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• HR Audit: Everything You Should...

HR Audit: Everything You Should Know to Get Started

What is an HR audit?

Why conduct an HR audit?

• Improves processes and policies that impact employees. An HR audit is a chance to improve areas of your processes and policies that have the biggest impact on employees. This empowers workers, helps retain them, and ultimately makes for a stronger company.
• Ensures corporate compliance. Never take for granted that your policies are compliant with all the laws. There are new employment laws and changes to the laws occurring all the time. In order to get and remain compliant and avoid unwanted lawsuits, you must be ahead of the game with HR compliance audits that identify any potential risk areas.
• Makes HR data meaningful and strategic. Put all that HR data to good use by connecting it with the reality of your HR policies and procedures.
• Helps prevents adverse impact in employment practices. You can mitigate problems with disparate impact on candidates in recruitment, and on candidates in salary and compensation, succession planning, and generally, throughout the employee lifecycle, by doing audits.
• Creates equitable and fair compensation. During your financial audits and compensation analysis , it can also be a good practice to audit how equitable and competitive your salary and compensation packages are. This can support recruitment and retention efforts and also avoid complaints.
• Identifies inefficiencies in systems and practices. At the very least, HR audits can help to discover any practices or systems that are not efficient. Redundant tasks or processes that are too lengthy can cause mistakes to happen.

When should you conduct an HR audit?

Types of hr audit.

7 steps for an effective HR audit process

Step 1: determine what you would like to audit., step 2: get buy-in from management., step 3: determine who will be conducting the audit., step 4: gather the data., step 5: review your findings., step 6: plan and implement your improvements., step 7: be transparent about the changes., summing it up, weekly update.

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The crucial role of hr audits in ensuring organizational success.

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CEO & Chief HR Strategist|Leadership Coach at Canary HR Consulting , where we Nurture your Talent and Minimize your Risk!

Every organization aspires to succeed, and human resources audits are pivotal in realizing this aspiration. Strategic review of HR policies, procedures and practices is essential for identifying areas of improvement, ensuring regulatory compliance and bolstering overall organizational effectiveness.

Though HR audits may demand time and effort, they establish the groundwork for organizational excellence and significantly contribute to a business's long-term success.

Throughout my career, I've collaborated with a diverse array of companies across different sectors, and a recurring trend I've observed is a concerning pattern of risk. Specifically, I've noticed a significant gap in understanding and leveraging human resources. In many organizations, HR isn't given the attention it deserves and isn't utilized to its fullest potential.

It's crucial to recognize that HR plays a pivotal role not only in recruiting and training employees but also in ensuring compliance and optimizing workforce efficiency. I've penned this article to shed light on the significance of HR and HR audits, as well as the critical areas they impact.

Here are seven key factors of importance for your HR audit:

1. Legal Compliance

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A primary function of HR audits is to ensure that the organization complies with all relevant employment laws and regulations. Organizations are accountable for being in compliance, and failure to do so will impact both employees and the organization's bottom line. Compliance includes labor laws, anti-discrimination laws, wage and hour regulations and more. Through a comprehensive audit, HR professionals can identify any potential legal risks and take corrective actions to avoid costly penalties and lawsuits.

Did you know that failure to comply with labor laws can cost your organization up to $10,000 per employee impacted? What you don't know can cost you!

2. Risk Mitigation

HR audits help identify and mitigate risks associated with various HR processes and systems. This includes assessing the effectiveness of employee policies, safety protocols and compliance training programs.

By addressing potential risks proactively, organizations can create a safer work environment and minimize the likelihood of workplace incidents. Unknown risks can substantially impact the organization, so establishing quarterly risk audits can ensure you keep your organization safe.

3. Optimizing HR Processes

HR audits, while time-consuming, allow the HR department to evaluate not only the efficiency but also the effectiveness of their processes. HR processes are inclusive of recruitment, onboarding, offboarding, performance management, training and employee development. By identifying bottlenecks and streamlining processes, organizations can improve employee satisfaction, reduce turnover and ultimately enhance productivity.

