Why are Human Resource Audits Important?

Proper management of human resources can be pivotal to a business’ success or failure. Employees are the backbone of a business. Therefore, effective human resource management will ensure that the business is handling its employee relations appropriately. Policies relating to benefits, wages, salaries, job descriptions, employee absence, and performance all fall into the umbrella of human resource management. How does a business monitor how well it is doing when it comes to human resource management? A human resource (HR) audit will help a business assess its human resource practices and procedures.

Human Resource Audits

HR audits are an objective review of the human resource policies of an organization to help identify gaps in their practices. The review enables the organization to ensure that these practices and policies comply with the law, are adequate for the company, and effective in meeting its goals. When gaps are identified, the organization can then take measures to correct them and minimize risks to achieve greater success. There are many ways to conduct an HR audit. Depending on the size of the organization and its goals, an audit can be comprehensive or narrowly focused. However, typical audits can be divided into the following types:

Risk Mitigation Audits

Risk mitigation audits focus on whether the organization is complying with the laws and identify gaps in compliance to limit exposure to litigation. The goal is to prevent employment-related lawsuits and federal fines for failing to meet federal employment standards. Most employment-related lawsuits involve hiring practices, termination, and discipline of employees.

Wage and hour laws are complex, and misclassification of employees is common.  An audit can reveal whether employees are being misclassified as exempt or nonexempt from overtime pay. An audit can help an organization catch these misclassifications so that corrections can be made. Additionally, time keeping practices must be accurate to prevent claims regarding inadequate overtime pay.  Furthermore, compliance audits can reveal issues related to fair treatment and sexual harassment.

Value Creation Audits

Value creation audits focus on practices to maximize employee performance. This type of audit can reveal if the performance evaluations are achieving the goal of providing adequate feedback to employees and exposes any issues in the evaluation process so that these can be improved.

Value creation audits also involve a review of compensation packages, such as salaries, wages, and leave of absence that the HR department offers to attract talent. A review may identify benefits not offered that can be implemented to retain and attract talent. For example, an audit may reveal that employees wish for more flexible hours and telecommuting options, which may be an additional benefit that can be offered to employees based on the audit.

An organization can perform an audit in-house or hire outside consultants. Before conducting an audit, it is important to define the type of audit that needs to be performed. After an audit has been conducted, it is vital to evaluate the findings and create action plans to implement the changes suggested by the audit.

The employment and labor law practice at MacMain Leinhauser offer a full range of services related to human resource management. For assistance with an HR audit at your organization, contact us online or call us at 484-318-7106. Located in West Chester, Pennsylvania, we provide legal services to clients throughout Philadelphia and Chester County.