Why You Need an HR Compliance Audit Completed Before the End of 2024

As 2024 comes to a close, businesses must ensure compliance with ever-changing labor laws, workplace regulations, and industry standards. Falling behind in compliance can expose your organization to serious risks—legal, financial, and reputational. An HR compliance audit is a proactive way to identify and address potential issues before they escalate.

For small to mid-sized businesses, staying compliant often requires expertise and bandwidth that may not exist internally. That’s where Soteria HR can help, offering customized solutions tailored to your needs.

What Happens When Businesses Ignore HR Compliance?

Failing to maintain HR compliance is no small risk—it can lead to costly and damaging consequences. Here are a few real-world scenarios where non compliance landed businesses in hot water:

1. Misclassification of Employees
   • The Risk: Misclassifying employees as independent contractors or exempt employees (vs. non-exempt) can lead to unpaid overtime claims, tax penalties, and lawsuits.
   • The Consequences: In 2023, a well-known ride-sharing company faced a $100 million settlement for misclassifying drivers as independent contractors. These issues could bankrupt smaller businesses.
2. Wage and Hour Violations
   • The Risk: Failure to pay minimum wage, miscalculating overtime, or not providing proper meal and rest breaks can result in class-action lawsuits and Department of Labor (DOL) penalties.
   • The Consequences: In one case, a retail company paid $120,000 in penalties after being found guilty of unpaid overtime for warehouse workers.
3. Noncompliance with Workplace Safety Standards (OSHA)
   • The Risk: Ignoring OSHA guidelines can lead to workplace accidents, lawsuits, and hefty fines.
   • The Consequences: A manufacturing company was fined $1.2 million for failing to implement safety protocols, resulting in multiple worker injuries.
4. Failure to Provide ACA-Compliant Benefits
   • The Risk: Not offering affordable health insurance under the Affordable Care Act (ACA) can trigger IRS penalties.
   • The Consequences: In 2022, a mid-sized company was fined $250,000 for failing to offer benefits that met ACA standards.
5. Outdated Employee Handbooks
   • The Risk: Employee handbooks that don’t reflect current labor laws—such as anti-harassment policies or leave regulations—can leave your business vulnerable to discrimination claims.
   • The Consequences: A small tech firm was sued by a former employee for wrongful termination based on outdated and unclear leave policies, costing them $300,000 in legal fees and damages.

What Is an HR Compliance Audit?

An HR compliance audit is a detailed review of your organization’s HR policies, procedures, and practices to ensure they align with current employment laws. Areas covered include:

• Employee Classifications: Ensuring all workers are properly classified to avoid wage-and-hour violations.
• Hiring Practices: Evaluating onboarding processes to ensure legal and inclusive hiring.
• Workplace Safety: Reviewing compliance with OSHA and other industry-specific safety standards.
• Payroll Practices: Confirming proper record-keeping and wage compliance.
• Employee Handbooks: Updating policies to reflect current legal and workplace norms.

With Soteria HR, audits go beyond compliance to uncover inefficiencies and recommend best practices to elevate your organization.

When Should You Audit?

The end of the year is ideal for conducting an HR compliance audit. Here’s why:

• Prepare for New Laws in 2025: Employment laws evolve yearly, and an audit ensures your organization is ready for January 1.
• Mitigate Risk Before Tax Season: Ensure payroll and benefits compliance to avoid IRS scrutiny.
• Start Fresh: Address gaps in 2024 and begin the new year with improved processes and peace of mind.

If your business has grown, entered new markets, or adjusted to remote or hybrid work arrangements, a compliance audit is especially critical to address potential gaps.

Benefits of an HR Compliance Audit

Auditing your HR operations has benefits far beyond avoiding penalties:

• Reduced Legal Exposure: Proactively identify and address noncompliance to avoid lawsuits, fines, and government audits.
• Improved Efficiency: Streamline outdated or redundant processes for smoother operations.
• Enhanced Employee Trust: Demonstrate a commitment to transparency and fair treatment of employees.
• Stronger Workplace Culture: Establish policies that protect employees and foster inclusion.

Soteria HR helps businesses navigate complex compliance requirements with a tailored approach, ensuring no detail is overlooked.

Key Areas to Review in an HR Compliance Audit

When conducting an HR compliance audit, focus on these critical areas to protect your business:

• Employee Classifications: Prevent costly misclassification errors by ensuring proper classification of exempt and non-exempt employees.
• Wages and Hours: Verify compliance with federal and state minimum wage laws, overtime rules, and timekeeping practices.
• Workplace Safety: Evaluate OSHA compliance, training protocols, and hazard reporting processes.
• Documentation: Update outdated or missing employee handbooks, job descriptions, and legal notices.
• Benefits Administration: Confirm adherence to ACA standards, ERISA requirements, and other applicable benefits laws.

With Soteria HR, businesses get a customized audit tailored to their industry and operational needs.

Why Choose Soteria HR for Your Compliance Audit?

When it comes to compliance, a one-size-fits-all approach doesn’t work. Soteria HR specializes in helping small to mid-sized businesses with:

• Customized Solutions: We design audits to address your unique risks and needs.
• Experienced HR Consultants: Our team brings years of expertise in compliance, benefits, and workplace policies.
• Focus on Small to Mid-Sized Businesses: We understand the challenges smaller businesses face and provide practical solutions.
• Track Record of Success: Soteria HR has helped countless businesses build compliant, thriving workplaces that align with their mission and values.

Don’t Wait Until It’s Too Late

Failing to address compliance gaps can result in significant legal, financial, and operational consequences. An HR compliance audit ensures your business is protected as 2024 wraps up.

Ready to safeguard your business? Contact Soteria HR today at info@soteriahr.com or visit www.soteriahr.com to schedule your HR compliance audit and enter 2025 with confidence.