4. Enhancing Employee Relations

HR audits provide an opportunity to assess the overall health of employee relations within the organization. This involves reviewing communication channels, management training, conflict resolution mechanisms and employee engagement initiatives. Addressing issues in these areas can lead to a more positive work culture, fostering stronger employee morale and loyalty. When employees have a positive work environment and feel heard, they can be more committed to the organization, which shows up in their performance.

5. Data Accuracy And Security

With the increasing reliance on technology, HR audits also focus on data accuracy and security. Ensuring that employee records are accurate, up to date and secure is crucial for compliance and maintaining trust. Audits help identify any vulnerabilities in data management systems and allow organizations to implement robust data protection measures.

Implementing quarterly audits can allow organizations to have a pulse on data accuracy and correct discrepancies in a timely manner. This is essential for accredited organizations that are required to show employee records to meet compliance.

6. Strategic Alignment

HR serves as the central nervous system of any organization. Aligning HR with strategic goals is imperative for organizational success. HR audits play a crucial role in ensuring this alignment by evaluating HR initiatives and practices that are in line with the overall strategic objectives.

By assessing the compatibility of HR initiatives with the company's strategic goals, organizations can tailor their approach to leadership succession, talent management, workforce planning and leadership development accordingly.

7. Facilitating Continuous Improvement

HR audits should not be viewed as isolated occurrences but rather as integral components of an ongoing process of continuous improvement. Regular audits facilitate organizations in adapting to shifting business landscapes, staying informed about evolving regulations and consistently refining HR practices.

Your employees represent the most valuable asset of your organization. Auditing compliance, processes, procedures, initiatives and alignment constitutes an investment in this valuable resource, yielding substantial returns over time.

Embracing continuous improvement fosters perpetual excellence, growth and expansion within your organization.

Challenges With HR Audits

While HR audits are necessary, they can pose several challenges to organizations.

• Defining the audit's scope and prioritizing review areas can be a hurdle.
• Limited resources may hinder the organization's ability to conduct comprehensive audits.
• Gathering and analyzing HR data, especially in decentralized or outdated systems, requires ensuring accuracy, confidentiality and security, which can strain resources and time.
• Audits often highlight areas for improvement or risks, potentially necessitating changes to existing policies, procedures, practices or culture.
• Assessing the effectiveness of HR audits and the impact of suggested changes can be challenging.

Final Thoughts

HR serves as your strategic ally in achieving organizational excellence and long-term success. Through systematic review and enhancement of HR processes, ensuring legal compliance and cultivating positive employee relations, organizations can establish a sturdy foundation for sustainable growth. Embracing HR audits as a strategic tool empowers companies to navigate the intricate realm of human resources, ultimately resulting in heightened efficiency, employee satisfaction and overall organizational triumph.

To prepare for organizational success, integrate quarterly, if not annual, HR audits into your strategic goals. A thriving and excellent organization necessitates a workforce aligned with its objectives. Ensure alignment of HR goals with organizational goals by engaging your HR partner. Do not underestimate the importance of HR audits in fostering growth and excellence within your organization!

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How to Conduct an HR Compliance Audit

As we know, compliance stands as a critical pillar that ensures an organisation operates within legal frameworks and ethical standards. As HR professionals well-versed in the challenges of compliance, you understand the importance of maintaining adherence to regulations and policies. A proactive approach to compliance is essential to mitigate risks, foster a culture of transparency, and safeguard the interests of both the organisation and its employees.

As an HR professional, you are responsible for safeguarding organisations from legal and reputational risks. But how can you audit your HR compliance efforts and identify ways to improve? This article serves as an informative guide to tick off your compliance audit checklist. We will shed light on why compliance is so important, key areas to consider and how HR software can streamline processes and procedures.

Understanding HR Compliance Audits

An HR compliance audit serves as a systematic and comprehensive review of an organisation’s HR processes, policies, and practices. It assesses whether these align with legal requirements and industry standards, identifies areas of non-compliance, and provides a roadmap for corrective actions. This proactive endeavour not only helps avoid legal pitfalls and financial penalties but also contributes to a robust organisational reputation and a positive work environment.

