A Human Resources Audit is a comprehensive method (or means) to review current human resources policies, procedures, documentation and systems. Its purpose is to identify needs for improvement and enhancement of the HR function as well as to assess compliance with ever-changing rules and regulations. An Audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion.

Audit reviews include:

  • Organizational strengths and weaknesses
  • Governmental Compliance
  • Benefits and Compensation
  • Employee Relations
  • Performance evaluation process
  • On/off boarding
  • Job descriptions
  • Form review
  • Personnel file review

Sample Audit Scorecard:

Benefits of the HR Audit

The HR Audit recognizes strengths and identifies any need for improvement in the human resources function. A properly executed Audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems.

Reasons to conduct such a review include:

  • Ensuring the effective utilization of the organization’s human resources
  • Reviewing compliance in relation to administration of the organization
  • Instilling a sense of confidence in management and the human resources function
  • Maintaining or enhancing the organization and the department’s reputation in the community
  • Performing “due diligence” review for shareholders or potential investors/owners
  • Establishing a baseline for future improvement for the function

Identifying Compliance Issues

Because of the multitude of laws affecting each stage of the employment process, it is extremely important for an employer to regularly conduct an HR analysis of their policies and practices. This helps to identify regulatory compliance issues if they exist and avoids potentially costly fines and/or lawsuits, if otherwise ignored. An employer overlooking regulatory compliance with their human resource practices could face:

  • Up to a $1,500 penalty for incomplete I-9 Forms
  • A fine of $1,100 for any violation of the appropriate payment of overtime for non-exempt employees in accordance with the Fair Labor Standards Act
  • Penalties as high as $10,000 per occurrence for failing to post required safety notices or keeping accurate records
  • Fines up to $1,000 per employee for non-compliance with the Federal Immigration Reform Act

While penalties such as these help define the risk of non-compliance and signify the importance of conducting periodic HR Audits, an Audit can also ensure that policies and procedures are fair and consistent across the organization and strengthen employee satisfaction. By maintaining a satisfied and productive workforce, an employer lessens the expense associated with costly turnover of staff. Losing one employee is estimated to cost a company 50 – 150% of the lost employee’s salary in time and money spent to replace that employee.

Peace Of Mind

Organizations that complete an HR Audit gain the peace-of-mind that goes with better understanding their organization’s strengths, weaknesses and potential liabilities. The Audit is generally completed within 3-4 weeks, encompassing the following steps:

  1. Initial meeting to determine scope of engagement
  2. Data request – Client competes utilizing secure online portal
  3. HoganTaylor meeting with management, along with a cross-section of managers and supervisors
  4. Presentation of Audit Report with compliance scorecard, findings and recommendations