Human resource audits are important, both to evaluate the effectiveness of a company’s HR function, and to ensure compliance with federal, state and local laws.
The compliance aspect is especially crucial in today’s ever changing regulatory environment, as companies operate within the confines of a heavily regulated employee environment. Further, those regulatory requirements for companies are in a constant state of change and evolution. The risks of non-compliance are numerous and expensive, and include employee lawsuits (damage awards and attorneys’ fees) and regulatory enforcement activities (fines and penalties). Voluntary audits of the HR function can help uncover compliance issues and reduce or prevent liability.
Before conducting a compliance audit, consider the potential results and how they can create or increase potential liability for your company. The audit report will identify the company’s human resource strengths and weaknesses. Are there specific areas of compliance concern? Will the audit disclose areas of non-compliance, and potentially increase possible legal exposure? If so, it’s prudent to conduct your audit in such a manner as to safeguard the audit results from being used against your company in future litigation or government investigations related to regulatory compliance issues.
Once you have completed your HR audit, there are additional steps that should be taken to ensure the audit process is meaningful. First, the audit report should be assessed, which should result in recommended changes in the HR process to address areas of weakness and non-compliance. Policies may need redrafting. Procedures may need amending. Development of an action plan for improvement in the HR function and regulatory compliance is absolutely necessary.
Second, the audit results should be reviewed with company management. Candid and thorough assessment of the audit report is crucial. All areas of concern should be identified, as well as the risks associated with continuing non-compliance. All necessary changes to your employment policies and procedures should be fully discussed with management to ensure financial support for the necessary remedies of any potentially problematic policies or practices, and to ensure compliance in the future.
Third, revisions in the HR process should be implemented to ensure regulatory compliance. This will require implementation of the changes in policies, practices and procedures needed to address areas of non-compliance. Also, training will be necessary to ensure all members of management are fully schooled on future implementation of the changes, and on the compliance issues identified which necessitated the changes.
Finally, follow-up evaluation and assessment should be performed on a regular basis to ensure compliance issues were adequately remedied. Ongoing assessment is also necessary to ensure all individuals are adhering to the revised policies and procedures. Re-training may be necessary if non-compliance issues continue.