Compliance audits help organisations avoid legal pitfalls and financial penalties by identifying any discrepancies between HR practices and legal requirements. By systematically reviewing policies, processes, and employee records, these audits provide a comprehensive overview of an organisation’s compliance status. This proactive approach not only minimises the risk of legal actions but also fosters a reputation of integrity, enhancing the organisation’s credibility in the eyes of employees, stakeholders, and regulatory bodies.

Secondly, regular compliance audits contribute to a positive work environment by promoting fairness and transparency. By uncovering any gaps or inconsistencies in areas such as recruitment, compensation, benefits, and diversity practices, organisations can take corrective actions to ensure that employees are treated equitably. This not only boosts employee morale and engagement but also establishes a foundation for trust within the organisation. Furthermore, compliance audits help organisations stay current with evolving regulations, ensuring that their HR practices remain up-to-date and relevant in a rapidly changing legal landscape. 

An HR Compliance Audit vs. General HR Audit

It’s important to distinguish an HR compliance audit from a more general HR audit . Compliance audits are all about mitigating risk; an HR compliance audit primarily centres on assessing the organisation’s adherence to legal regulations, industry standards, and ethical guidelines. The main goal is to ensure that HR practices align with the applicable laws and regulations.

In contrast, a more general HR audit encompasses a broader assessment of the overall effectiveness and efficiency of an organisation’s HR functions. While compliance is a part of this audit, it also covers other strategic HR areas such as talent management, employee engagement, training and development, performance management, and workforce planning. The general HR audit evaluates how HR practices contribute to the achievement of organisational goals, employee satisfaction, and the overall health of the workforce. It seeks to identify areas where HR practices can be optimised to enhance employee productivity, streamline processes, and align HR strategies with the organisation’s strategic objectives.

Now that we’ve explained in detail what a compliance audit is, let’s take a look at how to conduct one.

Steps Involved in Conducting a Compliance Audit

Preparing for the audit

• Define the Scope:

First, it’s important to outline the scope of the audit, specifying which areas, functions, and processes will be evaluated for compliance. This step ensures a focused and structured approach to the audit process.

• Assemble a Team:

Next, form a dedicated team comprising HR professionals, legal experts, and relevant stakeholders. Their combined expertise ensures a comprehensive assessment and a well-rounded perspective.

• Identify Applicable Regulations:

Research and compile a comprehensive list of laws and regulations that pertain to HR practices. These regulations serve as the benchmarks against which compliance will be evaluated.

• Collect Documentation:

Gather all relevant documentation, including HR policies, employee handbooks, contracts, training materials, and other relevant records.

With all this completed, it’s time to get started on the audit itself.

Identifying potential areas of risk

The first step on your audit checklist is to identify areas of risk. This involves a thorough analysis of HR functions.

These key areas include :

• Recruitment
• Onboarding process
• Compensation
• Employee relations
• Data protection

It’s important to mention how you handle this data. Ensuring that documentation is accurate and confidential will prevent the risk of data breaches.

As mentioned, an HR department must stay up-to-date with the current employment law if they want to remain compliant.

Reviewing documentation and policies

The next part of the HR audit process is a comprehensive review of a company’s HR systems and policies.

These include:

• The employee handbook
• Employment contracts
• Job descriptions
• Disciplinary matters
• General procedures
• Policies regarding discrimination
• Workplace safety

These documents must remain up to date at all times and should be easily accessible to all employees. Once you have reviewed all documentation and policies, you must compile a report of your findings.

Helpful hint : Place employment law compliance posters in central staff rooms for ease of reference.

Conducting interviews and surveys

Conducting interviews and surveys can play a significant role in enhancing the depth and accuracy of an HR compliance audit. By incorporating these interactive methods, organisations can gather valuable insights directly from employees, managers, and stakeholders, which can enrich the audit findings and contribute to a more comprehensive assessment of compliance.

