What Is an HR Compliance Audit?

An HR Compliance Audit is an assessment of your organization’s human resource policies, procedures, and practices. The goal of this human resources audit is to see if your organization is in line with state and federal laws, and what changes need to be made to be compliant with these laws. This helps businesses avoid fines, and potential employee issues, and protect employees’ rights. 

How to ensure HR Compliance with an HR compliance Audit

Solid HR strategies are valuable for your organization from every considerable angle. Complying with state and federal laws protects your business from costly fines and potentially negative PR, and most importantly prioritizes the safety, well-being, and rights of your employees. Many small and medium-sized business owners wear multiple hats, including managing human resources. This can eventually put your business at risk because you just “don’t know what you don’t know.” This is where HR Compliance Audits can really help your business.

What Is Reviewed in an HR Compliance Audit?

HR Audits must look at many different facets of your business. To ensure that your policies and procedures are up to standards and legal requirements, all of those policies and procedures need to be checked. For example, in our Culture and Compliance audit, we investigate over 400 data points, and up to 50 categories. The following are the top seven categories that must be reviewed in any HR Audit. 

1. HR Legal Compliance

At the heart of every HR compliance audit is legal compliance. This review must ensure that your business complies with relevant laws, regulations, and industry best practices. How do we check legal compliance? By investigating your internal policies on discrimination, harassment, wage and hour laws, data privacy, and more.

2. Talent Acquisition

The talent acquisition process is how you build your skilled workforce. But, many regulations cover how hiring must be conducted. An HR audit scrutinizes the job postings, candidate experience, interview processes, employment screenings, and offer letters provided by your business. Properly conducted talent acquisition ensures fairness, transparency, and compliance with equal employment opportunity laws.

3. Employee Relations

Strong employee relations are crucial for fostering a positive work environment and maximizing employee productivity. An audit evaluates practices aimed at maintaining and optimizing the employee experience. This includes communication channels, conflict resolution mechanisms, and performance management processes.

4. Total Rewards

Compensation and benefits are pivotal in attracting, motivating, and retaining top talent. An audit assesses the adequacy and competitiveness of compensation structures, benefits packages, incentives, and recognition programs to ensure they align with organizational goals and industry benchmarks.

5. Risk Management

Identifying and mitigating potential threats to the organization related to employment practices is key to minimizing legal liabilities and protecting the organization’s reputation. An HR compliance audit examines risk factors such as non-compliance with labor laws, inadequate employee training, and insufficient documentation processes.

6. Workplace Safety

Ensuring the safety and well-being of employees is a fundamental responsibility of every organization. Auditing evaluates the effectiveness of workplace safety policies, procedures, training programs, and compliance with Occupational Safety and Health Administration (OSHA) standards to prevent accidents, injuries, and occupational hazards.

7. Organizational Culture

Organizational culture sets the tone for how employees interact, collaborate, and thrive within the workplace. An audit explores the underlying beliefs, values, and norms that shape the organizational culture, assessing its alignment with the organization’s mission, vision, and goals.

training and development programs by HR NOLA

What Questions Should an HR Compliance Audit Answer?

A properly conducted HR audit should look at many facets of your organization. Every business is different, but there are many questions that every audit should answer. Here are our top 12 questions. 

Am I paying my employees correctly?

Compensation Compliance: For example, your HR Auditor should review FLSA (Fair Labor Standards Act) exemptions. Are you distinguishing between hourly and salaried employees correctly? And are you accurately compensating for overtime and commissions?

Are my Form I-9s legitimate? 

Form I-9 Verification: This is a costly question for companies because improper or missing I-9s can lead to huge fines. Ensuring proper documentation of employees’ eligibility to work in the United States is required.

What should be in my organization’s handbook and personnel files?

Policy Documentation: This is where you make clear your policies for your employees. Documentation of HR policies is essential. 

Do my employees know my policy on harassment?

Harassment Policy: Creating a culture of respect and inclusion starts with ensuring that employees are aware of and understand the organization’s stance on harassment.

How often are my managers trained on their legal responsibilities?

Manager Training: Managers can cover everything from personnel management to hiring and firing. This makes them especially important in your HR legal landscape. 

How do my managers handle workplace conflicts and performance challenges?

Conflict Resolution and Performance Management: Effective conflict resolution and performance management contribute to a positive work environment and productivity.

Are my job descriptions compliant with regulations?

Job Descriptions Compliance: Job descriptions must be compliant with several regulations including the Americans with Disabilities Act (ADA) and Equal Employment Opportunity (EEO), as well as HR best practices. 

What does the employee onboarding process look like?

Employee Onboarding Process: A well-structured onboarding process sets the tone for employees’ experience from day one. It also facilitates their integration into the organization.

Are my employees eligible for benefits, and are the total rewards competitive?

Benefits Eligibility and Total Rewards: Providing competitive benefits and rewards is crucial for attracting and retaining top talent.

Am I handling leave of absence requests legally?

Leave of Absence Management: Compliance with federal and state regulations regarding leave entitlements is important for avoiding legal complications.

How do my employees feel about their workplace?

Workplace Environment and Employee Sentiment: Regularly assessing employee sentiment helps identify areas for improvement and fosters a positive organizational culture. This needs to be handled externally, from an unbiased perspective – otherwise, you are unlikely to get accurate feedback.

Do my managers know how to legally terminate an employee?

Termination Procedures: Properly handling terminations reduces the risk of wrongful termination claims and maintains employer credibility.

What Are The Steps of an HR Compliance Audit?

HR Compliance is important to us! We like to say that we love HR so you don’t have to. After refining our HR Compliance Audit process over the years we’ve created a four-phase process that is highly effective. 

Phase 1: Initial Assessment

Our HR audit begins with an initial assessment phase. During this stage, the auditor reviews your current business practices, workflows, and overarching priorities. This assessment serves as the foundation for the rest of the audit process. By gaining a comprehensive understanding of your organization’s unique situation, we can tailor our approach to address specific needs and areas of focus.

Phase 2: Data Gathering

Armed with insights from the initial assessment, the auditor moves on to the data-gathering phase. This phase typically spans 3 to 5 days and can be conducted either virtually or in person, depending on the organization’s preferences and logistical considerations. We collaborate closely with your internal stakeholders to collect a wealth of information and practices related to every aspect of the employee lifecycle.

From recruitment and onboarding to performance management and offboarding, no stone is left unturned as we delve into the practices and workflows of individuals involved in each stage of the employee journey. This comprehensive data collection process ensures that the audit captures a holistic view of your organization’s HR landscape.

Phase 3: Data Analysis

With an extensive array of data and practices at our disposal, the auditor proceeds to the data analysis phase. Here, they meticulously scrutinize the gathered information, practices, and relevant documents to identify patterns, trends, and areas of concern. By conducting a thorough analysis, we can evaluate the associated risks and opportunities for improvement in every facet of HR management.

Phase 4: Audit Report and Presentation

The culmination of the HR audit process culminates in the preparation of an audit report and presentation. Presenting the findings and insights to leadership in a comprehensive summary is our final phase. The presentation serves as a roadmap, guiding leadership through the identified compliance risks, as well as recommending strategies to address critical issues and capitalize on opportunities for enhancement.

An HR compliance audit is a valuable tool for assessing and improving HR practices within an organization. By systematically evaluating various aspects of the organization, an HR auditor can help to find areas of improvement for the organization. This can help you save money on costly fines, improve employee morale, and create a better work environment! For more information on how HR NOLA can assist your business, contact us today. Let’s work together to ensure your HR practices are compliant and also strategic and effective.

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