HR Audits Improve Business Performance

by Michele T. Beccarelli, SPHR

"Audit" is a word that usually sends shivers down your spine. What typically comes to mind is the periodic financial audit in which the company's books and records are reviewed to identify potential issues. The goal of audits should be to protect the company, establish best practices and create an opportunity for improvement.

Unfortunately, many companies fail to audit another equally important area--human resource policies, practices, procedures and strategies. Companies often overlook these potential areas of exposure and do not consider the associated risks. Whether related to a complaint or by random selection, a government agency could knock on your door tomorrow and investigate areas related to legal compliance or your HR practices. In today's litigious society, it is more important than ever to ensure that a company's HR policies and practices are in compliance with local, state, and federal laws and are legally defensible if challenged.

In fiscal year 2004, the U.S. Equal Employment Opportunity Commission (EEOC) received 79,432 charges of discrimination against private-sector employers and state or local government entities. Race, sex, and retaliation were the most frequently alleged bases of discrimination. The agency recovered a record $420 million on behalf of thousands of people filing employment discrimination charges through mediation and other settlements and lawsuits. In citing its enforcement statistics for that year, the EEOC said it was the most monetary benefits it had ever obtained in a single year. It is important to note that these statistics do not reflect cases that were settled without EEOC's involvement.

These record-breaking statistics of charges and related damages are at the federal level involving one government agency alone and one area of potential liability--discrimination. Equally significant are similar statistics from additional government agencies, private litigation, and cases on file concerning other laws, such as the recently revised Fair Labor Standards Act (FLSA), the Family Medical Leave Act (FMLA), the American with Disabilities Act (ADA), and the Immigration Reform & Control Act (IRCA) to name a few. These laws are constantly changing and failure to comply can result in stiff penalties, and in some states individuals could be held personally liable.

How does a company protect itself against such a plethora of possible exposures that can impact its public image, brand, employee relations, and bottom line? More and more, the business tool of choice is the HR audit, which is also referred to as an HR vulnerability review. It is a "best practice".

Why Conduct an HR Vulnerability Review?

HR vulnerability reviews are designed to assess company policies and practices,<