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7 Easy Tips to Conduct an HR Audit

There is something about the changing of a new calendar year that stirs the organizing gene in us. We channel our inner Marie Kondo and purge every drawer, closet, and shelf in the hopes of sparking joy and order in our home. Label makers at the ready. Trips to IKEA and Target for the latest and greatest organizational systems available. In driveways across the country, long-forgotten items are piled into the back of the car, only to be abandoned in the drive-through lane at the local thrift shop. A clean slate feels invigorating!

But what about your business? Do you audit your HR files, policies, and practices with the same intensity? Unlike your home, auditors can show up at your office door unannounced and ask to see your files. Here we have some easy auditing tips for getting your people-related ducks in a row, just in case you ever have an unwanted visitor.

Good order is the foundation of all things.

~ Edmund Burke

The Chief Auditor

First, choose who will do the auditing? Will that be an HR person, the Office Manager, or maybe the Owner? Whoever you designate Chief Auditor should be the one that has access to the confidential nature of HR files, and holder of the key to the secure filing cabinets, drawers, room, etc. Should you ever be audited, this person will be the point of contact for locating requested information and answering any questions.

Everything Has a Place

Maybe you're a small business with not a lot of space, or a large business, and files are in different locations. Whatever your square-footage, gather all employee-related files into a central location and secure them. Whatever way you store your files, be it physical or electronically, personnel records should be readily available upon request in the event of an audit. We should also note, that not all paperwork goes into one file. This won't apply to everyone, but these are four files you should maintain separately:

  • Personnel file: employee and emergency contact information, application, resume, job description, performance reviews, disciplinary notices, etc.

  • Medical file: anything related to an employees medical history

  • I-9 (Employment Eligibility Verification): each employee's I-9 should be kept all together in a folder or binder in a secured location

  • Investigations: all documents related to an employee investigation should be kept in a file, preferably in the investigator's locked drawer/cabinet

Identify What You Have

Creating a checklist makes the auditing process seem less daunting. One method is to order your list by an employee's lifecycle. Think through the stages the employee goes through, from hiring and onboarding to benefits and leave of absences to separations. Then you can go down that list, checking off that you've reviewed and updated all policies, procedures, and regulations related to each stage.

The Handbook

A few months ago, we talked about the importance of having an employee handbook. When it comes to conducting a thorough HR audit, the handbook will want your full attention. This is where the majority of updates take place. New laws go into effect that can change an existing policy or require the addition of a new policy. After ensuring all policies are compliant, be sure and roll out the revised handbook to your employees and have them sign a new Employee Handbook Acknowledgment Form (this goes in the personnel file).

Wall Art

You've audited all the physical and electronic files - next up, the labor posters. If you use a payroll company or poster service, most likely they will be sending you updated labor posters this month. Whichever means you acquire your labor posters, don't forget to add this step to your audit checklist.

What to Keep, and for How Long

Record retention guidelines vary by federal and state, as well as by type of record. It's a good idea to add the timeframe next to each category on your checklist.

Don't Overlook the Big One

While not necessarily something that an outside auditor would penalize you for, the company's mission, vision, and values are still very much employee-centric and should be reviewed. Are these aligned with the direction you want to take the business, and do the employees feel connected and aligned with them? Spend some time during your audit thinking about how these three core pieces of your business correlate with the success of your employees and organization.

You asked so we are delivering! On January 27 at 11:00 MST, we are hosting an in-depth (but NOT overwhelming) training on conducting an HR audit and record-keeping review. If this time conflicts with your schedule, no worries. You can still register and receive the recording and slide deck to view at your convenience. We hope you stop by.

Got questions or need help with your own internal audit? We are here to assist.