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The Importance of Human Resources Audits

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Most employers have gone to tremendous expense and effort to create scores of human resources policies, practices, and procedures that comply with the law and are consistent with their organization's corporate culture. This can include, for example, employee handbooks, administrative guides for managers, performance management systems and guidebooks, succession planning systems, severance plans, and "behind the scenes" processes for onboarding new hires, disciplining or terminating employees, promotion guidelines, and making bonus determinations.

Not all human resources policies, practices, and procedures are committed to writing. But they are used nonetheless. Whether they are written or not, it is vitally important that companies also have a process to ensure that everything stays up-to-date with legal and compliance requirements, and actually works as intended. Conducting human resources audits is one way to do that.

A human resources audit usually involves review of all HR policies, practices, and procedures, whether or not they are formal. It includes reviewing documents, interviewing human resources professionals from different areas of the organization, interviewing some managers at different levels of the organization, and possibly interviewing in-house employment counsel.

The audit can be performed in-house. But it is worth considering whether to use an outside consultant who has no personal stake in what is working and whether everything complies with the law. An outside employment attorney can conduct the audit. And, if set up properly, the audit can be subject to the attorney/client privilege so that its results will not be discoverable in a lawsuit. Or outside counsel can retain the consultant on the company's behalf.

Either way, conducting an HR audit every two or three years can help a company:

  • Identify policies and procedures that need to be updated for changes in the law or compliance rules
  • Identify policies and procedures that are not followed and find out why
  • Find out about unwritten practices and whether there are any legal risks associated with those practices
  • Gauge whether procedures and practices are user friendly and what changes can be made to help assure broader compliance
  • Identify opportunities for new policies or procedures that will help minimize risk
  • Determine whether record-keeping practices are being followed
  • Identify where additional training or communication would be helpful for compliance

An effective HR audit will culminate in a well-organized report. The report includes not only the specific results of the audit, but also a list of recommended actions. And a truly effective list of recommendations is ranked by risk. That way, an organization can see at first glance where its largest or most expensive exposure is and can design reasonable response times to address the issues raised.

HR audits of the proper scope can be expensive. And it is important that business units are solicited for their support before embarking because when the audit is done, there may be changes that will directly impact the units. But most importantly, a company (through its executive management) should be committed to acting on the results of the audit, whether that means retaining outside counsel to perform a detailed legal review of policies, putting together project teams to create or update policies and procedures, designing training courses targeted to minimize risk, or writing a series of employee communications to address some of the issues discovered.

An HR audit can be as broad or narrow as the company wants. Perhaps in one year the audit is limited to written policies and procedures. Perhaps the next year an audit will look at the level of compliance with signed new-hire paperwork, contracts, and agreements. It doesn't matter. Whether an audit is done piecemeal or all at once, the important thing is to have a process in place that ensures the time and money spent on creating elaborate HR programs does not go to waste because they are out-of-date, insufficient, or simply are not followed.


Barrie Gross is former Vice President and Senior Corporate Counsel (Employment Law) for an international Fortune 1000 company and is a regular contributor to AllBusiness.com. She is the founder of Barrie Gross Consulting, a human resources training and consulting firm dedicated to assisting companies to manage and develop their human capital. Visit www.barriegrossconsulting.com to learn more about Barrie and the services BGC provides.

Note: The information here does not constitute legal advice and should not be relied upon as legal advice. If you have a legal issue or wish to obtain legal advice, you should consult an attorney in your area concerning your particular situation and facts. Nothing presented on this site or in this article establishes or should be construed as establishing an attorney-client or confidential relationship between you and Barrie Gross. This article is provided only as general information, which may or may not reflect the most current legal developments or be complete.

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