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Startup HR audit checklist.

Run through this list once a year, before a fundraise, and whenever you start hiring in a new state. Each unchecked item is a risk or a gap worth fixing. This is the same structure FlexHR uses in the first week of an HR Foundations Sprint.

By Mona Dhillon, Principal, FlexHR · Updated

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.

Next step

Get a fit read and a starting scope within one business day.

HR Foundations Sprint $4,500 fixed · Head of People from $4,000/mo · Fractional CHRO from $8,000/mo.

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