This document discusses the importance of conducting a human resources compliance audit. It begins by presenting frightening statistics on the increasing number of employment-related complaints and monetary awards. Common reasons for violations like making rash employment decisions are then discussed. The benefits of a compliance audit in avoiding costly legal issues and ensuring the company's policies follow employment laws are described. Key areas a compliance audit should examine are payroll, documentation, handbooks, policies and procedures. The document concludes with recommendations for next steps after an audit is completed.

1. Avoid Becoming A Statistic
Human Resources Compliance Audit
WORTH THE COST OR RISK?
J E A N I N E M A L O N E Y, S P H R

2. What Will We Learn?
 Frightening facts.
 Why so many violations?
 Why do a compliance
audit?
 What should be included?
 Opportune times to do a
compliance audit.
 What should it touch on?
 What happens after?
 Additional thoughts.
Certified Human Resources - 2011

3. Consider These Frightening Facts:
Certified Human Resources - 2011

4. Frightening Facts / Startling Statistics
 In 2010, there were 99,922 complaints filed with the EEOC,
up 7.1% from the previous year.
 Highest increase in complaints came from Retaliation (as
applied to all statutes) – 36,258 claims or 36.3%.
 In fiscal year 2010, the Wage and Hour division of the
FLSA received over 40,000 complaints.
 Family and Medical Leave Act (FMLA) complaint filings
were up 22% from previous year.
 The monetary benefits awarded in 2010 from EEOC
litigated suits were $85.1 million.
 (Date from the EEOC website)
Certified Human Resources - 2011

5. Why So Many Violations?
 High risk associated with non-compliance is overlooked.
 Employment decisions are often made “in the heat of the
moment”.
 Employers may be scrambling to get staff on board or don‟t
think about employment law issues when terminating
employees.
Certified Human Resources - 2011

6. Why Do A Compliance Audit?
 Monetary costs could be exorbitant if issues are ignored or
not addressed.
 Facilitates legal compliance for benefit of company, even if
considering retirement/sale of business, for liability
purposes.
 Liability has two-fold effect: It may not only remain with the
company but can follow the owner because he „should
have known the rules‟.
 Helps company avoid costs as well as time away from
business to address any issues.
Certified Human Resources - 2011

7. Opportune Times For Compliance Audits
 If there is a contemplated sale of the business.
 If there is an upcoming merger or acquisition.
 When there are changes in Senior Management.
 When there have been changes in Labor Laws or
regulations.
 If you have experienced significant growth in your
business.
 If you have added a significant amount of staff.
Certified Human Resources - 2011

8. What Should A Compliance Audit Touch On?
 Payroll compliance
 Record documentation
and retention
 Employee handbook or
manual
 Policies and Procedures
 Position Descriptions
 List is NOT all inclusive
but a good place to start
Certified Human Resources - 2011

9. Payroll Compliance
 Make sure that timesheets compare with actual hours
worked.
 Make sure that time clock rounding is done properly if time
clocks are used.
 Check to make sure overtime pay calculations are done
accurately.
 Ensure that classification of employees is done correctly to
avoid liability for overtime costs, understanding that Wage
and Hour violations can go back several years.
Certified Human Resources - 2011

10. Record Documentation and Retention
 Check for issues such as missing or incomplete information
on Form I-9‟s.
 Check for incomplete information in personnel files.
 Check to ensure health information kept separate.
 Check for inadequate discipline documentation.
 Ensure that personnel evaluation information is not
inadequate or inaccurate.
 Make sure you have accurate and complete data to support
any employment decisions.
Certified Human Resources - 2011

11. Employee Handbook or Manual
 Make sure it has been updated to reflect the current (and
ever changing) employment laws.
 Determine if employees have been provided a copy of the
handbook. The handbook is a communication tool to inform
employees of company rules, as well as Federal, state,
local employment laws that may apply to the business.
 Determine that the handbook is reviewed on a regular
basis, as well as communicated and reviewed with all
employees and managers. Having an accurate, updated,
and communicated handbook may help avoid possible
claims and litigation from non-compliance to many of the
labor laws.
Certified Human Resources - 2011

12. Policies and Procedures
 Check to ensure that policies and procedures are written,
up-to-date, communicated, and are followed as stated and
not administered on an ad-hoc basis.
 Make sure your policies and procedures include
disciplinary, performance and termination guidelines.
 Make sure all managers are trained on your policies and
procedures and use them consistently to avoid claims such
as wrongful termination.
Certified Human Resources - 2011

13. Position Descriptions
 Ensure they are updated as responsibilities change and as
business grows or changes in a significant way.
 Determine that position descriptions verify specific job
responsibilities for proper exempt / non-exempt
classification purposes (Wage and Hour claims).
 Determine that position descriptions include the essential
functions of each position to help with decisions about ADA
(Americans with Disabilities Act).
 Clarify that position descriptions help outline the details of a
position. This will be especially helpful when preparing
procedural manual information.
Certified Human Resources - 2011

14. What Happens Next?
 Determine the scope of the audit.
 Once the scope is determined, an audit questionnaire is
developed, data collected, and the findings detailed in writing.
 A written reports with recommendations, prioritized depending on
risk level, should be presented to senior management and
decisions on how to handle each issue should be discussed.
 If changes are to be made, a course of action should be set in
place to address and any which affect the employees should be
communicated along with reasons for the changes.
 Good practice is to let employees know that the company takes
people issues seriously and will always correct any problem
issues and concerns.
Certified Human Resources - 2011

15. Compliance Audit Thoughts
 Business owners perform audits on your financial records
on a regular basis, HR compliance should be taken just as
seriously.
 Take the initiative to prevent litigation or legal challenges in
the HR area.
 Don‟t let your company become a victim to one of the many
statistics mentioned above.
Certified Human Resources - 2011

16. Certified Human Resources
Jeanine Maloney, SPHR, is an Independent Human Resources
professional (Certified Human Resources) working in association with
Certified Acquisition Associates LLC and may be reached at
Jeanine@certifiedacquisitions.com
Certified Human Resources - 2011