Audit is such a dreaded word. Who wants to be audited? Pretty much no one. But if you get audited, wouldn’t it be better if you were prepared and had a reasonable belief that no issues would be found?
That sentiment is often the basis behind conducting internal audits. HR teams often conduct audits that mimic the audits regulatory agencies perform. They do so in order to ferret out any issues and get them corrected before a real audit happens or before there’s a problem. But there are more reasons to conduct audits. Some are designed to ensure legal compliance. Others are simply meant to improve efficiency. Still others are meant to improve processes. These are just a few of the many reasons to conduct internal audits.
Common HR Audits
Here are a few examples of the most common types of HR audits:
- I-9 audit. This audit reviews all I-9 forms for employees and ensures that they all exist, and they’re all filled in completely and correctly. It can also check for any follow-up needs or additional documentation needs.
- Policy or handbook audit. This type of audit typically looks for policy changes that need to be made to ensure policies are internally consistent and there is nothing within them that is not legally permissible—which is especially important since laws may change. It confirms that all employees have received copies of all policies, and, ideally, the employer has a signed acknowledgement of such from everyone.
- Compliance audit. While the details vary, most HR departments perform compliance audits to ensure legal compliance with reporting needs as well as compliance with all regulations. For example, many companies perform audits to ensure compliance with the Americans with Disabilities Act (ADA) or the Family and Medical Leave Act (FMLA) regulations. Any legal statute could be rationale to prompt an audit to ensure compliance.
- Functional audit. Again, the details will vary, but in a functional audit a specific function, such as payroll, is assessed to confirm it is operating as intended. This type of audit is typically then rotated across all functions, such as performance management, and complaint investigation.
- Wage and hour practices audit. This type of audit looks to uncover any potential problems with wage and hour practices. For example, it could uncover whether employees who are required to take lunch breaks have been doing so. It could also look to discover whether all overtime is being calculated and paid properly. These are just a couple of examples of the types of audits that could be conducted under the wage and hour umbrella.
- Exemption audit. This type of audit assesses whether all employees who are classified as exempt from overtime are actually qualified to receive that exemption.
- Job description audit. While this activity isn’t always referred to as an audit, it serves the same function. The key here is to review job descriptions and update them both for accuracy and for compliance.
- Safety audit. As the name implies, this type of audit assesses the safety measures taken within the organization. (This may or may not fall under HR audits, depending on company structure.) Companies need to ensure they’re complying with OSHA standards consistently.
- Hiring process audit. This type of audit looks at the hiring processes to ensure they’re consistent, efficient, and nondiscriminatory.
- Training and development audit. This type of audit assesses the employee development programs in place within the organization. It looks to analyze what gaps exist and whether all statutory training has been completed.
- Compensation and benefits audit. This type of audit can take many forms, depending on business needs. It could be used to ensure that all regulations related to implementing and carrying out benefits are being met. It could ensure that compensation is in alignment with company objectives. It could be used to ensure that private employee information—such as health information related to the administration of a health insurance benefit—is kept completely separate from other employee information.
What type of HR audits does your organization conduct on a regular basis? What would you add to this list?
*This article does not constitute legal advice. Always consult legal counsel with specific questions.
About Bridget Miller:
Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.