Pitfalls are the number one barrier to a company’s growth. If you want your business to grow and advance further ahead, you must first recognize the weak points that hide within it. In this regard, audits are an efficient way of doing so.
The term audit has become such a taboo word, leaders are so afraid to admit that they may need one. However, when you are proactive and choose to conduct an audit before an issue occurs, you save yourself from the excess fines and damaged reputation down the line.
What is an HR Audit?
The Human Resource audit is the process that evaluates a human resource department’s performance by examining its various aspects in a company. This can include policies, processes, procedures, documentation, and systems.
In ascertaining these, an HR Audit looks into the various fronts of human resource personnel’s work. Some of these are:
- Hiring Procedure
- Employee Onboarding
- Compensation Plan
- Benefits Package
- Performance Review
- Diversity, Equity and Inclusion methods (The Ultimate Guide to Diversity, Equity and Inclusion in Your Workplace)
- Exit Interview
- and more.
(More reading: 3 Discriminatory Signs to Look for in Your Employee Handbook)
Since these sections form a crucial part of the HR functions in a company, a study into these areas gives a fair idea of the HR performance in the company.
Conducting an HR Audit
To conduct an HR audit, a company may choose to do it internally or hire an external professional. Essentially, internal auditors are basically employees of the organization while external auditors are specialists who are hired from outside the organization. External auditors are highly recommended and preferred since they are experienced and not biased compared to their internal counterparts.
External or Internal Auditor for an HR Audit?
Internal auditors have a history of delivering biased HR judgment as they typically fear for their positions at the company. External auditing is the most preferred as it delivers judgment without favor or prejudice – illustrating a true picture of the HR department.
Many business leaders have fallen under the impression that hiring an external auditor is too expensive based on either public opinion or one unreasonable quote from one provider. When we asked our HR experts at MCDA CCG to weigh in on this, they emphasized the importance of shopping around for different audit estimates. (For more information, get in touch and our team will be happy to assist you.)
Benefits of an External HR Audit
When you choose to conduct an HR audit, you assure timely compliance with ever changing legal requirements while encouraging uniformity of HR practices and policies – which boost confidence in maintaining the organization and the department reputation in the community.
Furthermore, clarification of HR duties encourages greater responsibility, enabling stakeholder and investors -current and/or potential- surety in their investments.
This should come as no surprise, non-compliance with the set of laws and regulations comes with heavy penalties. These penalties carry the risk of disrupting and bringing down your entire organization.
What You Can Expect from an MCDA CCG Audit
Whether your company is established or just starting up, MCDA CCG’s process can help by performing an audit that will let you know where you are doing well and areas you need to improve.
Our audit process includes a review of HR forms, hiring practices, I-9s, personnel and benefit files, the performance management system, and federal and state posting requirements. Furthermore, if you are in need of updated forms, we can provide them for you.
There are some scary facts when you fail to comply with legal requirements, did you know:
- Every “clerical” error on an I-9 can cost you $110, up to $1100 per I-9?
- You can self-audit your I-9 forms and make needed corrections, but you cannot use white-out or scratch out entries?
- If you have a group health plan (medical, and /or dental and/or vision) and you had 20 or more employees on more than 50 percent of your typical business days in the previous calendar year you are subject to COBRA? Failure to comply with COBRA can cost you Excise tax penalties of $100 per day ($200 if more than one family member is affected) PLUS Statutory penalties of up to $110 per day under the Employee Retirement Income Security Act (ERISA)
- If you conduct background checks, are you subject to the Fair Credit Reporting Act requirements? The FCRA gives applicants and employees the right to sue businesses when they fail to comply with the FCRA’s requirements. Penalties for a business’ willful noncompliance with the FCRA can be either: 1) the actual damages suffered by the applicant or employee or 2) damages that may not be less than $100 and not more than $1,000 per violation. The applicant or employee will also be awarded reasonable attorney fees.
- An incorrectly worded offer letter can lead to claims of “promised” employment and compensation?
- Failure to obtain a resignation letter, even a very simple one, can lead to the employer paying unemployment to an employee who quit?
- Failure to have the correct posters in place can lead to fines in the thousands of dollars.
- Incorrectly worded “forms” that you created can lead to the exact opposite result of what you intended?
MCDA CCG, Inc. can solve all these problems for you so that you can rest easy knowing that your business is in compliance with the law.
Call our office – headquartered in Placentia, Orange County California – to speak with one of our HR experts today!
Other MCDA CCG resources you may like:
The Real Reasons That So Many Workers Quit in 2021
How Employers Can Support Equal Pay
5 Business Advisory Myths Keeping You Stuck
Why Outsource HR: Pros and Cons
Background Checks-Avoid Trouble with the FCRA