Why a Human Resource Compliance Audit Is Necessary

By Marianne Chrisos - Last Updated on January 18, 2019
Why a Human Resource Compliance Audit Is Necessary

Many people associate human resources with hiring, firing, and payroll duties. While this is largely true for most organizations, the responsibilities of human resources go deeper than that. One of the things that HR professionals need to handle is the issue of compliance – that is ensuring that the organization is operating in a fully legal manner regarding all employment laws. This includes things like taxes, business insurance, workers compensation policies, discrimination policies, hiring and firing policies, harassment policies, training, overtime and exemption policies, and much more. Noncompliance on any of these issues can lead not only to a disorganized or dissatisfied workforce but complicated legal issues and fees down the line as well.

Full human resource compliance audits give businesses the opportunity to better understand their processes and how they relate to employees. It goes beyond asking, “Are we keeping in line with the legal employment requirements” and starts to ask “Are they the most effective processes? Can they be improved?” Finding answers to these questions (in addition to making sure that your organization is adhering to all federal and local laws) can help your business become more confident, efficient, and capable.

The most important reasons to conduct HR compliance audits.

Human resource compliance audits are necessary, then, for two reasons.

  1. Legal compliance: Tax laws can change over the years. Employment stipulations can change based on the number of people your business employs. Employees can be miscategorized upon hiring. Because of these, and many other reasons, it’s important to regularly assess that your business and HR practices are up to date with the most recent employment requirements.
  1. HR growth: Your business is only as good as your people and your people depend on HR – from hiring and training to retention and performance management, your human resource team helps your business build a strong foundation of employees who work for your company. The success of your business is directly impacted by your workforce, so your HR practices should be updated as necessary to be effective for your current business needs. The only way to know if your processes are working is to regularly audit them and measure their success against your business goals.

How your business can create an HR audit report

There are several ways that your business can conduct its necessary human resource compliance audits.

  1. Internally: This method is used when your HR team, managers, and executives, work together to create an HR audit report. Using an HR compliance audit checklist, your organization methodically goes through each area of business and checks processes, manuals, and more. Every business will conduct this differently, with some choosing to build an audit over the course of a year, and others taking several weeks annually to make assessments. It will also depend on the internal resources that your business has to conduct a comprehensive audit.
  1. Agency: Other organizations will choose to hire a 3rd-party HR-knowledgeable agency to conduct the audit. This takes both the risk of missing something and the work of compiling and analyzing data out of the employer’s hands and allows a group with specific expertise to handle the audit. If changes are needed, the agency can recommend an appropriate action plan. Businesses who choose to invest in this auditing method justify the expense with the idea that any non-compliance would likely result in a greater cost, potentially of both revenue and reputation.

No matter what method your company chooses to complete your human resource compliance audit, it’s important for businesses to understand that these audits are not only necessary but beneficial for businesses as well. Whether you’re trying to reduce your legal risk, cut down on costs, or simply ensure a better HR experience for employees, regularly auditing your processes and documents is a crucial and helpful endeavor.

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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