiveness and fairness.

• Evaluate your compensation and benefits structure for competitiveness and fairness.

• Assess your employee relations practices to ensure effective communication, conflict resolution, and a positive work environment.

• Identify areas where improvements can be made to streamline processes, enhance efficiency, and align with industry standards.

  Thorough record-keeping is essential for HR compliance.

• Review your HR documentation, including employee files, time and attendance records, payroll records, tax forms, and performance evaluations.

• Ensure that records are accurate, up-to-date, and stored securely.

• Verify compliance with record retention requirements, as mandated by federal, state, and local laws. Identify any missing or incomplete documentation and take steps to rectify them.

• Identify any missing or incomplete documentation and take steps to rectify them.

• Strong record-keeping practices not only demonstrate compliance but also assist in addressing disputes, audits, or legal claims effectively.

After you’ve completed the data dive, develop an action plan based on any compliance gaps identified. Based on your findings from the audit, develop an action plan to address identified gaps and improve HR practices.

Prioritize the areas that require immediate attention and establish a timeline for completing all of the tasks necessary to get the business back into a compliant standing.

Stay tuned for next week’s newsletter where I’ll cover more detail about the meat and potatoes of auditing Employment Policies and Procedures.

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