HR Audits 101: Common Questions

In our last blog post, we discussed the importance of performing regular human resources audits. These HR audits are crucial for a number of reasons, chiefly ensuring compliance in a constantly changing legal landscape. They also help to recognize HR successes, standardize processes, identify risk areas, and align HR practices with the overarching strategy and goals of the organization. Most HR audits have a focus on three general areas:  internal services, legal compliance, and performance management.

Though employers may understand why performing these HR audits is necessary, they may still have some questions about the timing, scope, and execution. Some common questions that are asked include:

When Should the Audit be Performed?

Full-scale audits can take a lot of time and resources. Because of this, most organizations will only perform full-scale audits once a year. That being said, there is value in performing smaller-scale audits that focus on particular areas every few months. Audits are meant to be proactive, not reactive- organizations should schedule audits so they become an ingrained part of the organization’s calendar rather than performing them randomly or when a panic arises. It is also a good practice to conduct an audit after major changes occur, such as a change in management.

How Much Will it Cost?

Because HR audits can vary widely in scope, the cost of performing one can vary widely as well. The cost depends on the scope, the number of people that need to be interviewed, and the number of people needed to perform the audit. With all this in mind, it is important to remember that even a large-scale audit costs far less than any lawsuit would cost, making it more than worthwhile.

Who Performs the Audit?

An organization’s HR department can perform an audit in-house. There are, however, some challenges that this poses- the department must possess the expertise, the time to perform the audit, the ability to be objective in acknowledging discrepancies in current procedures, and the ability to make organizational changes. The other option is to follow stricter audit protocols and hire outside legal counsel to conduct the audit. For some organizations, it may be beneficial to have an outside consultant who has no personal stake perform the audit. This can ease some of the burden so attention is not diverted from other key business functions.

What are the Typical Principal Points in an HR Audit?

• Fair Labor Standards Act Compliance
• Disability Accommodation
• Health Insurance Portability and Accountability Act (HIPAA) compliance
• Interviewing and Hiring Processes
• Leaves of Absence Policies
• Payroll Management
• Substance Use Policies
• Wages and Hours
• Performance Management
• Termination Processes
• Employee Development
• Conflict Resolution

Understanding the details surrounding the execution of an HR audit is an important step for employers to take. Stay tuned for our next blog post, where we will detail the steps in performing an audit and discuss the outcomes of a successful audit.