1. Registrations and coverage
- State withholding and unemployment accounts open in every state with employees
- Workers' compensation coverage in every state
- New-hire reporting done in each state
- Required federal and state notices provided (physically or electronically for remote staff)
2. Classification
- Every contractor reviewed against employee tests (federal and state; California's ABC test is stricter)
- Every exempt employee meets the salary threshold and duties test for their state
- Non-exempt employees track time; overtime and break rules followed
3. Records
- Form I-9 completed on time for every employee and stored separately
- Signed offer letters and confidentiality / IP assignment agreements for everyone
- Personnel files and medical records stored separately, with access limited
4. Payroll and benefits
- Payroll tax filings current in every state
- Benefits eligibility rules applied consistently; ACA obligations understood at 50+ full-time equivalents
- PEO or broker contract terms and renewal dates known
5. Policies
- Current employee handbook with state addenda, acknowledged by every employee
- Anti-harassment policy and required training completed (e.g., CA, NY, IL)
- Paid sick leave and leave policies match each state's law
- Remote work, expense reimbursement and equipment policies
6. Hiring and comp
- Job postings include salary ranges where required
- Interview process structured and documented
- Comp ranges exist by level; offers approved against them
- No salary-history questions where prohibited
7. Performance and exits
- Documented feedback and performance process
- Termination checklist including state final-pay timing
- Separation agreements reviewed by counsel; age-related waiver rules followed for 40+ employees
General information, current as of 2026-10-12. Employment law changes often and varies by state and city. This is not legal advice; confirm specifics with employment counsel.
Frequently asked questions
How long does an HR audit take?
For a 20–80 person startup, a focused audit takes one to two weeks. FlexHR's HR Foundations Sprint covers it for $4,500 fixed, with a prioritized 90-day plan.