Internal labour audit: identify risks before inspection and increase your company’s value

In a climate of increased regulatory pressure and a growing number of corporate transactions, the internal labour audit has become an essential tool for middle-market companies.

It’s not just about avoiding fines—it’s about safeguarding business value, improving processes, and strengthening the confidence of investors or potential buyers.

What is an internal labour audit?

It is a comprehensive review of a company’s employment and human resources matters, aimed at identifying legal breaches, risks, and opportunities for improvement.

This type of audit may have two primary objectives:

• Preventive, to anticipate inspections or litigation.

• Strategic, in the context of a sale or investment (due diligence).

Why carry out an audit before a visit from the Labour Inspectorate?

In 2025, the Spanish Labour and Social Security Inspectorate (Inspección de Trabajo y Seguridad Social – ITSS) is focusing on:

• Temporary contracts lacking legal justification

• Inadequate timekeeping records

• Non-existent or ineffective equality plans

• Digital disconnection policies, harassment prevention, and psychosocial risk management

A labour audit enables you to:

• Correct irregularities.
• Avoid penalties.

• Demonstrate diligence in the event of an inspection.

Real-life example: A small company with 75 employees avoided an €18,000 fine after detecting and regularising 10 poorly drafted temporary contracts and updating its timekeeping system.

Labour audit before selling a company

In business sale processes, the buyer will scrutinise the employment side closely. If they uncover risks or contingencies:

• They may demand a price reduction.
• They could impose warranties or retention clauses.
• They might even walk away from the deal.

The labour audit as a value-enhancing tool

Conducting an audit in advance allows you to:

• Rectify issues before the buyer discovers them

• Negotiate from a stronger position

• Avoid last-minute surprises that could jeopardise the transaction

What does an effective labour audit include?

1. Employment contracts

• Review of contract terms, durations, job classifications, and applicable incentives or reductions.

2. Payroll and social security

• Assessment of salary items, correct contributions, and back payments.

3. Working hours

• Timekeeping, overtime, remote work arrangements, and digital disconnection compliance.

4. Internal policies and compliance

• Equality plans, anti-harassment protocols, and occupational risk prevention measures.

5. Litigation and disciplinary matters

• Overview of legal disputes, open conflicts, or irregular HR practices

Direct benefits for your company

• Avoid fines and legal disputes.
• Increase your company’s value to investors or potential buyers.
• Improve internal professional standards.
• Build trust and credibility.

Frequently asked questions (FAQ)

When is a labour audit recommended?
At least once a year, and always before a sale, merger, or introduction of new shareholders.

How long does a labour audit take?
It depends on the size of the workforce and the amount of documentation, but usually takes between 2 to 4 weeks.

What happens if irregularities are found?
Our team will provide an immediate corrective plan that is legally compliant, without disrupting normal business operations.

What if I want to sell my company?
A labour audit helps maximise the sale price, reduce risk exposure, and strengthen your negotiating position.

Do you need advice? Access our area related to internal labour auditing:

Labour law