Understanding what audits are, the purpose they serve, and the significance they provide can position a business to be compliant with various employment laws and sought after as an employer of choice. Remember; conducting an audit is not something you do just once. It is never a done and over with deal. Instead, effective audits are to be conducted, at minimum, regularly once a year.
Generally, there are four types of HR audits:
- Compliance: Evaluation of the company’s compliance with state and federal workplace laws as well as industry regulations.
- Function-Specific: Comprehensive assessment into specific areas of the HR function, such as Benefits, Compensation, and Safety.
- Best Practices: Comparative review of internal
- business practices with those of other businesses considered to be leaders in the industry or in the HR field.
- Strategic: Examination of the strengths and weaknesses of the company’s systems and processes to gain greater market competitiveness.
Examples of necessary reasons to conduct an HR audit
- State and federal employment laws and industry regulations,
- Company size in terms of number of employees,
- Business development into new areas including expansion into multiple states,
- Internal restructuring of the organization,
- Mergers and acquisitions, and
- Business cycles / seasons.
Federal and State agencies have been recently targeting certain industries to primarily audit for worker misclassification, wage and hour, and recordkeeping matters. Employee claims of unfair discrimination or practices in the workplace also can trigger a Federal or State agency audit knocking on your door. So, be constantly prepared and pro-active.