On a scale of 1-10, with one being the lowest score, where would your company rate today if it faced an audit of employment records? Are your employee files in such great shape that you would easily rate 10 because you follow state and federal law requirements? Or, would you fail miserably because I-9 forms are not kept separate from employee files, the same files that include records of employees who have not worked for the company in 10 years?
The historical role of the human resource professional has changed dramatically since the early 1900s. In the beginning, HR was considered a clerical function to hand out benefit forms and file applications.
Today, HR is viewed as a strategic partner in workforce planning and attaining company goals and objectives. The business climate of today demands more of the HR professional to do more with less and keep the company on the right track with legal requirements. Your role is to contribute value towards organizational policies and objectives.
Additionally, HR must address rapidly changing conditions that affect employees. They have to balance changing needs of employees with expectations of the company. Having flexibility and employment knowledge, your strategic planning skills are an integral part of doing business.
In your role as a strategic partner, it is important to understand employment laws that can negatively impact the company. Basically, you must identify areas of exposure and implement steps to overcome these areas. Performing a human resources audit is your best line of defense. Doing so will keep your company out of court for simply not knowing right from wrong.
In general, a human resources audit is using systematic methods to look at current policies, procedures, systems and documentation practices. The goal is to identify areas for improvement that will enhance HR’s function throughout the company. An audit will also make sure you are in compliance with constant changes to employment rules and regulations.
The best way to approach the audit is to use a checklist of each area that needs to be reviewed. These may include:
Typically, the purpose of performing an audit on HR practices will help you recognize strengths and weaknesses within the HR function. When executed properly, the audit will expose problem areas and provide recommendations on the best approach to remedy the problems. You can use the information gleaned from the audit to benchmark your company’s progress against similar organizations.
Key areas that are targeted to meet this purpose may include, but are not limited to: • Recordkeeping practices – I-9s, employment applications, personnel files of past and present employees • Employee relations • Employee handbook with policies and procedures
Legal compliance issues should be at the forefront while conducting the audit. It is essential that your company does not violate federal laws governing employment practices such as EEO, FMLA and ADA. Health, safety and security issues are also of major concern, especially if your company is in an industry heavily regulated by OSHA requirements.
Before considering reasons why you should conduct an audit, think about what could go wrong. In many situations, the best line of defense is preparation for the unexpected. What could go wrong will go wrong if your company faces a discrimination or wrongful termination lawsuit and does not have the proper paperwork to defend the case.
Performing an audit instills a sense of confidence from senior management that human resources is not simply a paper-pushing, nonrevenue generating function. Instead, you can demonstrate the human resources – employees – are being utilized effectively. In addition, performing a due diligence review will establish a baseline for ways to make future improvements within the HR department and company. Your company can maintain compliance with a myriad of issues.
Virtually all aspects of human resources is affected by legislation that constantly evolves with changing business dynamics. At any given time, your company could face legal ramifications of noncompliance that will impact the company, its employees and your department. Results from an effective audit can be used for different purposes throughout the company. At a minimum, audit results will assist you in determining what needs to change, how to prioritize problem areas to change and how these changes impact the bottom line.
There are a couple of ways that an audit can be performed. You may decide to conduct an in-house audit. However, it is worth considering whether an outside consultant might work best. He or she does not have a personal stake in the results and will have an objective view of whether everything complies with the law.
An employment attorney is another option for conducting the audit. If necessary, you can set up an agreement that subjects the audit to attorney/client privilege to prevent having results part of discovery if there is a lawsuit.
While these might sound like expensive alternatives to an in-house audit, the ultimate cost is small compared to the price of defending a lawsuit. The price tag for failed business strategies and noncompliance penalties can also outweigh conducting a proper audit.
Government agencies can come in at any time and conduct an investigation to enforce laws. Some of these investigations originate from employee complaints such as an unsafe work environment. Your audit can prevent complaint filings against the company by employees.
Regardless to which method you choose for the audit, it is a good idea to complete one every two or three years. Periodic reviews will help to identify outdated policies and procedures that are no longer in compliance with the law or sound business practices.
During the audit, it is also necessary to review policies and procedures that are not being followed and find out why. There might be unwritten practices that have legal risks. You want to perform the audit to gauge which practices are easy for employees to follow and make changes for broader compliance.
Sound recordkeeping practices are one of the best ways to avoid problems. If they are not being followed, your HR audit can help to uncover the reasons why. Perhaps additional training or improvement in communications would be helpful to make sure employees are on board.
With this in mind, solicit comments from each business unit that might be affected by the audit. You will want to have their support during the audit because it will be needed once the audit is complete. Any changes will directly impact the units.
The final product for your HR audit is a well-organized report that should include specific results and recommended actions. Each recommendation should be ranked by the level of risk to the company. That way, management will see at first glance the areas that have the most expensive exposure potential. You will also want to include a timeline for addressing each issue.
Essentially, the HR audit can be as broad or as narrow as you want. An initial process might only cover written policies and procedures. You could follow-up with a review of hiring practices, employment agreements and contracts. How much you cover is not as important as making sure the process results in well-invested time and money to finding what works for your company. More money is wasted on elaborate programs and procedures that are inefficient and out-of-date.
Because there are laws that affect each stage of the employment process, you should have a regular schedule to review policies and practices. It is important that you prevent avoidable penalties or lawsuits that not only hurts the bottom line, but also the company’s reputation as a positive place to work.
Penalties are in place to define the risk of noncompliance. However, a HR audit shares an equal – and less expensive – responsibility for ensuring policies and procedures are fair and consistent.