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The Importance of Auditing your HR Department

Posted by Ryan Howard on Fri, Sep 30, 2016  |  Share       

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Audit. The word may as well be considered a 4-letter word to those in your human resources department. Human Resources managers may not look forward to harsh scrutiny of their hiring practices but audits are designed to save time, money and resources in the long run. The good news is that you can conduct internal audits to ensure regulatory compliance before facing an external auditor with a virtual clipboard and pen. 

Internal audits of your hiring practices mitigate risk for your company. Here's how.

Why Conduct Audits?

Audits are important to employers for several reasons. They can help improve processes that may be out of date. They can alert managers and business owners of activities that could be illegal, costly or potentially risky to the organization. With regards to human resources activities, audits are necessary due to the interaction with the public - in the case of applicants, employees or clients. Recruiting and hiring employees is highly competitive and regulated. Businesses must be aware of the risk of litigation, before, during and after hiring.

Auditing your HR department will help with:

  • Legal compliance - With federal, state and local laws regulating employment, compliance can keep businesses out of a courtroom. 
  • Policies and procedures - In some cases, hiring policies and procedures may be outdated or no longer applicable. An audit ensures your practices are still working.
  • Best practices - Organizations want to attract the best employees. Best practices, with regards to recruiting, hiring and offering benefits, will make your company more attractive to high quality candidates. Regularly reviewing and updating your processes can improve competitive advantage.

Separate audits can also be focused on particular functions of the human resources department, such as a benefits audit, payroll or onboarding procedures. For this post, we will center our attention on hiring practices in general.

Recommended Internal Audits

Recruiting, hiring, promotion and termination processes can be subject to scrutiny, especially with litigious and disgruntled employees. Self-auditing these hiring policies can help mitigate risk for businesses but only as far as there is correction of any activities that are discriminatory or not in compliance. 

Some recommended areas for audit include:

  • Recruiting & Job Ads - HR managers should be aware of any discriminatory language used in ads or job listings. Certain words can be construed as age or gender-specific. In fact, there has been an increase in class action lawsuits involving age discrimination. 
  • Social Media Use in Recruiting and Screening - Reviewing a candidate's social media profiles may not be legal and can lead to discrimination, especially when this review happens prior to obtaining authorization to conduct a background check.
  • Background check consent and authorization -  A best practice to conducting a background check is as a contingency after an offer has been extended to an applicant. Businesses must also recognize the FCRA rights of the job candidate and obtain prior consent and authorization before conducting a background check
  • Adverse Action - More businesses are coming under fire for not following FCRA guidelines for denying employment than ever. Hiring managers must follow strict adverse action procedures when denying employment, terminating an employee and bypassing an employee for promotion.
  • Assessing criminal records in employment decisions - When selecting a candiate for hire, employers must be aware when they are discriminating against those with criminal backgrounds. Ban the box initiatives and EEOC guidance specifies that employers must assess criminal records in employment decisions on an individual basis. 
  • I-9 documentation - When an employee is hired, they must provide documentation that they are authorized to work in the United States. Employers may face an immigration audit and be penalized for not having acquired the proper documentation. Electronic I-9 records is a best practice for keeping documentation secure.
  • Background Check Policy - Hiring managers may not be aware that not every job requires every background check. A professional background screening company can be an effective partner in keeping background check costs down by relating certain background checks with certain security levels or jobs. For instance, not all positions will require a check of driving records however, if an inside sales representative was promoted to outside sales, you might consider adding drivers license screening. An up-to-date background check policy, presented during the hiring process, can also help employers when they need to re-screen existing employees.

Job-Related-Background-Checks

When to Conduct an HR Policy Audit?

Audits do take time and resources away from the daily tasks of your human resources department but are invaluable to employers. Depending on the size of your organization, you could set aside time on an annual basis to review certain areas for improvement. There may also be regulatory guidance that is issued that would prompt an audit of your processes. Evaluating certain aspects of your hiring practices or HR processes could be tackled separately, narrowing the scope, to ensure that all areas get attention at least once a year. 

Generally, your own HR professionals can self-audit if they can be objective enough to alert management to potential risks to the organization. Some employers opt to hire outside consultants or legal counsel. Anything found during the audit can be subject to discovery if the business is taken to court for non-compliance or discriminatory employment practices. Action plans must be created after any findings that could be considered non-compliant.

Annually evaluating your hiring practices can train your human resources department to be keenly observant and help foster a competitive advantage for your business. If hiring managers understand best practices, they can help continuously improve procedures and policies, mitigate risk to the organization, stay strategic and attract the best employees. 

 

Topics: Human Resources, background check policy, hiring practices

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