Memphis Business Journal, Published December 22, 2008 Written by Barbara Richman

1. Memphis Business Journal - December 22, 2008
http://memphis.bizjournals.com/memphis/stories/2008/12/22/smallb3.html
Friday, December 19, 2008
Tips for conducting a human resource
compliance audit
Memphis Business Journal - by Barbara Richman
With the year ending and the beginning of next year rapidly approaching, it is a time when
organizations normally take stock of where they are presently, where they want to go
strategically, and what is necessary to get there. The focus on human resources is a critical
part of the planning process, since it is readily understood that employees are one of the
organization’s most valued assets and will play a key role in meeting the business’ desired
objectives.
Although there are numerous ways to examine and identify strengths and areas for
improvement in the human resource function, one essential approach is to assess policies,
processes and practices on a periodic basis to confirm that compliance requirements are being
met. A human resource audit is a tool that is used frequently for this purpose.
Today’s political and economic climate provides an even greater impetus for organizations to
consider human resource audits as a means of ensuring that they are in compliance with
current laws. On the political front, there is widespread anticipation that recent elections will
signal some far-reaching changes in employment and labor laws. With layoffs and other
organizational actions taken as a result of a downturn in the economy, employees’ job security
and economic concerns are on the rise.
The potential for upcoming employment legislation and threatening economic conditions is
given regular attention in the media and elsewhere. These are factors that will, in all
likelihood, contribute to an increase in the numbers of charges and lawsuits that will be filed
in the months ahead.
The following are general tips for conducting effective audits to better ensure that the
organization meets its compliance requirements and has protections in place to decrease its
legal liabilities.
1. Use human resource or other professionals with knowledge of employment laws to conduct
the audit. If the organization has a human resource department, members of the staff may

2. serve as internal resources that will enable the audit to be performed in-house. Factors to
consider in making this decision include the staff’s familiarity with employment laws,
objectivity, willingness to acknowledge inadequacies in current practices and ability to gain
organizational buy-in for necessary changes. An attorney can be utilized for advisory and
oversight purposes. Other alternatives include using a human resource consultant or an
employment law firm.
2. Examine human resource functions related to organizational compliance and determine the
scope of the audit. A sample of areas that can be covered include employee classifications (e.g.
full time, part time, temporary, exempt, non-exempt), use of independent contractors,
recruitment and hiring processes, promotion practices, performance management, employee
handbooks, training, employee relations, personnel files and other employee records,
timekeeping systems, disciplinary procedures, workers’ compensation and safety. The audit
should also include a review of the content of a number of specific forms and other items,
such as job descriptions, performance appraisals, interview questionnaires, disciplinary
notices, medical certification, verification of employment eligibility (I-9 Form) and
employment posters.
3. Determine which federal, state, and local employment laws are applicable to the
organization. Coverage will be based on various criteria, including the organization’s status as
a public or private sector employer, number of employees on the payroll and nature of the
business.
4. Prepare a checklist, questionnaire, or other structured form to obtain information in a
systematic fashion. This document should serve as a roadmap for a comprehensive
examination of specific areas covered in the scope of the audit.
5. Collect data from a variety of sources. Thoroughly examine relevant written materials.
Interview individuals who are key to understanding paperwork, processes, procedures and
organizational practices.
6. Prior to concluding the audit, review documentation and develop a written report that
outlines findings and specifies areas where changes are needed. Recommendations can be
prioritized based on their impact on employees and the potential liability that each creates.
Once agreement on items is reached, an action plan should be developed and implemented in
order to remedy any deficiencies that were found.
7. After the audit is completed, track employment-related events on an ongoing basis to
ensure that the organization maintains up-to-date policies, processes and systems. Events
that may signal the need for potential modifications include new or amended laws or other
legal requirements; increases or decreases in the number of employees resulting in changes in
coverage under specific employment laws; the addition of facilities in another state or
country; and downsizing, mergers, acquisitions, or other significant organizational changes.

3. 8. Engage in regular audits, routine tracking and timely implementation and communication
of resulting changes. These actions will foster greater awareness within the overall
organization of the importance that management places on compliance.
BARBARA RICHMAN is a senior consultant with HR Mpact, a Memphis human resource
consulting firm. She can be reached at (901) 685-9084, (901) 496-0462 or barbara@hr-
mpact.com
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