From Chaos to Compliance: HR Audit Essentials for Entrepreneurs

We all know that Human Resources covers a lot of ground - from the intricacies of people leadership and development to the ever-challenging employee relations issues, and the ever-unique world of recruiting. But today, let's talk about something a bit more straightforward - compliance. Yep, good old compliance. The word may make you nervous and anxious, thinking about all the things you need to be doing to keep your business compliant. Maybe you put it out of your mind because you don’t have the bandwidth, but there’s always that looming fear of the government knocking on your door asking to see your I9 files. 

Fear not- an HR Consultant is here to help. HR audits are your friend. They're non-disruptive, enlightening, and they don't just highlight problems; they pave the way for solutions. Now, you might be wondering, "What exactly is an HR audit, and what does it solve?" Well, let's dive in!

Employee Files: In the world of HR audits, employee personnel files take the spotlight. You should have one for each current and past employee. These files house a treasure trove of information - offer letters, resumes, applications, pay changes, performance reviews, termination details, and more.

But what's equally vital is knowing what not to include. Sensitive data like medical info, Social Security numbers, and bank details should be tucked away in separate files, accessible only to HR and sometimes Finance. This means a close review of each file, deciding what needs to be segregated, and ensuring nothing crucial is missing. These files can be physical or stored in a secure cloud-based system, a modern approach that I highly recommend.

I-9s: Ah, the dreaded I-9 audit- the stuff of HR nightmares! Tools like E-Verify have made I-9 processes smoother, but you, as a business leader, still need to understand how to properly complete and store them. During I-9 audits, I meticulously review each form, making sure they're filled out correctly. Trust me, it's incredibly easy to miss certain sections or make errors. If the original I-9 has errors, they must be corrected.

Classifications: Misclassifications are where even the smallest businesses can hit big snags. Both small and large businesses often grapple with employee misclassification, usually an innocent mistake. For instance, Small businesses may have 1099 employees who should actually be part time, while larger employers may have hourly employees that should be salaried. 

Classifications depend on various factors, often involving a duties test, which requires reviewing each position. It's crucial to start with job descriptions for every role, which is a great launching point.

Policies: Compliance isn't one-size-fits-all; it varies based on your business's location, down to the county level. Specific policies and procedures are essential for compliance, and they're shaped by numerous factors like your company's size and where your employees work. These are ever-changing since employment policies are now often determined at the state, county, and city levels, given that federal protections are limited.

Keep an eye on policies such as sick leave, family leave, training, and pay transparency laws; they're significant in maintaining compliance and vary the most.

Notices & Posters: Traditional employee bulletin boards are becoming a relic. If you have a physical location, that's a good place for mandatory employment posters. If you're a virtual business, create a shared drive accessible to all employees, housing wage and labor information, employee rights, minimum wage data, and more.

Be cautious of organizations trying to sell you posters. Do your homework: Do you need that specific poster? Is it required, and can you access it for free from a government website?

While conducting an HR audit, don't forget about your employee handbook. Updating it ensures your policies are current, and both your business and employees are protected. It might be an extra cost, but it's money well spent.

Remember, compliance fines can be hefty. HR audits can range from $2,500 to $10,000, depending on the work and remediation needed. But trust me, this is still a much smaller bill than what you might face in fines. It sets you up for success on your leadership journey. As we venture into the new year, take this chance to get your business in order and embrace a fresh start with updated policies. 🌟🗂️ #HRCompliance #LeadershipJourney #NewYearNewPolicies