The Importance of Regular HR Audits: What Businesses Need to Know

In today’s fast-paced business world, Human Resources (HR) is more important than ever. HR is essential for looking after your employees, making sure you follow the law, and keeping your team productive as business standards change. One of the best ways to manage these responsibilities is through regular HR audits. These audits are crucial for any company, big or small, as they provide a detailed look at your HR policies, procedures, and practices. In this blog, Mohammed Balal, Employment Law specialist, explains why regular HR audits are so important, how to conduct them, and how a law firm can help make the process smoother and more effective.

Understanding HR Audits

An HR Audit of a company is a comprehensive examination to determine whether your organisation’s HR policies, practices, procedures, and strategies comply with employment laws and regulations, are effectively implemented, and align with your business goals.

HR audits can cover various areas, from recruitment and onboarding to employee relations, compensation and benefits, employment law compliance, performance management, and termination procedures.

Key Elements of an HR Audit

The graphic below highlights the areas of your HR processes we would review as part of an HR Audit.

The Importance of Regular HR Audits

Compliance with employment laws and regulations is a primary reason for conducting regular Human Resource audits. These laws are often intricate and frequently updated, posing a risk of non-compliance, which can lead to costly legal liabilities, fines, penalties, litigation, and damage to your reputation.

Regular HR audits help identify and mitigate risks associated with HR practices. This includes ensuring that employment contracts are legally sound, workplace safety standards are met, and that policies regarding discrimination, harassment, and employee grievances are robust and effective.

By evaluating HR processes and procedures, audits can identify inefficiencies and areas for improvement. Streamlining HR operations can lead to better resource allocation, improved employee productivity, and cost savings.

HR audits provide an opportunity to benchmark against industry best practices. This can help you in adopting more effective HR strategies, enhancing employee engagement, and improving overall organisational performance.

Regular audits ensure that HR practices are fair and transparent, which can improve employee trust and morale. Addressing issues proactively helps in maintaining a positive workplace culture and reducing turnover.

Audits can also provide valuable insights into workforce planning and management. By understanding current HR capabilities and gaps, organisations can better align their HR strategies with long-term business goals.

Example of HR Issues

The following examples illustrate the importance of regular HR audits in identifying and resolving issues that can lead to legal risks and operational inefficiencies.

Lack of Employment Contracts

In a previous audit, we discovered that a business had not issued employment contracts to over 20 staff members. This posed a significant risk, as employees could take the employer to a tribunal and claim up to two or four weeks’ pay for not being issued a contract. Additionally, the staff were unclear about their entitlement to Statutory Sick Pay or company sick pay, leading to disputes whenever they were on sick leave. As a result, new contracts were issued, and employees were consulted on the updated policies and procedures.

Hiring Skilled Workers

We were instructed to conduct an audit to ensure that all staff had the correct documentation to legally work in the UK and to ensure compliance if checked by the UK Visas and Immigration. This included checking contract of employment and the staff handbook.

This was crucial to protect the client and provide a straightforward document for the UK Border Force when applying for new work permits or during spot checks by the immigration team.

Mix-Up of HR Policies

In another HR audit, we found that a client had no staff handbook and allowed senior employees to create their own sickness reporting policies. New recruits were given mixed information on the reporting process and their entitlements. To resolve this, we developed a comprehensive process, trained the staff on the new policy, and created a staff handbook, which was distributed to all employees in PDF format.

Lack of Policies

A client initially instructed us to draft two employment contracts. Before we did do, we carried out a holistic review of the businesses HR process and discovered that they had no existing policies in place. We drafted a complete staff handbook, issued new contracts, and established a new recruitment and onboarding process for the client.

How can Butcher & Barlow’s Employment Law and HR Team assist your business?

Our Employment Law and HR Team has extensive knowledge of employment laws and regulations. Their expertise ensures that any audit covers all legal aspects comprehensively, reducing the risk of non-compliance. Our team provides unbiased and objective review of your HR practices. This impartiality can be crucial in identifying issues that internal staff might overlook or be reluctant to address. By instructing our team, you benefit from identifying potential legal risks and receiving actionable recommendations, helping mitigate the risk of litigation and regulatory penalties.

Regular HR audits are indispensable for ensuring legal compliance, managing risks, enhancing operational efficiency, and fostering a positive workplace culture. While businesses can conduct HR audits internally, the benefits of engaging a law firm’s HR audit services are substantial. With our expertise, objectivity, and comprehensive understanding of employment law, we can provide invaluable support in conducting thorough HR audits, mitigating legal risks, and aligning HR practices with organisational goals. For businesses aiming to maintain robust HR functions and secure a competitive edge, regular HR audits facilitated by legal professionals are a wise investment.

Beyond the audit, our Employment Law and HR Team can offer ongoing legal support and guidance, helping businesses navigate complex HR issues and implement best practices effectively.

For an initial no obligation chat with Mohammed, he can be contacted on 0164 764 4062 or email mbalal@butcher-barlow.co.uk