HR Audit Checklist for Small Businesses: What to Check and Why

An HR audit is one of the simplest ways to protect your business. At Floreo HR, we carry out HR audits for small businesses across Hull and East Yorkshire: we check your contracts, policies and processes against the law, and give you a clear, prioritised plan to put right anything that's missing or out of date. It all starts with our free HR Health Check, with no cost and no obligation.

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Prefer to make a start yourself? Below is a practical checklist you can work through, based on what we look at with our clients. With the Employment Rights Act 2025 changing the rules through 2026 and 2027, there's no better time to do it.

What is an HR audit?

An HR audit is a check of everything that sits behind employing people: your contracts, policies, records and the way you handle everyday issues. It answers three questions. Do you have what the law requires? Is it up to date? And does what happens in practice match what's written down? That last question matters most, because a tribunal looks at what you actually did, not just at what your handbook says.

For most small businesses, an audit takes a few hours spread over a week or two. Do one every year, and again whenever the law changes or your business grows.

How to run your audit

Gather everything in one place. Pull together your contracts, handbook and policies, right to work records, payroll and pension details, holiday and absence records, and your insurance certificate.

Work through the checklist below. Tick what's in place, and note anything that's missing, out of date or not being followed.

Fix the biggest risks first. Missing right to work checks, missing contracts and no employers' liability insurance can all lead to fines or claims, so put those at the top of your list. Then work through the rest.

Keep a record. Note the date of your audit and what you changed. It shows you take your responsibilities seriously, and it makes next year's audit much quicker.

Your HR audit checklist

1. Recruitment and right to work

• A right to work check was carried out for every employee before they started, following Home Office guidance, with copies or online check results kept
• Checks are repeated before any time limited permission to work runs out
• Job adverts, application forms and interview questions avoid anything that could be discriminatory

2. Contracts and written terms

• Every employee and worker received a written statement of their main terms on or before their first day
• Contracts still match what actually happens: hours, pay, place of work and job title
• Probation clauses end comfortably within six months, and say how probation can be extended
• Any changes to terms were agreed and confirmed in writing

3. Policies and handbook

• Disciplinary and grievance procedures that follow the Acas Code of Practice
• A harassment policy that covers customers, clients and other third parties, backed by a written risk assessment
• Sickness absence, family leave, flexible working, whistleblowing and data protection policies that reflect the April 2026 changes
• A date on each policy showing when it was last reviewed

4. Pay, pensions and holiday

• Everyone is paid at least the National Minimum Wage or National Living Wage for their age, including for time spent training
• Payslips show the hours worked for anyone whose pay depends on the time they work
• Eligible staff are enrolled in a workplace pension, and you've renewed your declaration of compliance with The Pensions Regulator every three years
• Statutory Sick Pay is paid from the first day of sickness
• Holiday is calculated correctly, including for part time and irregular hours staff, and records of holiday and holiday pay are kept for six years

5. Health, safety and insurance

• Employers' liability insurance of at least £5 million from an authorised insurer, with the certificate available to staff
• A written health and safety policy if you employ five or more people, plus up to date risk assessments
• Clear arrangements for first aid, fire safety and reporting accidents

6. Data and records

• Staff have a privacy notice explaining how you use their personal data
• You've paid the data protection fee to the ICO, unless you're exempt
• Personnel files are accurate, stored securely and not kept for longer than you need them
• Managers keep short notes of meetings, decisions and the reasons for them, especially about conduct, performance and complaints

7. Managing people day to day

• Probation reviews are held and written up for every new starter
• Absence is recorded consistently, with a return to work conversation after each period of sickness
• Managers know how to handle a disciplinary, a grievance or a flexible working request, and have had training
• Performance and conduct concerns are dealt with promptly, not left to drift

8. Ready for the Employment Rights Act

• A list of everyone who will have six months' service on 1 January 2027, when they gain protection from unfair dismissal
• A plan for telling workers about their right to join a trade union, which becomes a duty from January 2027
• Any planned changes to terms and conditions reviewed before the new “fire and rehire” rules, expected in January 2027

For every step of the new law, download our free Employment Rights Act checklist.

What to do with the results

If you've ticked almost everything, well done. Keep your records up to date and repeat the audit next year. If you've found gaps, don't panic. Most are quick to fix, and putting them right now costs far less than dealing with a claim later. Start with anything that carries a fine or a legal risk, then work down your list. Our guide to what HR a small business legally needs explains the legal basics in more detail.

How Floreo HR can help

Found some gaps, or simply short of time? We can take it from here. Book your free HR Health Check and we'll review your contracts, policies and processes, highlight any risks, and tell you exactly what to fix first. If you'd like us to carry out a full HR audit, write or update your contracts and policies, or keep everything current as the law changes, we can do that as a one off project or as part of retained HR support.

We support businesses across Hull, East Yorkshire, York, Leeds, Harrogate and Sheffield. Call 01482 765481 or get in touch.

This checklist is general guidance based on the law as at October 2026. It isn't legal advice, and rates and rules change regularly. Check the latest position on GOV.UK and Acas, or speak to us about your circumstances.