Interviews with employees at various levels of the organisation provide a qualitative perspective on HR practices. These interviews can focus on specific areas of compliance, such as diversity and inclusion, workplace safety, or anti-discrimination efforts. Employees can share their experiences, perceptions, and concerns related to compliance, offering nuanced insights that might not be apparent through documentation alone. Their feedback can highlight areas where policies are effective, as well as areas that require improvement.

Moreover, engaging with managers and supervisors adds a managerial perspective to the audit. Managers can provide insights into the implementation of HR policies within their teams, identify challenges they encounter, and discuss how they address compliance-related issues. Their perspective sheds light on the practical application of policies and procedures on the ground.

Implementing corrective actions

Implementing corrective actions is a crucial step within the HR audit process that follows the identification of areas of non-compliance or opportunities for improvement. This phase involves taking practical and strategic measures to address the issues uncovered during the audit. By initiating effective corrective actions, organizations can rectify compliance gaps, enhance processes, and ensure a more compliant, transparent, and productive work environment.

To do this,

• Prioritise and plan : Begin by prioritising the identified non-compliance issues or improvement areas based on their severity, potential impact, and relevance to organisational goals. Create a detailed plan that outlines specific actions, responsibilities, timelines, and resources required for each corrective measure.
• Break down each corrective action into actionable steps : These steps should be tangible and achievable, providing a clear roadmap for implementation. Define key milestones and deliverables to track progress.
• Establish accountability : Assign clear ownership for each corrective action. Designate individuals or teams responsible for executing the actions, monitoring progress, and ensuring the completion of tasks within the specified timeframes.
• Allocate Resources : Allocate the necessary resources, including financial, technological, and human resources, required to carry out the corrective actions effectively. Adequate resources are essential for successful implementation.

It’s also important to maintain thorough documentation of the corrective actions undertaken, including details of changes made, timelines, and outcomes. This documentation not only serves as a record but also provides transparency for internal and external stakeholders.

By diligently implementing corrective actions, organisations demonstrate their commitment to addressing compliance gaps and fostering a culture of accountability and improvement. This proactive approach not only mitigates potential risks but also contributes to a more compliant, transparent, and ethical workplace that supports the organisation’s mission and values.

Importance of Regular Compliance Audits

Mitigating legal and reputational risks

A regular HR compliance audit plays a vital role in mitigating legal and reputational risks for businesses. By identifying compliance issues proactively, HR professionals can prevent costly legal battles and damage to the organisation’s reputation.

Ensuring adherence to applicable laws and regulations

HR plays a crucial role in staying ahead of laws and regulations that impact various aspects of an organisation. As mentioned, a regular HR audit ensures that a business’s practices are in alignment.

• Equal employment opportunity
• Data privacy

Adhering to legal compliance not only protects businesses but also fosters a positive and inclusive working environment.

Ethical Workplace Culture

Conducting audits demonstrates an organisation’s commitment to ethical practices. By proactively addressing areas of concern, businesses cultivate an environment where employees feel valued and supported, fostering a culture of integrity and fairness.

Improved Employee Relations

Audits help identify areas that affect employee satisfaction, such as harassment prevention, fair compensation, and equal opportunity. Addressing these issues fosters positive employee relations, increasing morale and engagement.

You may also be interested in : Why HR risk management is key to any successful business

Conclusion: How HR Software Can Help

HR teams are the driving force behind successful HR compliance audits, ensuring that companies are compliant with employment law, data and privacy regulations, and more. Steering through the complex landscape of HR audits is made smoother with XCD’s innovative HR software which helps HR professionals gain complete visibility over all aspects of an organisation’s human capital management. From powerful reporting and analytics features to time-saving automation and built-in compliance with GDPR and HMRC , our powerful solution makes compliance simple. To see our HR and payroll software in action, book a demo or get in touch with XCD today!

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The HR audit process: a guide to ensuring compliance

Updated 6/2/23

HR audits are an essential part of any business compliance strategy. By regularly reviewing HR policies, practices, and procedures, organisations can identify and address potential compliance risks.

