Human Resources Audits

Posted on May 26, 2013 by Rick Rossignol

Over the last three years employers have paid out record numbers of wage and hour claims. The list of wage and hour violations, include misclassification of employee status, missed meal and rest periods, off the clock overtime, unpaid overtime, not paying overtime based on the regular rate, not providing employee a itemized wage statement. The Department of Labor has created apps for employees to record their hours, and track their pay.
To complicate matters California passed The Wage Theft Prevention Act. The new legislation amends existing laws (Labor Code sections 98, 226, 240, 243, 1174, and 1197.1), and adds new requirements (Labor Code sections 200.5, 1194.3, 1197.2, 1206, and 2810.5) which criminalizes willful violations.
Conducting a Audit of the Human Resources system is the only way employers can protect themselves. They need to have a outside HR Expert conduct the audit of their employment practices. Having a outside person take a objective look at their practices will produce unbiased results. Are they following the Fair Labor Standards Act? Do they have pay roll records needed to show compliance?
An HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the company’s “current state” can help you evaluate whether specific practice areas are adequate, legal and/or effective. Some of the areas an employer needs to reviews are listed below:

 

Hiring

  • Do job descriptions exist?
  • Are job descriptions up to date?
  • Are I-9 forms and acceptable documentation reviewed annually? Are I-9’s maintained in a file separate from personnel files?
  • Are job openings offered to current employees?
  • Are applicant references checked?
  • Are turnover rates monitored?
  • Are selection processes used with reference to the Uniform Guidelines?
  • Are all applicants required to fill out and sign an application form?
  • Are applicants asked to voluntarily identify their affirmative action information?
  • If applicable, do application forms identify that the employment relationship at the organization “at-will”?
  • Do employment applications refrain from requesting protected information?
  • Are pre employment physicals required?
  • Are background checks completed for all prospective employees?
  • Are motor vehicles reports obtained for employees that will be required to drive?
  • Are independent contractors accurately identified?
  • Are all new hires reported to the IRS?
  • Do new employees fill out W-4 forms?

 

New Employees

  • Are workplace policies in place?
  • Do policies focus on your workplace?
  • Are policies communicated?
  • Are policies enforced?
  • Is there an employee handbook?
  • Is the employee handbook specific to your workplace?
  • Do employee orientations take place?
  • Is safety training part of the orientation?
  • Are employees trained on policies and work rules?

 

Wages and Hours

  • Are compensation levels monitored and reviewed?
  • Are employees correctly designated as exempt or nonexempt per FLSA?
  • Is there a formal pay structure?
  • Is the compensation structured reviewed regularly?
  • Is working time documented?
  • Are paid time off (vacation, holidays, etc) structures developed?
  • Are non-exempt employees compensated at least one and one-half times their hourly wage for any hours worked beyond 40?
  • Are appropriate payroll withholdings performed?

 

Benefits

  • Are employees informed about their benefits?
  • Are Summary Plan Descriptions provided to plan participants?
  • Are general COBRA notices provided to plan participants?
  • Are employees allowed up to 12 weeks of leave under the FMLA?
  • Are plan documents in compliance with ERISA?
  • Are supervisors and managers trained to report employee absences of more than three days to HR for FMLA purposes?
  • If there is a health care plan, is protected health information kept private?
  • Are all Form 5500s completed and reported?

 

Employee Relations/Performance Evaluation

  • Is there a system for performance evaluation?
  • Does the system check for effectiveness of the evaluation?
  • Is quality and quantity of work evaluated?
  • Is performance tied to compensation?
  • Are workplace policies flexible?
  • Are disciplinary actions for violating workplace policies flexible?
  • Is there a process for employees to lodge complaints?
  • Are there a variety of individuals to whom employees may lodge complaints (supervisor, HR representative)?

 

Safety and Security

  • Are safety hazards reported to the appropriate personnel?
  • Are workplace accidents, near-misses, injuries, and illnesses reported and investigated?
  • Are results of investigation used to implement new prevention strategies?
  • Are employees encouraged to promptly report incidents, and suggest ways to reduce or eliminate risks?
  • Are measures in place to prevent intruders from entering the grounds or buildings?
  • Is bright, effective lighting installed indoors and outdoors?
  • Are measures in place (access badges, traffic control, etc.) to keep unauthorized persons from entering the facility through normal entrances?
  • Is there a reliable response system in place in the event an alarm is triggered?
  • Are structures readily accessible to disabled employees?
  • Is there an active Safety Committee?
  • Are minors prohibited from performing hazardous work?

 

Discrimination and Employee Rights

  • Are employees trained on discrimination issues?
  • Are supervisors and managers trained in anti-discriminatory practices?
  • Are employment practices in line with the various anti-discrimination laws?
  • Are minors prohibited from working more than their hours allowed by the Fair Labor Standards Act?
  • Are effective policies in place to prohibit retaliation against employees who exercise their rights?

 

An HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the company’s “current state” can help you evaluate whether specific practice areas are adequate, legal and/or effective.

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