HR Compliance Audit Checklist for Every CHRO

By Marianne Chrisos - Last Updated on March 5, 2019
HR Compliance Audit Checklist for Every CHRO

How do businesses safeguard themselves against legal and regulatory issues in human resources? This is a critical question for human resource managers.

Conducting regular HR audits helps to guard against these types of issues. Whether you are the CHRO who will conduct the audit or someone else who will oversee the process such as an HR specialist, it is important to consider several things while planning your business’s HR audit.

Everything you should know about your HR compliance audit.

The following factors will comprise a comprehensive HR compliance audit checklist to help guide your process.

When to audit

This will depend on how large your business is. Some businesses find that the best way to tackle audits is by the process, with one process being examined a month (hiring practices in January, benefits paperwork in February, and so on). Other businesses dedicate several months to a full-scale start to finish audit that they complete once a year. No matter how your business chooses to analyze your HR processes and procedures, the key component to HR auditing is that the audits are happening regularly, particularly as the business changes and employment laws are changed or added.

What laws to know

The United States has several employment laws that employers must be familiar with and follow at all times. These include:

  • The Fair Labor Standards Act (FLSA):
    This law governs the standards around minimum wage, overtime, and child labor laws, and also covers employee work type, such as exempt and non-exempt employees.
  • The Immigration Reform and Control Act (IRCA):
    Employers must maintain I-9 forms to establish that all employees can legally work in the US.
  • Federal Insurance Contribution Act (FICA):
    Involves companies and employers designating a percentage of employee wages to be withheld for Medicare and Social Security contributions.
  • The Equal Pay Act (EPA):
    Requires all employees, men, and women, to be paid the same salary if they are doing the same work.
  • The Occupational Safety and Health Act (OSHA):
    This act issued employer standards for workplace safety and record-keeping.
  • The Americans With Disabilities Act:
    Businesses may not discriminate in hiring against people with disabilities.
  • The Civil Rights Act:
    Forbids gender discrimination and sexual harassment at work.
  • The Age Discrimination in Employment Act:
    Requires that businesses don’t practice discrimination against applicants ages 40 and older.
  • The Affordable Care Act:
    Requires organizations of a certain size to provide affordable health care options to their employees.
  • The Affirmative Action Program:
    This law requires businesses to actively establish and document recruiting and training programs for women, minorities, veterans, and disabled individuals.

These are just a few of the many federal and state employment laws in place to protect both businesses and employees, so it’s important to be well-versed in all applicable laws and ensure compliance in these areas.

Policies and processes to audit

The best way to ensure compliance and adherence to the legal matters related to HR, it’s best to look closely at every process that HR handles. Here are some of the main areas to consider in your HR compliance audit.

  1. Hiring and recruiting: Examine your hiring records and ensure that you’re documenting application responses related to equal opportunity employment laws, including disability, veterans, and gender. The definitions around at-will and contract employment should be clear.
  1. Workplace safety rules and regulations: Auditing isn’t limited to the paperwork in the HR office. Safety information – such as worker’s compensation information – should be in a location that all employees can see. As part of the audit, businesses should also ensure that they have emergency procedures in place and supplies in case of power outages, bad weather, etc.
  1. Employee benefits: Employees can be eligible for a whole host of benefits, including paid time off, unemployment benefits, workers compensation, health insurance, and more. Make sure that each employee is correctly categorized so that they’re receiving all the benefits they’re entitled to.
  1. Compensation: Many things can affect compensation, including exempt vs. non-exempt classification, overtime, full-time vs. part-time employment, and job title. Review employee records and make sure that all employee information is complete and accurate. Make sure that each employee’s tax exemptions and other deductions are correctly cataloged to ensure legal compliance.
  1. Harassment: Employees should have documentation available about what constitutes harassment and other inappropriate, unacceptable behavior. They should also have a clear line of communication should they need to raise an issue.
  1. Employee handbook and company policies: Many of the above, such as benefits information and safety protocols, should be listed in the employee handbook. It should also include information regarding policies around the issues of harassment, internet usage, filing a complaint, raises, reviews, handling confidential information, expected business etiquette, and more.
  1. Missing or outdated policies: During your compliance audit, did you notice that any procedures were out of date or that information was incomplete or incorrect? Changes come as a business grows and it’s important to keep up with the proper documentation related to any changes. An audit is a great time to make updates to employee handbooks and other procedural manuals.

Looking at the closely at the specific pieces of your business ensure that your records are complete and in line with any employment laws. A careful and thorough examination of your HR practices through a compliance audit is a great way to ensure that you are creating a safe and positive environment for your employees to do their best work. It also helps you avoid legal fees, fines, and any negative marks against the reputation of your business.

Marianne Chrisos | Born in Salem, Massachusetts, growing up outside of Chicago, Illinois, and currently living near Dallas, Texas, Marianne is a content writer at a company near Dallas and contributing writer around the internet. She earned her master's degree in Writing and Publishing from DePaul University in Chicago and has worked in publishing, advertising, digital marketing, and content strategy.

Marianne Chrisos | Born in Salem, Massachusetts, growing up outside of Chicago, Illinois, and currently living near Dallas, Texas, Marianne is a content writer at a c...

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