When you own a business, compliance with labor laws, regulations, and internal policies is no small feat. An HR compliance audit is a key tool. They can provide a systematic and thorough assessment of an organization’s HR practices—but what are they? What should you include, and when should you conduct your own HR audits? This overview will help you understand what’s required of your company, and which tools can help you rise to the challenge.

What is an HR compliance audit?

An HR compliance audit is a comprehensive evaluation of an organization’s HR policies, procedures, and practices to guarantee alignment with legal and regulatory requirements. This process typically involves a systematic review of various aspects of HR management, specifically identifying potential areas of non-compliance and risk.

The ultimate goal of an HR compliance audit is to ensure an organization’s adherence to laws and regulations, minimize legal liabilities, and foster a fair, equitable, and respectful work environment.

What is included in an HR compliance audit?

An HR compliance audit covers a broad spectrum of HR practices, including but not limited to:

  • Employment laws and regulations: Companies should assess compliance with federal, state, and local employment laws, including equal employment opportunity, wage and hour laws, family and medical leave, and workplace safety.
  • Documentation and recordkeeping: Ensure that your HR records, such as employment contracts, personnel files, and training records, are complete, accurate, and up-to-date.
  • Policies and procedures: Review HR policies, procedures, and handbooks to verify they align with legal requirements in each jurisdiction your employees work in.  Ensure the policies are accessible and are effectively communicated to employees.
  • Data privacy and security: Examine data protection practices to ensure compliance with relevant laws, such as GDPR or HIPAA, and safeguard sensitive employee information.
  • Diversity and inclusion: Evaluate your diversity and inclusion initiatives, including equal pay practices, accommodation for disabilities, and the promotion of a diverse workforce.
  • Training and education: Review the effectiveness of training programs related to compliance, including anti-discrimination, harassment prevention, and workplace safety.
  • Employee classification: Review and ensure proper classification of employees as exempt or non-exempt, and distinguishing between employees and independent contractors.
  • Safety and health: Where applicable, ensure compliance with Occupational Safety and Health Administration (OSHA) regulations, workplace safety policies, and safety training.
  • Employee termination: Assess your termination procedures, including final paychecks, accrued leave, and exit interviews.

When to conduct an HR compliance audit

Knowing when to conduct an HR audit is important. Here are some key scenarios that should trigger an HR compliance audit:

  • Regularly scheduled audits: Many organizations choose to conduct HR compliance audits periodically — typically annually or biannually. This helps proactively address compliance issues and mitigates your risk.
  • Mergers and acquisitions: When an organization undergoes mergers, acquisitions, or significant structural changes, it’s an opportune time to evaluate HR practices for consistency and compliance alignment.
  • Regulatory changes: Whenever there are substantial changes in employment laws or regulations, conducting an audit can help ensure that HR practices remain compliant.
  • Employee complaints or legal actions: If an organization faces employee complaints, legal disputes, or audits by regulatory bodies, it’s crucial to conduct an audit. This can address any employee or leadership concerns and prepare the company for potential legal challenges.

Who should conduct an HR compliance audit?

Conducting an HR compliance audit can be complex. Generally, it should be undertaken by knowledgeable professionals who are well-versed in HR practices and employment laws. Organizations may opt for one of the following approaches:

  • Internal HR team: Internal HR professionals can conduct audits, especially in smaller organizations with limited resources. However, they must maintain objectivity and independence in the auditing process.
  • External HR consultants: Many organizations engage external HR consultants or firms with expertise in compliance audits. These consultants provide an unbiased evaluation and bring a fresh perspective, but they can be more expensive than working with an internal team.
  • Legal counsel: In some cases, it may be advisable to involve legal counsel, particularly when there are complex legal issues or ongoing legal disputes.

HR compliance audits are an essential tool to navigate HR management and ensure adherence to legal and regulatory requirements. They are not only good for reducing legal liabilities, but also for fostering a workplace that upholds fairness, equity, and legal compliance. Whether conducted internally, with external experts, or with legal counsel, HR audits are a wise investment in the long-term success and ethical integrity of an organization.

Prepare for HR compliance audits with SixFifty

Conducting your own HR compliance audit can be a massive undertaking. Fortunately, SixFifty’s products can make HR compliance—and audits—fast, cost-effective, and easy. Our platform allows employers to create and review legally compliant documents for every stage of the employment life cycle. Plus, our legal team carefully monitors changes to employment and related laws across the country. Should any important changes arise, we will notify you, allowing you to update and distribute your HR compliance and audit materials accordingly.

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