If it does, how would you really know?  As a small business owner you may be wondering if your human resources function is effective, or at least compliant with state and federal regulation.  At a minimum you will want to know that the basic aspects of human resources are being handled appropriately so that you can rest easy knowing you don’t have unnecessary exposure.

Many HR Consultants will recommend that you conduct an HR Audit.  These audits are typically quite comprehensive.  However, there are steps you can take to make your own evaluation before calling an HR Consultant and engaging in a full scale audit.  In fact, just focus on compliance. This will at least indicate whether or not your human resources department is built on a stable foundation.

Here is a short checklist on the compliance fundamentals.  Once your review is completed then you can determine if additional expertise and advice is needed.

HR Compliance Review:

  1. Personnel files – Large or small, employers are required to maintain certain employee records.  A few key elements include an employment application, Form I-9, authorization for all payroll deductions, employee handbook acknowledgement, benefits enrollment documents, and performance review(s). In addition to checking to make sure you have the necessary documents, you must also separate any health information and the Form I-9 from the general personnel file. This is to protect the employee as required by HIPAA and to remove supervisory access to an employee’s protected status (based on Form I-9).
  2. Exempt and Non-Exempt classifications – The Fair Labor Standards Act (FLSA) outlines what type of roles are exempt from overtime pay and which positions are non-exempt. It is very common for employers to make errors in this classification and as a result, unknowingly violate the FLSA.  The Department of Labor offers great compliance resources to assess exempt status for positions.
  3. Timekeeping practices – An essential practice for all employers is centered on the collection and retention of hours worked and pay detail. Employers must have a record of hours worked per work week for every non-exempt (hourly paid) employee.  These records are typically maintained alongside the payroll records and considered back-up to each pay period.
  4. Employee handbook and workplace policies – Employee handbooks are often referred to as the ‘necessary evil’ and usually very outdated.  While creating or updating a handbook seems like a daunting task it is vitally important in communicating your workplace policies and practices.  In addition to the specifics about your workplace rules, the handbook serves to communicate the required policies based on state and federal regulation (example; Equal Employment Opportunity, Harassment Free Workplace, and Family Medical Leave).  Employees can only be held accountable to workplace policies if they have been clearly communicated and acknowledged by the employee.  Therefore, review your handbook and ensure that you have a signed handbook acknowledgement form for each employee.

Following this checklist will help you to make the assessment of next steps for your HR Department.  If your review indicates many areas are insufficient then partnering with an HR Consultant to help you make improvements is a worthy investment.