HR Compliance & Audits: How To Avoid Costly Mistakes

Several years ago, I had the unfortunate opportunity to learn just how critical it is to ensure that even the smallest HR onboarding tasks are done correctly. It was day two on the job, and I was called to the front lobby by the receptionist, who told me that two men with a badge were there to see me.

Not one to easily panic, I asked what they wanted, and she replied they wanted to see me. Yikes! I quickly did a recap of my life and wondered what in the world law enforcement would want to talk to me about. Coming up with nothing, I chose not to flee and instead go to the lobby to talk to these ominous visitors.

Upon meeting the two lovely gentlemen from Immigration and Customs Enforcement (ICE), they presented me with a notice for an audit and inspection of our I-9s. Thanks to great legal counsel, I was granted a 30-day extension since it was my second day on the job. However, working with counsel we discovered that we had some significant issues in the way the company completed, verified, and stored the I-9s.

What is an HR compliance audit?

An HR Compliance audit is essential for employers to ensure compliance with employment laws. It goes beyond mere compliance by verifying the accurate maintenance and secure storage of records. Small issues like missing signatures on forms or unchecked boxes can lead to significant fines or legal liabilities. The audit covers personnel files, payroll, employee handbooks, compliance with postings, and even HR functions. Specific audits delve into recruitment and hiring practices, benefits, compensation and payroll, performance evaluation, and termination processes. Additionally, a legal compliance audit scrutinizes policies and procedures to ensure adherence to federal, state, and local labor laws, such as the Family and Medical Leave Act (FMLA), Fair Labor Standards Act (FLSA), anti-discrimination and anti-harassment policies, Americans with Disabilities Act (ADA) compliance, and Immigration Reform and Control Act (IRCA) requirements. This comprehensive audit process ensures legal compliance and protects both employees and the organization.

HR and I-9 Audit Compliance: Laws, Regulations, & Industry Standards

I won’t bore you with all the details, but suffice it to say that as a result, we suffered a significant loss of key talent due to this audit and faced significant fines. I now openly admit to PTSD when it comes to the I-9 process and am a zealot for ensuring this is done correctly, and, making sure routine audits are performed to ensure HR compliance.

In the immortal words of Jerry McGuire, “help me, help you!” – that is what every People Ops leader should be saying to their organizations. In the intricate web of modern business operations, the People Operations functions serve as the backbone that supports the entire organizational structure.

As companies continue to navigate an evolving landscape of laws, regulations, and industry standards, maintaining compliance within the People function has become more vital than ever. Helping the C-Suite understand the importance of routine audits is the role of all People leaders, and this is where audits step in to play a pivotal role.

These routine audits are a proactive shield against the looming threats of substantial fines, negative impacts to company reputation, and talent attrition. By meticulously examining and fortifying your HR processes, you safeguard your organization from punitive penalties and cultivate an environment where top-tier talent is nurtured and retained.

Benefits of An HR Audit

An HR audit can be likened to a thorough health check for a company’s People Operations department. It involves a systematic review of HR policies, procedures, documentation, and practices to ensure alignment with legal requirements, ethical guidelines, and industry best practices. While it might sound like an administrative chore, auditing the People function brings forth a multitude of benefits that go beyond mere compliance.

1. Risk Mitigation:

The business environment is rife with compliance risks that can arise from anywhere, be it labor laws, workplace safety regulations, or data privacy mandates. Conducting regular People Operation audits acts as a preventive measure, identifying potential compliance gaps before they snowball into costly lawsuits, fines, or reputational damage.

2. Legal Compliance:

Legislation related to employment practices is continually evolving, and non-compliance can have dire consequences. Audits help companies stay updated with the latest laws and regulations governing areas such as hiring, firing, employee rights, and discrimination. Adhering to these laws not only safeguards the company but also fosters a positive work culture.

3. Process Optimization:

Audits shed light on inefficiencies in People Operations processes, leading to better streamlining and resource allocation. This optimization can result in improved team member experiences, as processes become more transparent, timely, and fair.

4. Data Security and Privacy:

In the digital age, protecting employee data is paramount. audits assess data management practices, ensuring that sensitive information is handled securely and in compliance with data protection regulations like GDPR or CCPA. This safeguarding not only preserves employee trust but also prevents potential legal ramifications.

5. Internal Alignment:

A People Operations audit is not just about identifying areas of improvement; it’s also about promoting consistency and alignment within the organization. By standardizing HR practices across departments and locations, audits foster a sense of unity and shared values, which can positively impact company culture.

6. Team Member Engagement:

When Team Members perceive that their workplace adheres to ethical practices and follows regulations, their trust and engagement levels tend to rise. This can lead to higher morale, increased productivity, and reduced turnover rates.

7. Strategic Decision-Making:

Auditing People Operations functions provides management with valuable insights into the company’s human capital. This information can guide strategic decisions related to workforce planning, talent acquisition, training, and development.

In the complex realm of business, People Operations form the bedrock upon which organizations thrive. By conducting regular audits, companies demonstrate their commitment to ethical practices, legal compliance, and team member well-being.

These audits not only protect against risks but also pave the way for smoother operations, enhanced employee experiences, and more strategic decision-making. As compliance requirements continue to evolve, investing in auditing the People Operations remains a cornerstone of sustainable and responsible business practices.

This is where you need the trusted experience of a seasoned professional to evaluate your processes and, identify gaps, and provide solutions to ensure compliance.

Avoid Common HR Mistakes with Fractional HR Services

Ampleo is here to help! Ampleo HR professionals are here to assist you before you need to engage outside resources to defend against costly government audit findings or labor charges. Contact Ampleo today to learn more.