HR Audits: What They Are and Why Your Business Needs One

In today’s workplace, compliance and HR best practices are moving targets. Employment laws change at the federal and state levels. Regulations change in response to economic trends, remote work growth, and industry demands. On top of that, employee expectations for fairness, clarity, and benefits are higher than ever. For small and mid-sized businesses, keeping up with all of this while also running day-to-day operations can be a real challenge. Outdated policies, incomplete documentation, or inconsistent processes can put your company at risk, financially and legally. By conducting an HR audit, you can gain visibility into these issues. At Reynolds + Rowella, we view HR audits not just as a compliance task, but as a proactive way to strengthen your foundation, improve efficiency, and enhance the employee experience. Many businesses also choose to pair an audit with HR outsourcing to maintain compliance without the need for a large in-house HR team.

What Is an HR Audit?

An HR audit is a full review of your company’s HR policies, procedures, documentation, and systems. The goal is to make sure everything is up to date with current employment laws, supports your business objectives, and reflects best practice. Think of it as a health check for your HR function. We look for areas of compliance risk, inefficiency, or misalignment with your goals and then fix them. When combined with HR outsourcing, those fixes can be implemented quickly and maintained over time.

Why HR Audits Matter for Companies of all Sizes

Many HR systems evolve without a plan. Policies get added as needed, forms change without review, and compliance updates happen reactively. The result? Gaps, inconsistencies, and exposure to unnecessary risk. An HR audit helps you close those gaps before they become bigger problems. The benefits go beyond compliance:

Ensure compliance with federal, state, and local employment laws (only those applicable to your size and industry)
Reduce legal and financial risk by addressing outdated or incomplete policies
Improve efficiency by streamlining HR processes and reducing redundancy
Enhance employee trust through transparent, consistent practices
Support growth by building scalable systems
Leverage HR outsourcing to stay aligned with best practices year-round

5 Things We Review in an HR Audit

1. Compliance and Paperwork

Employee handbook review and updates
FMLA (50+ employees within 75 miles)
State leave laws (may apply to small businesses under 50 employees)
FLSA (wage and hour classification)
OSHA and workplace safety
Labor law posting and employee notices

2. Hiring and Onboarding

Job descriptions and offer letters
New hire forms and background checks
Onboarding process and training materials
I-9 compliance

3. Employee Classification and Pay

Exempt vs non-exempt classification
Wage and hour compliance
Overtime and payroll

4. Benefits Administration

ACA (50+ full-time equivalent employees)
COBRA (20+ employees; mini-COBRA for smaller employers)
Open enrollment communication and process
Required notice distribution
Non-discrimination testing
Sec 125 plan documents

5. Employee Relations and Performance

Performance review documentation and tracking
Disciplinary process
Recordkeeping for investigations and corrective actions

What to Expect During an HR Audit

Our HR audit process is thorough and includes the following steps:

Gather Information – Review your current HR documents, policies and procedures
Compliance Check – Compare to laws applicable to your size and industry
Process Review – How are HR tasks actually being done
Risk Assessment – Compliance and operational risks
Recommendations – Clear, prioritized action steps
Optional HR Outsourcing – Implement and maintain changes over time

How Often Should You Perform an HR Audit?

We recommend a full HR audit at least once a year and more often if any of the following occur:

Employment laws change
You open new locations
You introduce new benefits or compensation structures
You have high turnover or employee relations issues

Pair your audit with HR outsourcing and the changes will be implemented and sustained over time without adding internal headcount.

Our Approach to HR Audits

An HR audit should serve as a strategic tool for the business, rather than a simple checklist exercise. Our audits:

Review policies, processes, and documentation in depth
Identify compliance gaps and inefficiencies
Provide clear, easy-to-follow recommendations
Offer optional HR outsourcing to implement and maintain changes

The outcome is a stronger, more compliant and more efficient HR department that effectively supports your business.

Get Your HR Checked Out

An HR audit will safeguard your business, boost your workplace culture and give you some breathing space. If it’s been over a year since your last review or you’ve never done one, now’s the time. Get in touch with Reynolds + Rowella to book your HR audit and find out how our HR services can keep you compliant, efficient and supported in the long term.

INSIGHTS HR Audits: What They Are and Why Your Business Needs One