Easy Internal HR Audit Tips to Reduce Risk and Create Top Value

Take a moment to honestly answer these questions.

Are you ready?

What’s the condition of your HR files?

Is it a ready-for-the-wrecking-ball pile?

OR Is it a Fixer-Upper ready to be transformed into a beautifully restored gem?

How long has it been since you last checked the content of your employee files? Do you know what’s lurking inside your shiny water resistant, fire-retardant HR filing cabinets?

If we peek inside your cabinets, what will we find?

This?

Gizmo

Or this?

Gremlin

STOP!

The 1984 comedy horror film ‘Gremlins’ is a lesson in why you must comply with certain laws and regulations.

The regulations of owning a Mogwai stated: No water (violated), no food after midnight (violated), and no bright light (violated – BIG TIME).

These violations resulted in the cute cuddly Mogwai called Gizmo spawning Gremlins – small destructive, evil monsters – who ran amok terrorising the town.

Now when it comes to HR matters, there is a time and place for rebelliousness. This is neither the time nor the place.

As a self-confessed HR Rule Breaker this is a bitter pill to swallow. But swallow it we must.

D.I.Y Risk Reduction or Internal HR Audit

It’s tough to keep up with change.

a) The ever-shifting business landscape.

b) The rapidly evolving compliance regulations for your industry. E.g. legal, financial, health and safety.

c) Your legal and statutory obligations towards your employee community.

If that’s not enough to get your mind around, don’t forget this one.

d) The importance of ensuring that your HR strategy and activities are closely aligned to and support the achievement of your business goals.

If you take your eye off the ball for one moment, the pace of change can quickly switch from a minor snowball to a destructive avalanche.

Carry out your own internal checks and corrections and you will remove some of the worry and fear of a visit from an External Auditor.

Starting now, get ready for lashings of practical actionable tips over two posts to help YOU protect your business against potential legal, financial, regulatory and brand reputation risks and create value with internal HR audits.

Types of Audit

The Society for Human Resource Managers (SHRM) zeros in on two main types.

• Risk Mitigation Audits “are designed to ensure that existing policies and procedures are effective and followed.”

This type of audit focuses on compliance with requirements of national employment laws.

• Value Creation Audits “look more broadly at how HR’s activities correlate with business priorities and how these activities might be performed more effectively and efficiently.”

This type of audit focuses on where and how HR can add value, impact and make a positive difference to the business and the employee community it serves.

This post will show you how YOU can use the principles of a Risk Mitigation Audit to prevent business pain and eliminate the gremlins skulking in your employee files.

The mandatory content for your employee files will vary depending on your national employment laws and any regulatory requirements for your industry.

It doesn’t matter if you have analogue paper-based files or e-files; this checklist can alleviate persistent pain through compliance and doing the right thing.

Let’s get to work on this HR renovation.

The Fixer-Upper: Your Outdated Neglected Employee Files

Use this 19.5 Point Internal Audit Checklist to help you create employee files with compliant content.

1. CVs / Resumés or Employment Application Form: Ensure that each employee file has a full CV or Resumé.

If your organisation uses employment application forms instead of CVs/Resumé, it is important that each applicable section is complete and the employee has signed and dated the form.

2. Reference Checks: This is a HUMONGOUS area of risk. Close the yawing risk abyss by doing reference checks in the first instance.  Get at least 3 references from;

• Recent employers or clients if your new employee has been freelancing (work).

• University, college or school tutors or teachers for recent graduates (academic).

But you must absolutely refuse to accept references from known family members. Side step that conflict of interest risk!

3. Criminal Background Checks: Depending on the role for which your employee has been hired or nature of your business, it may be a legal requirement for you to carry out a criminal background check.

Even if this is not a compulsory requirement, I strongly recommend that you ask all new employees to provide a Police Certificate of Character (name of document will vary in each country)

4. Official Identification: Be sure to see original valid photo identification documents e.g. passport, drivers license, Social Security, National ID.

Make photocopies of the relevant pages and sections of the ID and record the date the original was seen before adding to the employee’s file.

5. Legal Authorisation to Work: It is critical to ensure that you have the correct documentation in place and within the set legal time frame. Work permits, evidence of residency etc.

Don’t fall foul of the law. Monitor expiry and renewal dates to ensure that the company and your employee takes the necessary action in good time.

