What is an HR Audit and Why Your Business Needs One

Did you wince at the word, "Audit"? Yeah I know but hear me out...

As a business owner, you’re probably managing a lot of different tasks, but there’s one thing you shouldn’t overlook: your company’s HR practices. This is where an HR audit comes in handy—it’s a tool that helps ensure your business is following the rules, running smoothly, and ready to grow.

?What’s an HR Audit?

Think of an HR audit as a health check for your company’s human resources. It’s a way to review your HR policies, practices, and procedures to spot any areas that need improvement, make sure you’re following the law, and align your HR efforts with your business goals.

?Why is an HR Audit Important?

1. Staying Legal: The main reason to do an HR audit is to make sure your business is following all the necessary employment laws. This covers everything from how you classify employees to how you manage payroll. Not following the rules can lead to fines and legal troubles.

2. Working Smarter: An HR audit can help you find ways to make your HR processes more efficient. Maybe your onboarding process needs updating, or you could simplify how you manage employee benefits. Whatever it is, the audit will help you make things run more smoothly.

3. Avoiding Problems: An audit also helps you spot potential risks in your HR practices. For example, are your anti-discrimination policies current? Do employees know how to report issues? Addressing these things early can prevent bigger problems later on.

4. Supporting Your Business Goals: Your HR practices should help your business succeed. An HR audit makes sure your HR strategies are working in harmony with your business plans, creating a positive environment where employees can do their best work.

?How Does an HR Audit Work?

Here’s a simple overview of what happens during an HR audit:

1. Planning: First, decide what areas you want to review. Will it be a full review of all HR functions, or just specific areas like compliance?

2. Gathering Information: Collect all the necessary HR documents, like employee handbooks, job descriptions, payroll records, and benefits information.

3. Reviewing the Data: Compare the information you’ve gathered with legal requirements and best practices to see where improvements are needed.

4. Reporting: After reviewing everything, you’ll get a report that outlines what’s working, what needs fixing, and recommendations for making improvements.

5. Making Changes: Finally, put the recommended changes into action. This might mean updating policies, retraining staff, or investing in new HR tools.

?When Should You Do an HR Audit?

It’s a good idea to do an HR audit every year, but there are specific times when it’s especially important:

Before a Merger or Acquisition: Make sure your HR practices are solid before any big changes in your business.

After Rapid Growth: If your company has grown quickly, an audit can help you ensure your HR functions are keeping up.

When You Notice Issues: If you’ve seen more employee complaints or higher turnover, an audit can help you find out what’s going wrong.

An HR audit isn’t just about following the rules—it’s a way to help your business grow and succeed. By regularly checking and updating your HR practices, you’re not only keeping your business legally compliant, but also creating a positive, productive work environment. Whether your company is small or large, the benefits of an HR audit are clear: peace of mind, fewer risks, and a stronger, more aligned business.

If you’ve got questions about parts of your HR function and want a free consult book time with us here .? And if you’re in need of an audit and you want us to do it for you we have our HR Program Review that covers over 250 points of your HR function.

Check out my nifty video about our HR Program Review here: https://youtu.be/b9bK9M_XoPU?si=Cm0fYItaYEIiBXZk

-L

LeiLani E. Quiray is the Founder and CEO of be the change HR , Inc., certified Minority and Woman owned, a conscious company and social enterprise, providing HR support for small-to-medium sized businesses in any facet of HR from pre-hire to post-term and everything else that happens in between. She and her team also teach free job readiness courses and provide free coaching to trafficking survivors.? Her team is not only HR Pros, they are Life Changers.?

?If you’d like to chat with someone on our Squad for a free consult or are interested in our services book time here .