HR Audit Checklist for 2024

What is a human resource audit? Maybe your business is still young, and the concept of a human resource (HR) audit is completely foreign. Perhaps this isn’t your first rodeo and you’ve been through multiple HR audits, or maybe you’ve outsourced HR at your business and no longer worry about HR audits. Wherever you might land on that spectrum, the constant updates to employment, labor, and tax laws can make an HR audit feel like a whole new world every year. Still, HR audits are important for fixing outdated procedures, staying competitive, and ensuring your business is compliant with the latest laws.

At Milestone, we know the importance of an HR audit, so we have put together some key points to remember and consider during your next one.

What Is a Human Resource Audit?

You typically hear the term “audit” relating to finances, like going through an IRS audit. An HR audit is similar, but this audit examines HR instead of financial accounts. There are many reasons why regular HR audits are vital to your business’s health, but here are two major ones to consider:

Changing Laws 

Laws are complex and constantly changing. New issues are developing in workplaces with every passing moment, and lawmakers respond to these issues by updating and creating new laws. For example, in 1970, the United States Congress passed the ​​Occupational Safety and Health Act, which introduced a wave of new and much-needed workplace safety requirements that HR had to implement. Because of this, deaths in the workplace have reduced greatly since 1970, from 38 worker deaths a day to 15 a day in 2019. 

With that many safety requirements being implemented so quickly, no doubt some of the requirements have fallen through the cracks in many workplaces. An HR audit is a great way to catch those errors. 

Staying Competitive 

One of the worst feelings as an employer is having a talented employee come to you and say they are resigning. You may have asked yourself in these situations, “what could I have done to keep them?” Talent retention is a common issue all employers face. In fact, voluntary turnover costs exceeded $630 billion according to a 2020 retention report from the Work Institute. 

Going through an external audit gives you an expert, third-party perspective to understand gaps in your employee lifecycle that can help explain talent retention problems. An HR audit will examine internal and external factors to determine what changes your business needs to make to stay competitive. 

What Should an HR Audit Include?

An HR audit should be thorough and include many aspects that depend on your business’s size, type, and other factors. Creating and utilizing a human resource audit checklist each year is one of many steps you can take to keep your HR up-to-date. You can make a simple HR audit checklist in Excel or even have an HR audit checklist PDF to email to employees so they know what to expect during the audit. “What goes in the human resources audit checklist?” you might ask. If you’re looking to create your own checklist, here are just a few aspects to consider:

Hiring Process

• Ensure all applications are written in accordance with nondiscrimination laws
• Read through all job descriptions and ads to update any inaccuracies if job duties have changed
• Confirm rules are being followed regarding background checks, ​​Fair Credit Reporting Act laws, and any other pre-hiring, investigative procedures 
• Review all interview questions and testing for impermissible inquiries, such as those relating to gender, religion, age, etc.
• Make any necessary revisions to employment offer templates and check current employee contracts to stay up-to-date with new laws 

Employee Benefits

• Gather information about benefits offered by competitors to make necessary changes to your benefits to remain competitive
• Audit employee usage of existing benefit programs
• Review new healthcare laws and regulations to update employee health insurance benefits accordingly
• Monitor new legal cases relating to the Employee Retirement Income Security Act (ERISA) and, based on the outcomes, make any necessary adjustments to employee benefits documentation 

Employee Compensation

• Review employee compensation to ensure it remains commensurate with each employee’s experience and performance
• Articulate company compensation philosophy
• Outline retirement-deferred comp plans
• Check that compensation offerings remain competitive in the job market
• Stay up-to-date with any changes to the Internal Revenue Code and applicable state, federal, and local tax laws

Employee Relations and Workplace Environment

• Review company policies on workplace harassment and discrimination.
• Examine records of employee complaints and resolutions.
• Assess the effectiveness of communication channels between management and staff.
• Evaluate training programs on workplace ethics, diversity, and inclusivity.

Training and Development

• Check that training materials are updated.
• Ensure mandatory training sessions, like safety or compliance training, are conducted.
• Assess the effectiveness of onboarding processes for new hires.
• Monitor the regularity and impact of performance reviews.

Leave and Absenteeism

• Confirm compliance with your country’s Family and Medical Leave Act (FMLA) or equivalent.
• Assess absenteeism patterns and ensure policies are in place to address them.
• Review leave policies to ensure they are up-to-date and competitive.

Record Keeping and Documentation

• Confirm that all employee files are complete and updated, including I-9 forms for U.S. employers or equivalent documentation in other countries.
• Ensure proper documentation for all terminations.
• Check that all mandatory posters and notices are displayed in visible locations.
• Ensure retention policies are being followed for old records.

This list is only the tip of the iceberg for all that should be covered in an HR audit, but it is a great starting point for businesses looking to improve their HR functions and procedures. 

Can Milestone Help My Business with an HR Audit? 

We love helping businesses implement improvements to their HR or building out HR procedures from scratch. Not only do we assist with annual HR audits—we can help with every aspect of your business’s HR! If that human resource audit checklist above felt intimidating or like something you simply don’t have time for, that’s where we come in. 

At Milestone, we partner with businesses to relieve them of all the extra work and stress that comes with managing HR. Not only that, our experienced team has plenty of creative initiatives and ideas to take your HR to the next level. We want your employees to be happy and safe, which will no doubt make your business thrive. Contact us today to learn more about our high-quality HR solutions!