Most business owners don’t realize they’re sitting on compliance violations until an hr compliance specialist walks through the door. That first compliance audit reveals gaps you didn’t know existed—and each gap carries financial risk.
Understanding what an hr compliance specialist examines helps you prepare. More importantly, it shows you where your business might already be vulnerable to penalties that can reach into six figures.
Employee Classification Errors Cost Companies Thousands
The first area any hr compliance specialist reviews is employee classification. Misclassifying workers as independent contractors instead of employees triggers penalties exceeding $2,000 per violation, not including back wages and taxes owed. The Department of Labor increased classification error penalties significantly in 2019, making this a priority focus during every compliance audit.
Your hr compliance specialist will examine job descriptions, work arrangements, and payment structures. They verify that exempt employees actually meet salary and duty requirements under the Fair Labor Standards Act. In 2023, approximately 70% of employers audited by the DOL had at least one wage and hour compliance violation. The average settlement for wage and hour claims reached $8.2 million in 2022.
I-9 Forms and Employment Eligibility Documentation
Form I-9 compliance ranks among the most scrutinized areas during any compliance audit. An hr compliance specialist checks that every employee hired after November 1986 has a completed I-9 form—and that each form was completed within three days of hire.
Missing or improperly completed I-9 forms expose businesses to fines, particularly during Immigration and Customs Enforcement audits. Your hr compliance specialist will verify that I-9 forms are stored separately from personnel files, that reverification was completed when required, and that no prohibited documentation practices occurred.
Many companies fail this review because they don’t understand I-9 retention requirements. Forms must be kept for three years from hire date or one year after termination, whichever is later.
Wage and Hour Compliance Under Federal and State Laws
An hr compliance specialist examines pay practices against both federal and state employment laws. This includes verifying minimum wage compliance, overtime calculations, meal break policies, and final paycheck timing.
States like California impose penalties exceeding $10,000 per violation for repeat wage and hour offenders. Your compliance audit will review time-tracking systems, pay stubs, and whether employees are compensated for all hours worked—including pre-shift setup and post-shift tasks that many employers miss.
The hr compliance specialist also verifies that tipped employees receive proper compensation and that overtime is calculated correctly using the regular rate of pay, not just base salary.
Personnel Files and Required Documentation
Your personnel files tell the story of your employment practices. During a compliance audit, an hr compliance specialist reviews these files for completeness and organization.
They check for offer letters, signed acknowledgments of company policies, performance documentation, disciplinary records, and accommodation requests. Missing documentation creates liability during wrongful termination claims or discrimination complaints.
An organized personnel file system demonstrates good faith compliance efforts, which can reduce penalties if violations are discovered. The hr compliance specialist will also verify that medical information and I-9 forms are stored separately, as required by law.
Benefits Administration and Regulatory Filings
Benefits compliance spans multiple employment laws including ERISA, COBRA, ACA, and FMLA. Your hr compliance specialist reviews whether required notices were provided to employees, whether continuation coverage was offered properly, and whether benefit plans have current documentation.
The maximum penalty for failing to file Form 5500 for employee benefit plans increased to $2,670 per day in 2024. Late or missing filings add up quickly during a compliance audit.
Workplace Poster Requirements
Every hr compliance specialist checks whether mandatory federal and state workplace posters are displayed. The maximum penalty for FMLA poster violations reached $216 in 2025. While this seems minor compared to other violations, it’s an easy fix that demonstrates attention to regulatory requirements.
What Happens After Your First Audit
Once the compliance audit concludes, your hr compliance specialist provides a detailed report identifying violations and recommendations. This report prioritizes issues by risk level and provides clear remediation steps.
Smart business owners use this first audit as a roadmap. They fix identified issues immediately and implement systems to maintain ongoing compliance. Working with an hr compliance specialist prevents small oversights from becoming expensive legal problems.
The cost of a proactive compliance audit is minimal compared to DOL penalties, class action lawsuits, or back wage claims. Self-auditing and HR compliance training can reduce wage violation risk by up to 60%.
Don’t wait for a government audit to discover your vulnerabilities. Schedule a compliance review today and protect your business from preventable penalties.