Compliance

Ask these Questions for a Successful Comprehensive HR Audit

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3 min read

Audit for Compliance

While a Strategic Alignment Audit will take you on a 30,000 feet journey and overview, the firm bedrock of a comprehensive HR audit will forever be overall compliance, policies, and regulatory adherence. It would be a disservice if we did not cover the tried and true, so we’ll quickly highlight some key areas that we tend to see poorly audited.

Employee Files

An easy place to start is the employee files.

  • Are the forms correctly filled out?
  • Are there documents related to an employee’s medical condition?
  • Did you accidentally file an I-9 with the rest of the forms?
  • What has been added to a file over the years?
  • Does it show potential signs of discrimination or retaliation?
  • Does your application ask for information that is confidential or protected, such as medical status, number of children, race, religion, etc?

These are all valid questions and your digging may uncover potential legal ramifications or problem areas.

Payroll Procedures

Payroll errors are usually not very significant and can be speedily resolved. However, unlawful payroll procedures can create many legal problems which may take a long time and many resources to fix. Intentionally (or knowingly) manipulating the payroll can result in fines or lawsuits, and ignorance is never an excuse when you are talking about payroll. An exhaustive payroll audit will ask:

  • Are employees correctly classified as exempt, non-exempt, or contractors?
  • Does the company pay at or above minimum wage?
  • How are deductions impacting wages?
  • Does the company understand overtime?
  • Are people paid equally for the job, are wages established objectively?
  • Do experience, skill, and education tie to wages?
  • How is time tracked?
  • What is the break policy?

These are just a few of many areas to explore and a comprehensive audit would tie payroll procedural audit with financial strategy, “full” compensation (benefits, equity, bonuses, gifts, etc.), and software review.

Hiring and Interview Practices

More than half of the companies we have audited routinely made mistakes when it comes to application and interview questions. Although asking the wrong questions does not automatically prove a basis for discrimination, it can raise serious and costly doubts and show discriminatory impact (albeit unintentionally). Questions asked during the interview and application process that are not job-related can land a company in serious trouble.

Employee Handbooks

The employee handbook is the most important document you can create in an employment setting, as it establishes the relationship between the employer and employee, as well as sets boundaries for conduct for both parties. A poorly written handbook can be costly and dangerous. Why? Because what you put in a handbook can be as important as what you exclude. Not only do your policies need to conform with the law, but they need to apply equally and fairly to all and tailored to your industry, state, business strategy, business size, and culture. Handbooks are routinely out of date or sync in relation that actual business practices, communications to the workforce, or latest laws. And in most cases we’ve seen, handbook templates downloaded from the internet (that were created for companies twice your size in another state in 2010) set you up for liability.

Corrective Procedures

Having to correct or discipline employees may be a supervisor’s least favorite task, albeit a necessary one. And it is much easier when the focus is on helping the employee instead of disciplining him. An audit of a company’s corrective procedures may not only help increase morale and improve attitudes, but can also reduce a company’s liability. Untrained supervisors may put a company at risk by allowing personal opinions and emotion to control the corrective procedure. This, in turn, can result in EEOC violations and accusations of unfairness, bias, and discrimination. It can also increase turnover and a company’s unemployment rate.

Denny Garcia

Denny is an employment & Labor Attorney with 9+ years' experience, and a professional human resources consultant across many industries. Supported company growth and stability through skilled Performance Management, Risk Analysis, Recruitment Strategies, Employee Relations, Compensation, Employee Engagement and Training. Has extensive multi-site and multi-state experience bridging corporate office programs and initiatives with market and unit driven challenges. Experience with the following industries: construction, non-profit, hospitality, legal, insurance, food and beverage, pharmaceutical, security, retail, telecommunications, advertising, and manufacturing.

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