The word “audit” usually promotes concerns of “what are we doing wrong” or “what did we miss”. In reality an audit is just a standardized assessment of your organization that lifts up opportunities for continuous improvement and risk mitigation. An HR audit helps identify whether your organization’s Human Resources department is operating in a healthy and compliant fashion.
The results obtained from an HR audit help identify gaps, ineffective processes, potential violations and more. In addition to ensuring your HR processes, policies and procedures are compliant, HR audits will help an organization achieve and maintain a competitive workplace. With the ever-changing nature and demand of HR management, HR professionals should always keep their focus on understanding whether their current practices have a positive impact on business goals. An HR audit will achieve this.
If you are not convinced that an HR audit is extremely beneficial, it may be helpful to know where most employers fall short. HR professionals are already aware that areas such as hiring, performance management, discipline and termination have caused the majority of lawsuits, however; additional risk areas that should be carefully reviewed in an HR audit include:
- Misclassification of an employee
- Employee handbook
- Wage & hour practices
- Personnel files
Almost every organization has positions that have been misclassified as exempt or non-exempt from overtime eligibility. The complexity of wage & hour laws and its regulations creates the potential for errors that can put an employer at risk for overtime liability.
An employee handbook is an excellent business tool that enables employees to know what is expected of them and will help mitigate potential damages to the employer. The general approach includes a review of the existing employee handbook and identifying policies that are not in compliance. Specific recommendations can be made based on best practices as well as state and federal requirements. The overall design of the employee handbook should reflect the organization’s business philosophy and it should clearly communicate the employer’s expectations of its employees.
Employers typically require non-exempt employees to punch a time clock or complete time sheets reflecting their hours worked. These time records are the employer’s primary means of defense against wage & hour claims so it is imperative that time-keeping policies and practices are clearly communicated and consistently administered.
A review and sampling of personnel files often reveals inadequate, expired or wrongly placed documentation. Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims.
Federal, state and local employment laws are complex, often conflicting and at times counterintuitive. Violations, unintentional as they may be, lead to lawsuits, fines, bad publicity, loss of talent, employee dissatisfaction and lost revenue. Mitigating those risks is a key measure of success for the HR function and is critical to the success of the organization as a whole.
Engaging in a comprehensive HR audit not only ensures compliance of applicable laws, it also highlights opportunities for increasing the effectiveness of HR practices to improve employee performance, engagement and retention. At the conclusion of such an audit, HR leaders must engage in continuous observation and improvement of the organization’s policies and procedures to ensure best practices are utilized.
Vice President, Practice Leader
Human Resource Consulting