HR Needs to Plan Ahead Before an Internal Wage and Hour Audit

When conducting an internal wage and hour audit, HR should help plan the scope and purpose of the audit, how it will proceed, and how the employer will respond to the audit. HR first needs the C-suite’s buy-in and should avoid common auditing mistakes.

“Ensure that if the audit reveals any issues, that there will be an appetite to make appropriate changes going forward,” said Brett Coburn, an attorney with Alston & Bird in Atlanta. “After receiving this buy-in, HR should begin by determining who will conduct the audit. Will it be done by outside counsel, by in-house counsel, by HR only, or by some combination of these roles?”

If HR conducts the audit without the involvement of attorneys, the results of the audit will not be privileged. So, Coburn recommended that counsel conduct wage and hour audits, or at least direct them.

According to a SHRM survey, 46% of HR professionals said their organization conducts internal wage audits on a regular, scheduled basis, while 33% do so on an ad hoc or as-needed basis (January 2026 Current Events Pulse, SHRM, 2026). The primary drivers for conducting audits are a proactive commitment to diversity, fairness, and inclusion (63%) and improving employee trust and transparency (53%). HR professionals at organizations that do not conduct audits most often cite a belief that current pay practices are already fair (48%) or that senior leadership does not view it as a strategic priority (48%).

Toolkit: Complying with U.S. Wage and Hour Laws

Scope of Audit

Once an employer decides who will conduct an internal wage audit, “the audit team should start by identifying the scope of the audit, which includes defining parameters — companywide or department-specific, gathering employee lists and job descriptions, and ensuring attorney-client privilege is preserved,” Coburn said. 

The scope and purpose of an internal wage and hour audit may, for example, depend on whether the organization performs the audit to address a specific concern or issue, such as regular rate or meal period compliance, said Brian Long, an attorney with Seyfarth in Los Angeles. 

Map Out Audit Subareas

After determining the proposed scope of an audit, the team should prepare a comprehensive plan mapping out subareas of the audit, he said. The plan should, according to Long, set forth: 

• The areas the team will audit.
• The data sources needed to complete the audit.
• The stakeholders for each area of the audit.
• Defined timelines for completion.
• The form of any results or conclusions.
• Review of the conclusions and action steps to be taken in response to the findings.

“The plan should be a living document and adapt to findings made during the audit,” Long said.

Interactive Resource: Multistate Laws Comparison Tool

Review Data Sources

Data sources would, Long said, typically include: 

• Time and pay records for covered employees.
• HR policies and procedures.
• Samples or complete records of various employment documents, such as onboarding documents, wage statements, or meal period waivers.
• Job descriptions.
• Direct interviews of relevant management and employees.

“If, for example, the audit is focused on regular rate and meal period compliance, consider first reviewing the relevant policies, then relevant pay codes with stakeholders, then analyzing the relevant time and pay records,” Long said. “Once that analysis is complete, it will help determine where to focus the audit[’s] direct interviews of impacted employees and managers. This is because the data analysis may show that a particular job category or department is potentially more problematic and should be a focus of direct interviews.”

The audit process involves removing clearly exempt and nonexempt employees from review, Coburn added, then confirming job duties through interviews with managers and employees to validate classifications. 

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Acting on Audit Recommendations

“Once determinations have been made, the audit team should present findings and recommendations to leadership, advise on any necessary changes and reclassifications, and make strategic decisions about how best to implement recommended changes,” Coburn said. The audit team should maintain organized documentation throughout the audit of its process, recommendations, and final decisions.

“Once the audit has been conducted, it is critical to review the results and develop an action plan to implement any needed changes, including prospective changes as well as remediation if necessary — such as back wages related to regular rate or other systemic pay issues,” Long said. The action plan should attempt to address the root cause of any potential source of liability if doing so aligns with business necessities, address any needed remediation, and schedule a follow-up check in the future to ensure that any changes are promptly and properly implemented.

Avoid Common Mistakes

Common mistakes to avoid include reclassifying large groups of employees at once, which can be costly, time-consuming, and likely to attract potential claims from reclassified employees, as well as scrutiny from agencies like the U.S. Department of Labor, Coburn said.

In addition, interviews with managers often fall short when HR relies on generalities. “Instead, they should ask supervisors or employees to explain each duty in detail to ensure accurate classification,” he said.

Another common mistake, according to Long, is not properly setting the scope of any review. This “may in turn miss a critical issue and give a false sense of security.” 

For example, if the audit is intended to address regular rate of pay issues, and the scope of the review is limited to a few pay periods, the review may miss the impact of quarterly or yearly bonuses that need to be included in the regular rate, Long said. 

“Similarly, a review that is limited to a few pay periods or even departments may miss lower volume use of particular pay codes.”

Kyle Nelson, an attorney with Seyfarth in Seattle, said that an audit should have: 

• Purpose.
• Privilege.
• Localization.
• An action plan.

As for localization, Nelson explained that “a good audit does not merely look through data and policies at a corporate level. Rather, auditors should talk to individual managers at multiple locations to find out whether and how policies are being followed, which provides context and color to the data and policy review.”

Robert Boonin, an attorney with Dykema in Ann Arbor, Mich., said the most common errors he sees with wage and hour internal audits are: 

• Failing to plan the audit with an experienced wage and hour attorney before conducting the audit.
• Relying on records, including job descriptions, when assessing if the company pays for all work time and if employees primarily perform the duties listed in their job descriptions.
• Failing to properly document the conclusions of the audit to protect the ability to assert a good-faith defense if later challenged.
• Overlooking adjustments to policies and procedures as to how work time is captured and recorded so that the risk of not properly capturing the time is minimized.
• Failing to take into account state law nuances.
• Failing to closely scrutinize whether independent contractors are truly contractors and not employees.

An Exemplary Audit

Sometimes, however, internal wage and hour audits are notably good.

Long described one exemplary audit where a client proactively audited regular rate issues and reviewed historic and seldom-used pay codes.

“The client took the audit as an opportunity to clean up payroll codes that had not been used for years and also ensure that the codes it continues to use are clear on their impact for the regular rate of pay,” he said. “The review performed by the client was systematic, detailed, and thorough.”