Auditing the HR process can help to avoid costly legal disputes, protect a business’s reputation, and create a fair and equitable workplace for all employees.

To help you make sure you’re running a tight ship, we’ve outlined below the step-by-step guide to the HR audit process, from planning the audit to implementing improvements. Throughout this article, we speak to a selection of HR experts, auditors and consultants, to find out which HR mistakes are the most common, and how you can fix them.

What is an HR audit?

An HR audit is a comprehensive review of an organisation's human resources policies, practices, and procedures. It is designed to identify areas of compliance risk, as well as opportunities for improvement. HR audits can be conducted internally by the HR department, or externally by a third-party auditor.

The purpose of an HR audit is to help organisations ensure that they are in compliance with all applicable laws and regulations, and that their HR practices are fair and equitable. HR audits can also help organisations to identify areas where they can improve their HR processes and programs.

Why are HR audits important in business?

Overall, HR audits are an important tool that can help businesses to improve their HR practices, mitigate risks, and comply with all applicable laws and regulations. Let’s take a closer look at why they’re so important:

• Compliance: HR audits can help to ensure that businesses are in compliance with all applicable employment laws and regulations, avoiding costly legal disputes and penalties.
• Risk mitigation: HR audits can help to identify and mitigate potential risks, such as discrimination, harassment, and retaliation, helping to protect the reputation and financial health of the business. 
• Best practices: HR audits can identify areas for improvement in HR management, helping to improve the efficiency of the HR department, and to create a more positive and productive work environment for employees.
• Employee morale and retention: HR audits can help to identify areas where employee morale and retention are low.

An overview of a typical HR audit

First, let’s clarify exactly what an HR consultant or auditor might be interested in looking at:

• Documentation
• Recruitment
• On boarding & induction
• Training & development
• Performance management
• Compensation & benefits
• Employee relations
• Process efficiency

These eight areas make up the backbone of any strong HR function, which is why they are normally the hot points for HR auditors and consultants. So it’s no surprise that the most common HR mistakes tend to fall into these categories. Let’s take a look at each of these areas in more detail.

1. Documentation: Key documents and contracts are often missing or wrong

One of the most expensive mistakes – in both time and money – is when key HR documents or contracts, such as employee records , are missing from the company’s HR system , according to Nickie Elenor, Managing Director of Your HR Lawyer .

“When we audit their HR system, they are missing key documents like contracts of employment, proof of the right to work in the UK, disciplinary warnings, notes of absence reviews, agreements to pay back training fees and appraisals notes” she says. “And if they do have the documents, they are rarely as good as they could be.”

Elenor suggests that this stems from HR being seen as more of a ‘lip service’ function for some organisations. And this is a dangerous game to play. She says that if employers do not create and store their HR data accurately, then they’ll be on the back foot if a situation arises that requires evidence.

2. Recruitment: Too much bias in the recruitment process

The recruitment process can be filled with unconscious bias, which can lead to a lack of diversity and missed opportunities to hire incredibly qualified candidates who do not fit the typical idea of the ‘ideal candidate’.. Although you think your recruitment process is unbiased, according to ex-recruiter Taylor Dumouchel, you probably do discriminate – whether you realise it or not.

“People are unconsciously drawn towards a certain gender, age, or ethnicity” says Dumouchel, who now works for Peak Sales Recruiting , “but the truth is that none of these factors translate into an exceptional employee.”

Dumouchel says that unconscious bias during recruitment is extremely common and is picked up often during HR audits, but that there’s a simple fix. You need to adopt the blind recruitment method , which means taking out all identifying information from applications.

“Implementing blind CVs helps us to conduct an objective assessment. Comparing blind career profiles allows our clients to conduct a more apple-to-apples comparison, and eliminates bias.”

3. Onboarding: Contracts not issued fast enough during induction

HR audits also consider how employees start their journey at a company too. Ensuring that the process is compliant with UK law is critical, and employers usually get tripped up when it comes to onboarding and induction timings and information. 

For both Kevin Smith and Linda Marsh – senior HR consultants at Guardian Support – the biggest issue they face during HR audits with clients, is a failure to promptly issue new starters with employment contracts.

