What is a checklist for Human Resources Audits?

A Human Resource Audit Checklist (or HR Audit) is a systematic process for evaluating existing human resources practices, processes, reports, and systems to see if all is as it should be to protect the company from lawsuits. This systematic analysis helps identify needs to strengthen and enhance the HR role. It also assists in determining compliance with ever-changing laws and rules. An Audit includes evaluating all facets of human resources regularly, usually in a checklist format.

These include:

• Hiring and Recruitment

• Security and Safety

• Worker’s Compensation and benefits

• Income

• Job descriptions

• Examination of staff files

• Termination process and exit interviews

• Methods for evaluating efficiency

• Form review

• Staff Relationships

Aims of an HR audit-What are the benefits?

A properly conducted audit will identify areas of concern and include feedback and suggestions for remedying potential problems. Some of the grounds for doing such a study include:

• Ensuring good utilization of the human resources department of the organization.

• Development of the organization’s HR department’s professional image.

• Decrease costs related to HR.

• Motivation of The HR staff.

• Find the problems, and easily solve them.

• Sound systems for measuring results.

• Systematic review of the jobs.

• Reviewing conformity with the organization’s administration.

• Maintaining or improving the community’s respect for the company and the department.

• Reviewing shareholders or prospective buyers/owners “due diligence”.

• Establishing a framework for potential improvements.

Background

Human resource audits are a critical way of eliminating legal and regulatory liability arising from the HR policies and practices of a company. An HR audit essentially includes discovering issues and finding solutions to problems before they become unmanageable.

The scope of the HR role involves defining and implementing a number of policies and practices-many of which include compliance implications-that significantly influence the competitiveness and profitability of the company.

HR Audit Defined-What do HR audits look for?

An HR compliance audit consists typically of two key components:

An overview of the organization’s organizational HR strategies, procedures and processes that concentrate on essential aspects of HR department delivery (e.g., recruitment — internal and external, retention of staff, compensation, benefits to workers, performance management, and employee relations, training, and growth.

A summary of current HR indicators ( e.g., number of vacancies, time taken to fill a new job, turnover, employee satisfaction, internal grievances lodged, number of legal complaints, rate of absenteeism).

Types of Audits

An HR audit may be designed to be either detailed or based narrowly on time, budgets, and personnel. There are various types of audits, and each is intended to achieve different goals.

Some of the most common ones include:

• Compliance. It focuses on how well the company complies with existing laws and regulations in federal, state, and local matters.

• Best practices. Comparing its strategies with those of organizations recognized as having outstanding HR activities helps the company retain or boost competitive advantage.

• Political. Focuses on system and procedure strengths and limitations to assess whether they fit with the overall plan for the HR department and the company.

• Function specific. Focuses on a particular HR role (for example, payroll, performance management, preservation of records).

What to Audit

Most lawsuits can be traced to recruiting, performance management, disciplinary or termination problems.

Some additional areas of risk which employers should carefully evaluate in an audit include:

• To misclassify exempt and non-exempt jobs.
  The ambiguity of laws and regulations relating to wage and hour makes it possible to fail by classifying a job as exempt, thereby exposing the employer to liability for past overtime.

• The staff files are incomplete.
  Evaluations of results may be vague, unreliable or out of date. For employers to defend any form of employee claim, particularly unemployment compensation or wrongful termination claims, reliable and comprehensive records are essential.

• Prohibited attendance policies.
  Regulating over-absenteeism is a significant problem for most employers. Organizations also have attendance policies that do not comply with applicable laws and regulations or offer more protection to workers than is required.

• Inaccurate time records.
  The records created by systems such as timesheets or time clocks are the primary means of defending the employer against wage and hour lawsuits, so time-keeping policies and practices need to be clearly communicated and regularly implemented.

• Form 1-9 errors.
  Reviews of employer hiring practices show insufficient documentation, such as missing or incomplete I-9 forms. Employers can be fined between $100 and $1,000 for each failure to correctly fill out a Form I-9.

When to Audit

Most organizations would not want to go through this process more than once a year, given the resources required. However, mini-audits allow for some correction to be performed approximately every six months without too much discomfort. It is better to schedule annual checkups and maintain a routine evaluation discipline over only periodic or emergency audits (e.g., those that occur when a possible problem is brewing).

Another technique is to perform an audit for any major event ( e.g., new plans or changes to the management).

Who Should Conduct an Audit

HR specialists within the company may execute an in-house audit if they have the experience. However, whether the audit is carried out with internal resources or also by an independent contractor who is not a lawyer, anything relevant to the audit is subject to disclosure in work practices litigation.

It is recommended, however, that the company follow fairly strict audit procedures and guidelines and consider recruiting legal counsel from outside to perform the audit.

Conclusion

Make sure your company is safe from possible litigation due to faulty HR systems.

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