Why You Should Conduct an HR Audit

Jennifer L'Estrange
September 7, 2021

With the number of changes in employment law and practice over the last 18 months, now it is more important than ever to be on top of your HR compliance topics. In this article, we review some of the key HR audit points that we cover during an engagement to ensure that the company is meeting or exceeding legal requirements as part of being an employer of choice.

What’s a Human Resources Audit?

Simply put, an HR audit is a review of any and all HR processes, policies, and activities across the employee lifecycle. Most often, we are asked to conduct an HR audit to ensure legal compliance with federal and state requirements, but we also look at processes to see if they meet the goals that they set in their design. For example, when we review an organization’s recruiting and onboarding process, we start by asking what KPIs were set to measure recruiting success. When we’re looking at a payroll process, we check communication rhythms for time and attendance to ensure that time is reported accurately and on time for hourly workers. Each HR process has its own set objective and the audit identifies opportunities to streamline or improve each one.

The Importance of HR Audits

We are often asked the question, “why is an HR audit important?” Like any compliance topic in your business or organization, an HR audit will show you where your processes are working and where there are opportunities to improve. In some cases, the processes protect the confidentiality of your employees and in others, they support (or erode) the values-based decision making that drives your business forward. 

Common types of HR audits

  • Legal compliance audits: these focus on HR compliance from the perspective of policies and practices, including I-9 reviews, employee handbooks, federal and state legal reporting requirements, etc.
  • HR processes: these include a review of all processes in the employee lifecycle to ensure that they are functioning as intended and are meeting the business goals that they are designed to achieve. Key processes to review here include recruiting, onboarding, payroll, performance management, salary reviews, workforce planning and budgeting, employee exits, terminations, succession and career planning and organizational and individual learning. 
  • Compensation and benefits audits: these include equal pay audits, wage and hour audits, employee classification in regards to overtime exemptions, and reviews of statutory and other forms of paid time off, as well as a review of mandatory and optional employee benefits packages, depending on organizational size. 
  • Organizational audits: these focus on maintaining up to date job descriptions that are written to include essential job functions, mandatory training and development or certifications. We also ensure that organization charts are accurate and review which positions are eligible for modified schedules, including remote work, flex time and adjusted hours. These last audit points have taken on increased importance in the post-COVID workplace. 

Top Reasons Why You Should Conduct an HR Audit

We believe that every organization should, at a minimum, conduct a review of HR policies annually. This abbreviated audit will catch anything out of compliance with federal and state regulations.

Beyond the mandatory legal compliance requirements, here are our top 5 reasons why clients ask us to do an HR process and policy audit for them: 

  1. They believe that one or more of their HR processes is not meeting business objectives.
  2. The business has changed and they need help identifying where the HR processes need to change as a result.
  3. They have grown in headcount and have different legal compliance requirements.
  4. They have expanded to new geographies and need to adapt processes and policies as a result
  5. They haven’t developed all of their HR processes yet and need help with a gap analysis and setting priorities for process design.

Who Can Help with an HR Audit?

HR audits can be run internally or externally but must be conducted by someone who was NOT responsible for the process design or policy development. When done internally, the General Council or internal audit department is typically the go-to for an HR audit. External audits for Human Resources processes and employee policies are either conducted by an experienced labor and employment lawyer or by an organization that supports HR in terms of process design, implementation, and possibly outsourcing. If you would like to learn more about us, how we work, and how we might be able to help your organization, please feel free to reach out.

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A start up junk removal company was preparing for growth and recognized the need for compliance and HR processes to help scale appropriately. The company lacked structure and policies to sustain growth. There was an evident need for ongoing support for employee relations, compliance, policies, compensation planning, recruiting processes, and change management.

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