“Often we find that the employer has not carried out a proper induction” says Smith, explaining how necessary employee details are not obtained, no contract of employment is issued, and new employees are not informed of company rules. “Consequences of this are that where there is a later dispute, the employer cannot show the terms on which the employee was employed.”

Marsh advises that companies issue contracts within 8 weeks of commencing employment.

“The Contract of Employment sets out the terms of the employment relationship” she explains. “If this is not clear, then the employer can face difficulties in managing the employment relationship, and potentially leave themselves liable for an award of 2-4 weeks’ pay on top of any successful Employment Tribunal claim.”

ACAS explains that while a verbal contract is still legally binding, you are required by law to provide a ‘written statement of particulars’ once an employee has been with you for two months. Source .

4. Training: Not being taken seriously

Training is another core aspect of a HR audit as it’s vital for employee development, and training programmes ensure employees are up-to-date with relevant laws and regulations such as workplace safety and industry specific regulations. 

For Chere Taylor, President of Fulcrum HR Consulting , the biggest bugbear by far is training. Or rather, the lack thereof.

“The lack of training is by far the most negligent and short-sighted way that companies fail not only their employees, but themselves as well” explains Taylor. “Everything from initial new hire on-boarding to harassment and manager training are generally viewed as a nice-to-have… but not really necessary.”

Taylor is quick to remind us that nothing could be further from the truth. Employee turnover is much higher in companies that don’t provide training. And Taylor adds that companies get sued all the time because they didn’t provide a basic level of attention to making sure their people know what they are doing!

5. Performance management: Long-standing performance issues get ignored

Performance is closely linked to overall effectiveness and efficiency of an organisation, including its HR department. Performance management systems will certainly be considered in an HR audit as it directly affects company key targets. Additionally, the way that performance issues are communicated and fed back to employees is considered.

For trusted CIPD partner Bradfield HR , the biggest mistake they often find themselves working the hardest to fix, is a failure to appropriately communicate and deal with long-standing performance issues.

“Many employers have let performance problems fester, sometimes for years” reveals Caroline Griffiths, Managing Director. “The impact on company performance is great, and this permeates further through the organisation as high performing staff see underperforming colleagues ‘getting away with it’.”

The solution, Griffiths advises, is to tackle performance issues as soon as they arise, making sure to apply sound investigative skills, and best-practice processes.

Martine Robins – an expert with 25+ years’ practical HR experience

So what about the other areas an HR consultant might investigate? To help you with the rest of the HR audit checklist, we asked for a bit of advice from experienced HR expert Martine Robins. Robins runs the HR Dept Woking branch , and is a Chartered Fellow with the CIPD. Her experience covers all angles of HR, including:

• Employment law
• People management
• Disciplinary and grievance
• Training and development
• Policy writing

Robins’s HR wisdom is often shared by media platforms such as The Telegraph . So we decided to ask if she could help me understand the biggest mistakes that are coming up in HR audits,  in terms of compensation, employee relations, and process efficiency.

6. Compensation & benefits: Employers are failing to pay at least the minimum wage

One of the biggest compensation stumbling blocks, according to Robins, is basic compliance. In particular, compliance in making sure you’re paying the minimum/living wage.

“This mistake is often due to a lack of knowledge or awareness” explains Robins, adding she speaks to many employers who think “it does not apply or can be avoided.”

At the time of publishing this article, the National Living Wage (also called the National Minimum Wage) was set at £10.42 per hour, for employees aged 23 and over. You can keep up with current rates on the government’s website here . Also, try not to confuse this with the ‘Real Living Wage’ – also called the ‘Voluntary Living Wage’ – which is not a legal requirement, but aims to set a more realistic rate of pay based on what people really need to live.

7. Employee relations: Managers need to follow processes and document conversations

When it comes to employee relations, too many managers fail to follow appropriate processes. They also fail to document important conversations, such as disciplinary hearings .

