HR Compliance Audit

Service description

An HR compliance audit reviews a business's employment practices against the laws that apply to it: how workers are classified, whether wage-and-hour rules are followed, whether required notices are posted, and whether policies fit each state where the business has employees. The provider documents the gaps and a plan to correct them.

Common industries

Applies to any employer, especially those hiring in several states.

ROI

Finds and fixes the employment-law exposures that turn into claims, especially as you hire across states.

Benefit

Audit your HR practices — classification, wage-and-hour, required postings, multi-state policy — and remediate the gaps.

Why get it

Employment laws differ by state and change often, so a practice that is compliant in one state can be a violation in another. An audit finds problems on the business's own schedule rather than a claimant's or an agency's.

When you benefit

Repeated every year or two, and after growth events such as the first hire in a new state.

What it costs

Flat or hourly fee.

When you pay

Providers usually quote a flat fee scaled to headcount and number of states, or bill hourly for narrower reviews. Payment is typically staged, with a deposit at the start and the balance on delivery of the findings.

Other costs

Back pay or corrections the audit reveals, and fees for follow-up work such as updating the handbook or workplace postings.

Risks to know

Treating an employee as exempt from overtime when the job doesn't qualify, or failing to keep required pay records, can mean back wages under the Fair Labor Standards Act (29 U.S.C. §207; 29 CFR Part 541). Missing workplace postings (29 CFR §1903.2) or incomplete I-9 verification (8 CFR §274a.2) can draw agency penalties.

When risks arise

Wage-and-hour problems accrue with every pay period, so exposure grows the longer a gap goes unfixed. They typically surface when an employee complains or an agency opens an investigation.

The process

The provider reviews payroll and personnel records against federal and state rules, interviews managers, and checks postings and I-9 forms. The business receives a report ranking gaps by risk, with recommended corrections. The provider then helps the business correct the highest-risk items and document the changes.

Your commitment

The business provides payroll records, job descriptions, the handbook and sample personnel files, and a list of where employees work. It should say what concerns prompted the audit and name someone to answer questions and act on the findings.

Documents to gather

• Payroll registers and timekeeping records
• Job descriptions showing exempt or non-exempt status
• Employee handbook and written HR policies
• Sample I-9 forms and personnel files
• A list of employee work locations by state

Helpful reading

• How to conduct a wage and hour audit — Interdisciplinary Center for Healthy Workplaces, UC Berkeley
• Fair Labor Standards Act (FLSA) — Legal Information Institute, Cornell Law School (Wex)

Further research

• 29 U.S. Code § 207 — Maximum hours (overtime)
• 29 CFR Part 541 — Defining and delimiting the exemptions for executive, administrative, professional, computer and outside sales employees
• 29 CFR § 516.2 — Records to be kept for employees subject to minimum wage or overtime provisions (Fair Labor Standards Act)
• 29 CFR § 1903.2 — Posting of notice (OSHA)
• 8 U.S. Code § 1324a — Unlawful employment of aliens
• 8 CFR § 274a.2 — Verification of identity and employment authorization (Form I-9)
• U.S. Department of Labor — Workplace Posters