How To Conduct HR Compliance Audits

Conducting HR compliance audits can seem difficult and time-consuming. But this is an essential practice for making sure your policies align with employment laws. 

That said, don’t be quick to write it off as a box-ticking exercise. If you’re willing to go the extra mile, a culture of compliance can drive the success of your business.

The Importance of Compliance Audits

An HR compliance audit is a key legal responsibility for any business. It means you’ll have to understand every aspect of your HR policies and their impacts. Fortunately, things are more streamlined than ever, thanks to modern Human Resource Information Systems (HRIS). Efficient and effective workplace policies are what define HRIS.

But that doesn’t mean you can afford to slack off on your compliance checks. Despite their importance, various companies still fail them each year. The direct consequences include OSHA violations, fines, and other legal troubles.

And, as well as the actual court, you’ve also got to worry about the court of public opinion. Breaking employment laws is terrible PR, which can threaten both your customer base and pool of applicants. Legal costs on the one hand, and damage to your public image on the other. As a result, poor HR compliance can seriously threaten the stability of your business.

Your HR Compliance Checklist

It’s always good practice to create a checklist for HR compliance audits. There’s a lot to cover, and it’s easy for things to slip through the cracks. So, here are some aspects of your audit you should be sure to include.

Hiring Policies

It’s important to go over everything you do when it comes to hiring new employees. That means job ads, interview processes, and background checks. But also any headhunter technology and any recruiting platforms or agencies you work with.

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One crucial aspect you’ll want to check for is preventing discrimination during the hiring process. For instance, you must ensure that you are not asking invasive interview questions concerning protected characteristics, such as:

  • Race
  • Religion
  • National origin
  • Sex
  • Sexual orientation
  • Gender identity
  • Pregnancy status

Beyond the questions you ask, you also need to analyze the kind of language you use in job ads. Otherwise, you can alienate potential applicants. For example, you might (even unintentionally) position a role as male-only or available only to applicants of a certain age.

But it’s also about making sure you aren’t hiring anyone illegally, such as hiring people without the right to work in the US or violating state laws for employing minors. Illegal hiring practices will land your business in hot water. 

Employee Onboarding

Once you’ve taken a fine-toothed comb to all your recruitment methods, you’ll want to look at onboarding. This means showing how you communicate policy and procedure to new hires. And, when you’re running an HR compliance audit, documentation is king.

For instance, if you issue staff with any sort of employee handbook, you or your auditor will need to review those materials in full. You’ll also need to go over any training materials you use as part of your onboarding process.

Pay and Hours

Reviewing your formal pay structure is one of the most important parts of an HR compliance audit. After all, being unable to prove you’ve paid people fairly is a bad look for any employer.

You’ll also need to evidence the following:

  • Hours worked
  • Rates of sickness absence
  • Vacation days taken
  • Adjustments for flexible working

Employee Policies

By employee policies, we mean everything related to how your organization manages and supports its people. Your systems for performance management and review are big parts of this. Partly, it shows that you’re managing people fairly and equitably, but it also shows whether you’re managing them in an efficient way.

It’s also essential to review complaints and disciplinary policies. When things go wrong in an organization, these policies are some of the most important ways that employees interact with HR.

Discrimination Training and Safeguards

You need to give a detailed report of all discrimination, sensitivity, and workplace conduct training you provide employees. As noted above, this includes how you handle complaints to ensure people come forward, as well as how you handle disciplinary action in these cases.

Data Protection

Illegally sharing or retaining an individual’s personal information can get your business in hot water, even if it’s unintentional. That’s why you need to review your specific data protection policies. This includes assessing the kinds of information you retain on employees and applicants, how long you keep it, and what you do to keep it secure.

That’s our basic checklist. Hopefully, it illustrates the need for a detailed list of compliance goals.

How to Approach HR Compliance Audits

Now that we’ve been through what to cover with your HR compliance audit, it’s time to plan your approach. There are a few different choices you’ll have to make, which we’ll outline below.

Choose Your Timing and Frequency

When it comes to long-term planning, you should figure out your audit frequency in advance. Some businesses choose to run large compliance audits at the end of each year. This allows them to compare HR trends year-on-year.

Other organizations prefer a series of smaller audits throughout the year. This is better for getting a moving picture of HR challenges in your business. You might even wish to blend those two approaches for the best of both worlds.

On top of all that, you need to consider timing. It can be best to perform audits at slower points in the year. This makes them less disruptive and makes sure HR departments aren’t overwhelmed.

Choose Your Methodology

There’s no one-size-fits-all solution for how to conduct an HR compliance audit. You might want auditors to observe employees in person, or you might prefer to use survey portals for different branches of an international company. 

For example, you might choose to use an ae domain for United Arab Emirates employees, a .com domain for US employees, and so on. 

Some of the best methods for an HR compliance audit include:

  • A dedicated HR audit taskforce
  • Auditor interviews with senior management
  • Questionnaires for employees and management
  • Data collection by an HR specialist
  • Evaluation workshops with random selections of employees
  • Employee observation by an HR auditor.

Plan Out Phases and Steps

An HR compliance audit can be very time-consuming, but it’ll go much quicker if you plan ahead. A rough plan might look like this:

  • Announce the audit early to minimize the upheaval
  • Plan the audit using your checklist and chosen methodology as a guide
  • Meet with auditors and senior management
  • Conduct interviews and collect documentation
  • Produce the rough draft of the audit and make final checks
  • Finalize the audit report.

When you plan your HR compliance audit out like that, you will find that it’s perfectly manageable. 

The Takeaway

Conducting an HR compliance audit may seem like a vast responsibility, but it is also a necessary part of your business operations.

By following our simple guide, you can make compliance a regular part of your workplace culture and ensure you pass your HR audits with flying colors each time.

Jesse Liszka is the Senior Communications Specialist at Paylocity, a leading provider of cloud-based payroll and human capital management software. She is a highly experienced communications, client marketing, and content specialist with more than 12 years of experience. You can find her on LinkedIn.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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