“Typically, there are clearly stated legislative frameworks for such areas that companies are legally obliged to adopt” Robins explains. “Unfortunately, there are occasions when these processes are not properly followed, and this is when companies put themselves at risk of legal action.”

Robins remarks that the simple act of documenting these kinds of conversations often stops the issue going further. And when it does go further, it is the absence of this documentation that often leads to claims being awarded in the employee’s favour.

8. Process efficiency: HR departments tend to stick to what they know

When it comes to running an efficient HR department, the biggest hurdle is the tendency to ‘stick with what we know’ rather than adopt new HR processes. There a number of reasons why companies often keep whatever feels comfortable:

• Big companies find change tortuous, because of the need to convince stakeholders
• Smaller companies may find it’s a question of affordability
• For some companies, it’s simply an emotive decision – they don’t like to feel they’re leaving something behind

“Continuous improvement has to be a constant process in any department, in all businesses, regardless of size” she advises. “The investment made in good change initiatives – such as HR automation technology, or new payment methods – is often recouped very quickly, because it stabilises and de-risks your processes.”

What you can do to prepare for a HR audit

There are a few things you can do right now to get your company’s HR function into top shape. This won’t solve every problem you’ve ever encountered but it’ll certainly help improve your HR function:.

• Check that every single existing employee has a contract of employment.
• Ask your recruiters to consider a blind CV test the next time they hire somebody.
• Design a quick automatic process that issues an employment contract each time you add a new starter to your HR system.
• Revisit a handful of employee records, and check for training gaps – if you find any, start a more thorough review.
• Check your performance review process, and make sure it contains regular follow-ups – not just an annual interview.
• Make sure every single employee is receiving at least the National Living Wage.
• Find out when your last HR-employee interaction was. Can you find the documentation that accompanies it? If not, re-consider your protocol.

HR audits are crucial in helping organisations ensure that they are in compliance with all applicable laws and regulations, so it’s important that your HR processes are up to date and compliant. 

One of the best ways to keep your HR department running smoothly and complying with UK laws is with HR software . It does this by automating the management and updating of legal and regulatory requirements, as well as improving the efficiency of overall HR department processes.

Try our HR software free trial today and see all the different ways your HR department can improve.

Gareth Moss is a New Business Sales Team Leader with nearly a decade of experience in the Access PeopleHR product. Gareth specialises in serving those within the SMB market, and his passion lies in helping businesses streamline their HR operations. Before transitioning into his current role, Gareth was a HR software product trainer, making him your ‘go to’ guy for all things PeopleHR.

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How to Conduct an HR Audit

With regular self-inspections, HR professionals can keep their organizations out of legal trouble and improve policies and practices.

​Few people relish going to dental checkups, but those cleanings can help stave off a painful root canal procedure. Similarly, regular HR audits can help minimize potentially painful legal risks and offer opportunities to improve HR policies and practices.

But a solo HR practitioner’s days are already crammed full, and auditing takes considerable time. So be sure to devote enough energy and resources to develop a plan of attack.

Define exactly what to audit and then ensure that the organization’s leaders support that process, says Sarah L. Davis-Temple, SHRM-SCP, talent management business partner for Greenway Health in Tampa, Fla. 

“Build rapport with leadership to find out what’s important to them and what the response might be to something identified as a problem,” she says.

Some business leaders have a high tolerance for risk and may not support the HR professional’s proposal for corrective action, while others will want to address every issue. “The level of tolerance is directly tied to what to audit and how,” Davis-Temple says.

Prioritize problems that need to be addressed immediately. Note any issues that aren’t covered in the organization’s procedures or policies. These are areas of potential exposure that HR should address during an annual or semiannual review process.

“I strongly recommend focusing on one or two audit areas,” Davis-Temple says. “Trying to tackle everything from A to Z will simply overwhelm an HR practitioner,” especially one who is the only HR person at the company.

Risky Business

Focus first on any practice that can harm the business if it’s not done correctly, recommends Priscilla Tomestic, SHRM-CP, HR compliance manager for a branch office of Aspen Air Conditioning in Boca Raton, Fla. 

