In many small businesses, owners and managers wear a lot of hats. This is understandable because due to budgetary constraints. Hiring a large amount of management personnel is just not realistic. Having a skilled/trained HR Professional on staff is also a luxury that is cost prohibitive. Still someone has to handle Human Resources.
In most small companies that task often is handled by the Owner, or an Office Manager or other management person. Unfortunately with Employment Law being extremely complex, staying current with the changes to laws and the requirements placed on companies is more than most non HR trained managers can keep up with. The result is when a situation arises that involves Employment Law the company is put in a liability situation that can jeopardize company legal compliance, employee trust and company reputation.
Areas where most liability occurs are: recruiting and hiring, training, compensation and benefit administration and most frequently discrimination. In these situations having a little knowledge of Employment Law can almost be more dangerous than not having any knowledge. Managers who know a little about Employment Law and therefore think they are doing the right thing can actually be violating several laws without even knowing it. The result can be a law suit or government charge.
By having an HR Audit done before major issues arise, the company is made aware of all liability under Employment Law. It then becomes a business decision as to how much liability the company is willing to assume.
Some of the issues identified may not need to be remedied as they are minor. However, some issues are very important and failure to correct them can create major liability. Most companies would rather know of potential areas of liability before something happens as it is easier and less expensive to fix a problem before an issue arises than to have to do damage control afterwards.