Jan 123 min read

HR Audits: What You Need to Know

Updated: Jan 22

Whether you manage a growing business or an established company, you'll want to be sure your HR provider conducts an audit at least once every one to two years.

In this blog, we'll discuss what you can expect during an HR audit and help prepare you for the process.

What is an HR audit?

An HR audit is an in-depth examination of a company's HR practices, policies, and procedures to determine what areas of the company are working and which need improvement.

In essence, an HR audit provides businesses with a chance to fine-tune their current HR practices to ensure that they are compliant with the frequent changing of HR laws and regulations.

Is an HR audit worth my company's time?

Unless you are 100% confident in your own knowledge of the constantly changing HR laws and see no need for improvement, you can guarantee that an HR audit is worth conducting.

HR audits help ensure that you're going about things correctly, the first time, instead of spending time and resources backtracking to remedy any mistakes (and possible broken laws) that you weren't aware of. In 2021 alone, the IRS estimated that around one-third of employers made an HR mistake... and collected nearly $7 billion in penalties. This equated to about $850 per year for small businesses.

Likewise, established businesses - both large and small - benefit from conducting HR audits as things like turnover trends and recruiting processes are analyzed and improved, resulting in the hiring and retention of top talent.

What type of audit does my company need?

Once you've concluded that your company will benefit from an HR audit, decide which areas need it. Consider any and all areas that you aren't feeling confident about or seem to be struggling with. Many companies choose to go with a full audit; however, should you choose to focus on one area at a time, that is completely your prerogative.

Your HR provider can focus on and offer solutions for areas like legal compliance, safety, recordkeeping, recruitment and onboarding, and more!

Follow the Cycle

As your HR provider maneuvers through the auditing process, you can do your part by keeping yourself well-informed about each step of the audit cycle.

Cycle breakdown:

Step 1: Assess current practices & policies: During this step, your HR provider will gather data on current HR practices and may use several methods to do so including conducting interviews/focus groups, reviewing any written HR policies, and general observation of company compliance with present rules.

Step 2: Compare current employment practices against legal & HR best practices standards: Next, your HR provider will take their findings from step 1 and compare them to what is legally within HR laws.

Step 3: Identify & recommend areas of change: Here, your HR provider will share with management any practices that they found to be illegal or non-compliant.

Step 4: Implement legally compliant employment & best HR practices: After areas of change have been identified, your HR provider will fulfill step 4. During this step, your HR provider will offer a solution for the areas in need of change and provide you with the tools needed to implement the new practices.

Step 5: Re-evaluate practice & provide ongoing HR support: Almost to the finish line! New practices will have been put in place and all staff are expected to comply, however, just in case, your HR provider will re-evaluate the current state of your organization and provide you with ongoing support to ensure total compliance.

Step 6: Set or adjust HR practices: We've now reached the end of the cycle! At this point, your organization should be fully compliant; however, every company is different, and one or two practices may need adjusting to ensure total satisfaction with the results.

Wrap up

An HR audit is a small investment that can save your company thousands of dollars in fines and lawsuits, not to mention the overall improvement of HR practices throughout the organization. Sure, the process can be lengthy, but wouldn't you agree that protecting your company is entirely worth it?