6. Academic and/or Professional Certificates or Licenses: If your recruitment marketing information, the role specification and/or regulatory body requires that that job holder have specific qualifications and/or professional licenses, be sure to collect verifiable evidence.

Make photocopies of original documents or, if needed, request notarised copies and place on the individual employee’s file.

7. Emergency Contact Details: It is important to have up-to-date details of next of kin or individuals who the employee wants to be contacted in the event of an emergency.

8. Recruitment Selection / Interview Records: Avoid the risk of breaking discrimination laws by rigorously vetting all records, interviewer notes and scores to ensure compliance.

Ensure that you take proactive steps to prevent discriminatory practises in your business.

9. Formal Offer and Contract of Employment: Invest in the services of a competent employment lawyer or HR specialist to create legally compliant templates.

Ensure that you issue terms and conditions of employment to your employee within the period stipulated by law.

Double check that both the employee and the authorised representative of the business has signed the contract.

10. Job Descriptions: You may not use a traditional Job Description in your business; but it is critical to give your employee a role profile or scope of role document.

It must accurately reflect the role which the employee has been recruited to perform and it must be signed by the employee.

11. Employee Status Change Records: Be sure that you implement a process and culture that encourages employees to voluntarily update you about changes in their personal circumstances. E.g. marriage, children etc.

These changes may have an impact on their eligibility for company or statutory benefits.

12. Employee Handbook or other key policies: As you communicate and train key policies and standards (e.g. code of conducts, values) be sure to provide full access to to all policies and standards to each employee in your business.

Your employees may need to sign copies of specific policies to indicate their understanding, acceptance and willingness to comply with the contents of the policy or standard.

13. Company Assets: Keep accurate records of company assets or equipment issued to individual employees. Examples include, smart phones, laptops, tools, keys etc.

This information will be helpful to guide the replacement and return at the end of the employment relationship.

14. Leave Records: Keep records of your employees’ statutory or company leave entitlement and any leave taken by the employee or owed to them by the business.

Types of leave benefits include; sick, holiday/vacation, maternity, paternity etc which all have a financial cost to the business attached.

15. Performance Evaluation Records: No matter the process, tool or method you use; ensure that performance evaluations measure the important and relevant contribution to your business.

Completed formal performance assessment documents must be signed and dated by the employee conducting the appraisal and the employee whose contribution is being evaluated.

16. Professional Development Plans: Have you identified individual employees for leadership or specialist roles needed by your business soon or in the future?

Do you know which employees need an uplift in skills or know-how?

What’s your plan of action?

A professional development plan tailored to your individual employee’s needs and linked to your business goals will help to connect your employees’ contributions to your company’s purpose. This can help mitigate the risk of purpose drift and employee flight risk.

17. Disciplinary Action: Ensure that you comply with national laws or applicable Union work agreements and company procedures as it relates to handling disciplinary matters and record keeping.

Scrutinise all documentation to ensure that investigations and disciplinary action documentation are fair, legally correct and do not present a legal, financial and brand reputation risk to your business.

18. Recognition and Commendations: Keep records of your employees’ positive contributions to your business with the same diligence as you do the negative.

It is important to keep a balanced perspective of your employee’s impact on your customers and their colleagues.

19. Learning and Development Records: It is important to demonstrate that you have provided your employees with the necessary learning and development opportunities which allows them to perform their role to the expected standards and in a way which is in keeping with the culture of the business.

Keep records of new recruit Orientation/Induction, internal and external training and ongoing skills coaching.

19.5. File Style: Invest in good quality files – the ones with multiple divided sections.   For easy reference and to avoid a disorganised mess, cluster your employee information.  E.g. Recruitment, Performance Management, Compensation and Benefits, Employment Status Change.

Get busy with this 19.5 point checklist to help you renovate your HR, tackle the most challenging fixer-upper employee files and remove the Gremlins from your HR filing cabinets.

I am sure there’s a lot more to add to this important topic. 

What other pointers can you provide to reduce financial, legal and brand reputation risk found in the content of Employee Files?

Drop a comment in the box below.

This post was originally posted in the blog The HR Rabbit Hole on 22nd November 2015. Now it is freshly served for the Recruiting Blogs community.

Nicole is the Founder and Principal Consultant of Aquarius Human Resources Consulting Ltd. Passionate about HR as Art, she is an advocate of Creative HR. Connect via Twitter @AquariusHRLtd.