There’s no time like the present for an HR audit
The last few years have been a flurry of legislative activity, especially on the state level with the approval of paid leave laws, pay transparency rules, and other employer mandates.
Combining that with ongoing remote and hybrid work arrangements, previously single-state companies have transformed into multi-state employers. This means it might be time for an HR audit to make sure all your “Ts” are crossed and your “Is” dotted.
Yes, an HR audit is a lot of work, but if you are unaware of new or changing employment laws and regulations, or if you don’t follow them, your business may have to pay fines, damages, or risk being sued and face a costly court case.
8 steps involved in an HR audit
If you decide an audit would be beneficial for your organization, here are the basic steps to share with leadership to make sure everyone is on board.
- Define the scope and goals of the audit. Will the focus be on compliance with labor laws, efficiency of HR practices, or both?
- Review HR policies, employee handbooks, and contracts. This step ensures that the policies are up to date and in line with current laws and regulations. Make sure policies protect staff from workplace harassment, for example.
- Analyze recruiting and hiring practices. This includes job descriptions, notices, applications, and onboarding practices. Ensure that these processes are fair, non-discriminatory, and in compliance with labor laws.
- Review compensation structure and payroll. Evaluate whether employees are being paid fairly and in compliance with all relevant federal, state, and local laws. This includes making sure all employees are paid at least the applicable minimum wage or minimum salary level, and that you are calculating overtime correctly when needed. Make sure employees and independent contractors are classified correctly.
- Look at benefits and leave policies. Confirm that leave policies align with federal and state laws. Verify that health insurance, retirement plans, and other benefits meet the legal requirements and are communicated effectively to employees.
- Evaluate performance management systems. Assess whether performance reviews are fair, unbiased, and aligned with company goals. Make sure that systems are in place to provide constructive feedback for employees. Consider whether disciplinary notes or performance evaluations have been inconsistent or vague and implement ways to improve this so that in the future written documentation can help prove, for example, that proper steps were taken.
- Ensure that the company adheres to all other applicable labor laws. This includes posting requirements, working conditions, workplace safety, and other statutory requirements.
- Review employee files. Make sure you are adhering to recordkeeping laws. For example, an employee’s personal health information must be kept separate from their general personnel file.
Key to remember: With the flurry of employment law changes in the past several years, 2025 may be a good year to do an HR audit.