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HR Audits: A Critical Consideration in the Wake of COVID-19

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business team conducting a human resources auditCOVID-19, increased regulations and remote workforce management have all significantly contributed to the changing nature of HR and intensified the pressure on the function.  Through the end of July, current and former employees alike filed at least 436 workplace-related lawsuits linked to the pandemic.  Other cases included wage and hour issues, wrongful termination charges, and equal pay—among many others.  Now more than ever, this new environment demands that HR is equipped, engaged, and invested in not only helping their organization meet its business objectives but mitigating risk as well.  Not an easy task.

HR audits typically trigger a negative reaction.  They can be daunting, complex, and instill fear over the review process and potential outcomes.  Depending on the level of infraction, penalties can be crippling for an organization, not just financially but also reputationally.

Internal HR audits can be a vital means of identifying and mitigating an organization’s legal liability and determining whether its HR practices are helping, hampering or having little impact on its business goals.  The results of an audit can help identify gaps, ineffective processes, potential violations, and more.  In addition to ensuring HR processes, policies and procedures are compliant, HR audits help an organization achieve and maintain a competitive workplace—to make sure that it is well positioned to continue to attract, retain and engage its employees.

In short, an HR audit can keep an organization out of trouble and quantify the results of the HR function’s initiatives to support the organization.  And those results can provide HR with a road map for creating the necessary changes to improve the health of the organization.

Well-designed HR Audits usually have two major components: an HR Compliance Review and an HR Capability Assessment.

HR Compliance Review

Federal, state and local employment laws are complex, counterintuitive, sometimes conflicting and frequently changing.  There are over 180 laws related to employment.  And within the last 6 months, organizations are now dealing with recent changes in COVID-related leave, state paid leave policy changes, increased OHSA penalties, changes in FSLA standards, and “ban the box” legislation.

Special emphasis is placed on improving policies and procedures to make certain they comply with local, state and federal requirements.  Violations, as unintentional as they may be, lead to lawsuits, significant fines, bad publicity, loss of talent, employee dissatisfaction, and lost revenue.  The ability to identify and mitigate those risks is a key measure of success for the HR function and is critical to the success of the organization.

HR professionals are already keenly aware that areas such as hiring, performance management, discipline and termination practices, if not managed properly, tend to increase exposure and result in expensive lawsuits.  Additional risk areas that should also be carefully reviewed include:

  • FLSA Classifications
  • Employee Handbooks (or lack thereof)
  • Benefits / Administration / ERISA and COBRA
  • Background Investigations / Drug Screening
  • Wage & Hour Practices
  • Personnel/I-9 file Reviews

Internal audit results will specifically identify those areas with the greatest exposure and are presented and prioritized by level of vulnerability.  Recommendations are made, in order of priority, to mitigate those risks.

HR Capability Assessment

Given the current environment, many companies now must reimagine how HR will develop talent, manage performance, deliver services, and increase employee engagement.  HR professionals will need to have a viewpoint, be systematic in their thinking, and move with speed and agility.  Organizations will need to determine whether the HR function has the right level of talent, capability, and influence to lead the charge to adapt to this new future of work.

The HR Capability Assessment will not only evaluate the talent within the function but also the structure under which it operates. It will identify any gaps between the function and the needs of the organization it supports.  This would typically include the following steps:

  • Interviewing select members of the leadership team and other key HR department constituents regarding their HR-related service needs and expectations
  • Assessing whether the functions supported by the HR department are clearly defined and meet the needs of the organization
  • Confirming the current roles and responsibilities of the HR staff
  • Determining the level of HR support needed based on current business objectives, current business challenges, and future needs of the organization
  • Evaluating HR’s overall approach to functional areas, including talent acquisition, leadership development, total rewards, and employee engagement
  • Assessing the current competencies and skillsets of the staff and identifying any gaps that preclude the function from providing the necessary support to the business

Audit results will certainly quantify risk, lost opportunities and inefficient processes.  However, more importantly, they will highlight opportunities for improving HR’s competency level, style, structure, and processes to ensure the function operates as a competent, influential and strategic partner—and that it is well positioned to lead the organization through this “next normal” of work.

 

Paul Jeffers
Vice President & Practice Leader, HR Consulting
CCI Consulting

 

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HR Audit Checklist

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