A company's human resources (HR) department can play a huge role in how successful and efficient the business becomes. HR audits may particularly impact your company significantly because they oversee new laws and regulations and ensure all company rules correspond with them. This guide explores how HR audits work and effective tips for conducting a human resources audit in California. 

What Is an HR Audit?

An HR audit is when a business reviews its HR policies, systems, procedures, practices and documentation. These internal audits of the company help the HR department identify the strengths and weaknesses of current systems and areas for improvement. There are four types of voluntary HR audits that cover specific HR practice areas: 

• Compliance audit: This audit assesses whether the company successfully fulfills legal HR obligations in areas like harassment, at-will employment and absences and leave. 
• Strategic audit: The strategic audit ensures that HR-specific areas like training programs, hiring practices and benefits programs align with the company's strategic goals. 
• Best practices audit: To ensure that company decisions are similar to court rulings and decisions on these matters, this audit monitors the company's best practices for handling performance reviews and disciplinary actions. 
• Functional area audit: This audit looks at practices in particular areas like health insurance programs and 401(k) administration. 

Why Is an HR Audit Necessary for Your Small Business?

HR audits help you recognize if any processes and policies are doing more harm than good and whether any issues might lead to a lawsuit if left unchanged. By following HR policies correctly, the company can avoid compliance violations, penalties and fines. 

It also gives the company a competitive edge. Confidence in company practices creates a positive and efficient work environment, leading to better performance. Still, you may only be able to achieve this if you know how to perform an effective HR audit for a small business. 

HR Audit Tips for Small Businesses

There are various HR procedures and policies within a company. To conduct a successful human resources audit in California, you must identify which HR areas directly contribute to your overall business goals, strategies and operations. Here are some of the top HR auditing tips for small businesses. 

1. Create a Compliance Checklist

You can evaluate HR audit data and create an actionable plan more effectively when you sort your compliance audit into an organized compliance checklist. Some questions you can add to your checklist include: 

• Do you store personal information as the U.S. Privacy Law requires? 
• Do your onboarding practices comply with state and federal regulations? 
• Are there policies in place for events of discrimination? 
• What policies do you have for situations that involve sexual harassment and bullying? 
• Is the company compliant with current laws and regulations? 

2. Plan the Audit in Advance

Planning the HR audit involves clearly defining the strategy and goal of the audit. If it is the company's first time conducting an audit, it's best to perform a comprehensive review of all aspects of HR practices. Otherwise, if you have any key concerns or new legal rules and regulations were passed, you may focus on reviewing these areas of concern. Doing this planning in advance can also allow the team to gather the relevant documents beforehand. 

3. Maintain Compliance

To maintain compliance, you need to know and understand California laws. For example, there are certain registration permits and certifications that your company should renew or update at a specified date. Check up on these dates to ensure you do so on time. 

Similarly, the California Consumer Privacy Act (CCPA) implemented some regulations for consumers regarding personal information. This ensures that businesses let customers and clients know how their information is used and avoid discriminating against consumers for exercising their rights. 

Are you complying with these laws? Are you putting legal information up in the workplace to remind all employees of these important regulations? 

4. Review Best Practices and Policies

Do you have an employee handbook or a standard recruitment and selection procedure? These are important things to review in a human resources audit so that you may update them accordingly every few months. You might believe you can avoid this if you are actively informing current employees of new rules. Still, when onboarding new employees, they may adopt outdated practices that could affect the company's growth and improvement. 

5. Maintain Competitiveness and Continuous Improvement

To ensure the company is always improving, HR professionals must regularly observe the organization's procedures, policies and practices to recognize areas for improvement. By staying aware, the business can continuously thrive, satisfy consumers and employees and stay ahead of their competition. 

Do this by monitoring HR systems, keeping them up-to-date and following up with new aspects regularly to avoid built-up issues. This will help you easily identify where the issues lie and how you can improve certain areas. 

6. Create an Action Plan and Track Performance

The most important part of an audit is what you do after reviewing current practices and procedures. When noticing areas that could do with improvements, use your insights to form more effective policies that promote compliance with laws, regulations and company values. Be sure to continue tracking the progress since it may increase your legal risk if you identify an issue and neglect to act on it. 

7. Compliance Specific

When building your audit list, you may create a compliance checklist specific to just one area. For example, if your health and safety responsibilities are lacking, you can review OSHA and industry requirements and compare them with your company's standards for safety training, emergency response programs and injury prevention. 

What Are the Benefits of an HR Audit for a Small Business?

There are numerous benefits of implementing these HR auditing tips for small businesses: 

• Improve workplace safety: HR audits help spot patterns in safety issues in the workplace and create effective solutions that make everyone feel safe. 
• Increase employee retention: You can also use an audit to identify turnover trends and which aspects need improvement through interviews and surveys, helping to retain employees. 
• Attract top talent: Your insights can help you recognize gaps in the recruiting process and prescreening job applicants and leverage valuable opportunities to improve the process. 
• Identify and solve issues fast: With regular audits, the issues you find may become smaller over time and easier to fix, making the auditing process faster and keeping you up to date with ease. 

Receive Assistance From Business Consumer Alliance 

Whether you're a small business owner looking for ways to improve your current HR audit practices or you're just about to take on your first audit, Business Consumer Alliance is ready to assist. Our specialist may help with legal disputes, business operations advice and compliance with HR laws and regulations. 

Becoming part of our Business Membership Program will allow you access to a knowledgeable attorney for legal advice and HR assistance that helps you implement legal compliance into company practices more smoothly. To leverage the benefits of an HR audit, become a BCA member today.