Audits are a critical aspect of any business because they allow employers to analyze their business processes and practices from every angle and make improvements to move the business forward. As an HR professional, you know your department is no different.
What you may not realize is that the term “HR audit” isn’t just one all-encompassing action. An HR audit is actually made up of a diverse range of audit types, all designed to help you deeply understand one particular aspect of your department. Take some time to learn about the different types of audits and how each plays a role in helping you improve.
Types of HR Audits
HR in any company encompasses a lot of functions, including regulatory compliance, payroll, recruiting, drafting and enforcing policies, and more. While comprehensive audits can be a good starting point, it’s important for HR professionals to drill down into specifics to ensure every aspect of the department is performing optimally.
Here are five types of HR audits you can perform to help you accomplish that goal:
Regulatory Compliance
Compliance risk exposure is something all HR teams should be continually looking to minimize, especially since a failure to comply with federal, state, and local employment laws can put the business in jeopardy of incurring fines and penalties.
Because laws shift regularly, it is important that you ensure the organization is up to date on changes and that policies and practices are aligned accordingly.
It’s a good idea to start this process by reviewing your employee handbook and ensuring all policies are up to date. This includes things like ADA, EEO, and FMLA policies, along with state specific policies. Additionally, you’ll want to look at personnel file documentation, records retention practices, required postings and notices, and Fair Labor Standards Act classifications for overtime pay.
To make this process easier, download our 2025 HR Compliance Checklist here. This comprehensive checklist provides a starting point for staying on top of legal changes in the coming year.
Industry Standards
At some point, you’ll want your audit to go beyond the bare minimum of regulatory compliance to ensure your HR department is operating at its best.
Rather than seeing whether your policies and practices follow legal requirements, you’ll be looking at how they stack up against the best the industry has to offer. As an HR professional, you’ll have to use your knowledge of industry trends, standards, and best practices to successfully audit your department.
Consider things like job descriptions, the establishment of company culture, and your expectations for employee behavior. Go through your handbook once more and audit the related information to ensure you’re meeting the industry standard in all you do.
Employee Performance
Good workforce management is about more than just hiring the right people or ensuring every part of the schedule is covered. You’ll also want to make sure your current employees are performing at the level they should be. This requires a robust and consistent employee development cycle.
As you audit this area, look at the ways in which managers are providing feedback to employees and what opportunities for growth employees are being offered. Identify ways to improve the review process to allow supervisors to provide more targeted feedback so you can keep employees performing at a high level.
Overall HR Strategy
An HR strategy audit is all about evaluating the key metrics and objectives related to your overall HR strategy, such as employee turnover, employee engagement, and retention and acquisition costs, and considering how your strategy impacts and supports the overall business goals. Consider what you may need to change to improve scores and performance in these areas.
Also, analyze your compensation and benefits packages to ensure they are on par with competitors and with industry standards. If not, see how you can either adjust packages or offer perks so you can attract and retain top talent.
Function-Specific Audits
Function-specific audits are not done on a large scale. Instead, they are a series of smaller audits that allow you to drill down deep into specific areas, such as payroll, recordkeeping, or discipline policies.
Best Practices for HR Audits
It’s not enough just to perform an audit. You must ensure that your process is effective, resulting in actionable recommendations and lasting organizational change. Follow these best practices to help you get the results you desire out of your audit process.
When and How Often to Audit
Proactively schedule audits annually, with mini-reviews in between. Consider auditing after major organizational changes, such as mergers or leadership transitions, to ensure processes remain aligned with company goals.
Who Should Audit?
Decide whether to use internal staff or a third-party auditor. While external auditors bring objectivity, they may lack insights into your company culture. Internal audits, on the other hand, can benefit from a deep understanding of your organization but may face concerns about bias.
Keep Your HR Department Up to Par
HR audits are essential for ensuring your department isn’t just functioning but thriving. By identifying areas for improvement and planning for growth, you can ensure your HR team is helping the business meet its strategic goals.
If you’re unsure where to start, download our 2025 HR Compliance Checklist to guide your audit process. VirgilHR also provides a comprehensive tool to simplify data gathering and ensure compliance. Schedule a demo today and learn how we can support your auditing efforts and overall compliance strategy.
