Although we care about your personal health, we're actually talking about a human resources check-up. We know you try hard to stay current with all of the changing state and federal employment regulations, and to have sound HR policies and practices, but it's very challenging. Rather than crossing your fingers and hoping you're on top of things, we recommend at least conducting an annual basic HR administration audit.
An expert in the field in HR is my dear friend and business associate Victoria Aguilar, a partner at the AR Group. She will bring some insight into why we need a check-up. Some of the questions posed to Victoria will give us insight into why you should ensure that you do not miss the opportunity to put terms in place that will allow them to operate efficiently while minimizing liability. Since many businesses fail to use strategic agreements and policies, often allowing themselves to have obligations implied into the relationship. Why just play the game when you can make up the rules? Let's here was Victoria has to say.
A human resources audit is a comprehensive method (or means) to review human resources policies, procedures, documentation and systems to identify needs for improvement and enhancement of the HR function as well as to ensure compliance with ever-changing rules and regulations. An audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion.
Sections of review include:
- Form review
- Hiring and Orientation
- Job descriptions
- Performance evaluation process
- Personnel file review
- Termination process and exit interviews
The purpose of an HR audit is to recognize strengths and identify any needs for improvement in the human resources function. A properly executed audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems. Some of the reasons to conduct such a review include:
- Ensuring the effective utilization of the organization's human resources
- Reviewing compliance concerns with a myriad of administrative regulations
- Instilling a sense of confidence in management and the human resources function
- Maintaining or enhancing the organization's and the department's reputation in the community
- Performing "due diligence" review for shareholders or potential investors/owners
- Establishing a baseline for future improvement for the function
Because of the multitude of laws affecting each stage of the employment process, it is extremely important for employers to regularly review their policies and practices to ensure regulatory compliance to avoid potentially costly fines and/or lawsuits. An employer overlooking regulatory compliance with their human resource practices could face fines of $1,100 for any violation of the appropriate payment of overtime for non-exempt employees, penalties as high as $10,000 each occurrence for failing to post required safety notices, or fines up to $1,000 per employee for non-compliance with the Federal Immigration Reform Act.
While penalties such as these help define the risk of non-compliance and signify the importance of conducting periodic HR audits, an audit can also ensure that policies and procedures are fair and consistent across the organization and strengthen employee satisfaction. By maintaining a satisfied and productive workforce, an employer lessens the expense associated with costly turnover of staff. Losing one employee is estimated to cost a company 50 percent to 150 percent of the lost employee's salary in time and money spent to replace that employee.
What is an HR audit?
An audit is a means by which an organization can measure where it stands and determine what it has to accomplish to improve its human resources function. It involves systematically reviewing all aspects of human resources, usually in a checklist fashion. The key to an audit is to remember it is a learning or discovery tool, not a test. There will always be room for improvement in every organization.
What does an audit include?
An audit generally includes the review of Hiring and Orientation, Benefits, Compensation, FLSA Classification, EE HB Assessment, Performance evaluation process, Termination process/Exit Interviews, Job Descriptions, Form Review and Personnel File Review
Why do an audit?
The purpose of an audit is to recognize the strengths and identify any needs for improvement in the human resource function. A properly executed audit will reveal problem areas and provide practical recommendations and suggestions for the remedy of the identified problems. Some reasons to conduct a review are to ensure the effective use of an organization's human resources, assess compliance with various administrative regulations, instill a sense of confidence in management and the human resources function that it is well managed and prepared to meet potential challenges, maintain or enhance the organization's and the department's reputation in the community or to perform a "due diligence" review for shareholders or potential investors/owners.
Why bother with the cost and inconvenience of an HR audit?
There are a multitude of laws that affect each stage of the employment process. Even in a good economy, it is important to recognize the risk that non compliance presents, but in a not so good economic climate, employers traditionally witness more compliance complaints and thus increased regulatory intervention. It is truly important for an employer to regularly review policies and practices to ensure regulatory compliance to avoid potentially costly fines and/or lawsuits. Just as important is for employers to recognize the value inherent in running a company that works efficiently through effective management of its human capital.
While penalties help define the risk of non-compliance, an audit can also ensure that policies and procedures are fair and consistent across the organization and designed to strengthen employee satisfaction. By maintaining a satisfied and productive workforce, an employee lessens the expense associated with costly turnover of staff. Losing one employee is estimated to cost a company/employer 50-150 percent of the lost employee's salary in time and money spent to replace that employee. These figures, obviously, do not take in to account the emotional cost associated with morale that unquestionably results from high turnover. Put simply, it is good business to maintain a complaint HR culture.
Victoria makes us think that you don't want to step over dollars to pick up dimes when it comes to the financial implications of having to defend your practices or actions when it's likely that you "didn't know what you didn't know." So don't wait until you get the death notice for your business. Having regular check-ups and being proactive and not reactive will keep your organization healthy and your bank account growing. You can check this off your to do list and start 2012 in good shape.
Victoria Aguilar is a partner at The AR Group, 4850 E. Perry Parkway, Greenwood Village, CO 80121; 720-283-1021.