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6 Steps for a Successful HR Audit

Similar to a financial or tax audit, an HR audit gives businesses the opportunity to identify any potential human resources compliance issues and establish HR best practices.

An HR audit reviews an organization’s essential human resources functions to determine the organization’s compliance with state and federal regulations. It may cover many topics, including the organization’s employee handbook, record-keeping policies, hiring/termination procedures and even communications like company-wide emails or announcements. Because regulations are always subject to change as a result of new legislation or interpretations, HR audits should be conducted periodically to ensure that organizations are in compliance with the latest federal and state requirements.

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Why your company should be conducting regular HR audits

Human resources audits have helped small business owners save thousands of dollars each year. Regular human resources audits or assessments can help a company maintain a competitive edge, avoid potential losses and improve human capital management.

Forbes reports that 36%-53% of small businesses are involved in at least one litigation in any given year and 90% of all businesses are engaged in litigation at any given time. A human resources audit is essential for businesses that cannot afford to take a loss from lawsuits. HR audits help companies identify whether their HR policies, procedures and practices are legal and effective. They ensure that a company remains compliant with federal, state and local HR laws.

When should a company get an HR audit?

Regular audits are essential to a small businesses’ growth. It is highly suggested that a company completes at least one human resources audit each year. Not only do HR audits help companies keep up with the ever-changing business world, but they are also especially useful whenever a company experiences a merger or acquisition. A company should also consider getting a human resources audit before adding a significant number of roles or employees to its workforce.

What does the process of getting an HR audit entail?

The HR audit process generally begins with a comprehensive HR assessment. Examples of assessment questions include: Is a policy in place that prohibits workplace discrimination? How are complaints documented? Are complaints resolved in a timely manner?

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Our six-step HR audit checklist

  1. Determine the scope: The first step of conducting an HR audit is to determine the scope of the audit. If an HR audit has never been conducted, a comprehensive review of all policies and procedures is recommended. Going forward, businesses may choose to conduct audits that focus on specific HR functions, such as payroll or record keeping.
  2. Develop a plan: The next step is to develop a plan for conducting the audit. Identify the goals of the audit, assemble the audit team and create a timeline for completing the audit.
  3. Gather and analyze the data: Once the audit begins, the audit team should gather all the applicable documents and forms under the scope of the audit. The audit team should also review current and potential legal actions.
  4. Produce a report: After all of the necessary information has been analyzed, the next step is to create a report with the findings of the audit. This report should identify any strengths and weaknesses found during the audit, as well as offer recommendations to correct any instances of noncompliance.
  5. Create an action plan: Once the audit is complete, company executives should meet with the audit team to discuss the findings and formulate a plan to address each problem or area of concern identified in the report. Action items may include changes to policy, procedures and/or training practices. Organizations should also consider their available resources when setting a timeline for correcting noncompliance issues, and ensure any corrective actions are realistic and achievable. In addition, organizations should take measures to ensure the audit information is kept confidential and protected from unintentional disclosure.
  6. Evaluate the progress: Once corrective measures have been implemented, organizations should continuously monitor and periodically review the new processes or procedures to ensure the organization stays compliant.

How G&A Can Help

G&A Partners offers a lifeline to businesses by delivering both strategic as well as tactical HR and administrative support. Our experienced human resource professionals study the nuances of federal and state labor laws so they can help companies understand and expertly execute procedural tasks surrounding government compliance. For more information about all the services G&A provides, schedule a consultation with one of our trusted business advisors.