An HR compliance audit can help ensure that HR practices abide by the multitude of frequently changing laws and regulations. The compliance audit generally has two parts: an evaluation of the organization’s HR policies, practices and processes, and a review of current HR data. Indicators of potential problems include internal grievances filed, pending legal complaints, and turnover and absenteeism rates. 

• Most lawsuits can be traced to issues related to hiring, performance management, employee discipline or termination. Other high-risk areas include:
• Misclassification of exempt and nonexempt jobs.
• Inadequately maintained personnel files.
• Prohibited attendance policies.
• Inaccurate wage and hour or time records. 
• Form I-9 errors.
• Outdated federal and state labor and employment law posters. 
• Insufficient record retention.

Research the requirements for each of these areas, determine the scope of the audit, gather the necessary information, and then create action plans to correct or mitigate the risks.

As a solo HR practitioner, Tomestic is responsible for everything from onboarding new hires to handling payroll administration and safety and risk management. She even issues employees their equipment and uniforms. To manage the multitude of tasks, she has devised a system that incorporates regular mini-audits of onboarding and payroll requirements into her normal daily duties.

“I regularly audit employee files to make sure everything required is in them,” she says. “I track I-9s, onboarding paperwork and wet signatures on my own spreadsheet so that nothing’s missed.”

She also handles her company’s performance management process, which includes 30-, 60- and 90-day feedback sessions held with new hires, as well as annual performance reviews. She uses checklists to help ensure that reviews are done in a timely fashion and that all the necessary paperwork is prepared for each employee file.

Divisional managers also perform quarterly internal “desk audits,” or spot checks, of HR practices at each of the branches, aided by risk management software that generates lists of requirements to maintain regulatory compliance, Tomestic says.

The best audits are the ones you control, Davis-Temple says. The worst are those prompted by a dreaded letter from a government agency.

“If I find something in an audit, I go to my leaders and say I found it and want to understand whether it’s a problem,” she says.

Preventive Maintenance

Once immediate needs have been addressed, schedule audits of other HR functions to head off future problems. The beginning of a plan year is a great time to conduct a quick audit of employees’ benefits selections to ensure that the correct amount of money is being deducted from their paychecks, Davis-Temple says.

Spot checks can be done at other times. When addressing a performance issue, for example, HR professionals can check files on other cases of disciplinary action to ensure that no records are missing, Tomestic says.

HR audits help determine how work can be done more efficiently or less expensively. For instance, HR professionals can help improve their company’s business position by comparing its HR practices with those of other companies. 

“Audits are particularly useful in identifying areas in which the organization may benefit from implementing technology or outsourcing certain functions to remain compliant,” Davis-Temple says. While there are expenses associated with moving in either of these directions, there are also potential costs when the company fails to comply with laws and government regulations. 

“The best thing an HR practitioner can do is thoroughly vet the issue, understand what the potential risks are, and then develop a business case for the implementation of a new technology or outsourcing a particular function that will help maintain compliance,” Davis-Temple says.

Audits also can focus on strengths and weaknesses of systems and processes to help determine whether they align with the HR department’s and the organization’s strategic plans.

As Tomestic conducts audits, she makes notes on how she can improve her own processes to encourage better compliance from others. These “self-audits” help her develop goals for herself and improve her performance.

“Be truthful with yourself,” she says. “No one’s perfect; there’s always room for improvement.”

Treat auditing as a continuous process by weaving it into the culture of the organization, HR professionals advise. 

“Clean up one issue at a time, making it the best you can make it, then move on to the next thing,” Tomestic says. “Taking the time to get it right proves HR’s worth and adds value to the company.”

Davis-Temple has this advice: “Once you perform your audit, you need to be planning for the next one and improving that process each time. Performing audits should be as routine as any other function in the organization. It makes them less daunting and more of a cultural norm.”  

Theresa Minton-Eversole is a writer based in Alexandria, Va.

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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.

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?

Our six-step HR audit checklist

• 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.
• 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.
• 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.
• 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.
• 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.
• 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.

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