A human resource (HR) compliance audit is a tool that organizations use to make sure their HR policies and procedures align with company goals as well as state, federal and local laws and regulations.  

HR compliance audits are essential for minimizing legal risks, ensuring employees are being treated fairly, and maintaining a positive work culture

How does an HR compliance audit work?  

An HR compliance audit reviews business operations to make sure they are adhering to relevant laws. Here are some examples of what to look for when conducting an audit: 

  • Employee relations issues 
  • Employee handbook 
  • Employee files and record retention 
  • Job descriptions 
  • Employee training 
  • Federal and state employment posters 
  • Exempt employee justifications 
  • Independent contractor justifications 
  • ADA compliance 
  • FMLA compliance 
  • Additional state and federal law compliance 

Here are the steps to needed for an HR compliance audit:  

  • Gather relevant documentation: Collect employee handbooks, safety protocols, benefits plans, job descriptions, contracts, HR policies, and other relevant documentation.  
  • Research laws: Familiarize your team with federal, state, and local employment laws and regulations. Then, compare your company’s current policies to legal requirements and see if your company is being complaint. 
  • Identify compliance gaps: Pinpoint the areas that your company is not being complaint to laws and regulations, so that improvements can be made as soon as possible. 
  • Evaluate potential risks: Assess any potential risks with gaps in HR practices and non-compliance. This will help prevent your company from being involved in potential legal liabilities and financial impacts. 
  • Make necessary changes: Update HR policies, practices, and procedures as soon as possible to make sure everything is adhering to current laws and company standards. 
  • Conduct follow-up audits: Conduct frequent audits to help ensure there is ongoing compliance and improvement. 
  • Document the process: Keep records of the entire audit process. Record any non-compliance findings, the recommendations that were made to resolve the non-compliance, and the outcomes.  

The importance of HR compliance audits 

There are several reasons why HR compliance audits are not only beneficial for a company, but they are also beneficial for employees.  

Here are three reasons why HR compliance audits are important:  

  • Legal compliance: Ensuring that your company is complying with federal, state, and local laws will help prevent your company from being involved in costly fines, penalties, and lawsuits.
  • Employee trust: When employees see that your company takes the time to make sure all HR practices and procedures are fair, it helps them to know they are being treated equally and their rights are being protected. 
  • Enhanced work culture: HR audits reveal areas where your company is falling short, so addressing these issues will help improve the overall work culture by making sure your company is fully complying with laws and regulations.  

Conducting HR compliance audits will help maintain employee satisfaction, keep your company out of legal trouble, and improve the work culture.  

Helpside has developed an HR self-audit checklist that small businesses can use to conduct their own HR compliance audit. Click the button below to download your copy. 

Download HR Audit Checklist 

If you have any questions regarding HR compliance audits, reach out to us at humanresources@helpside.com.