What is an HR Audit

A Human Resources Audit is a comprehensive method to review current human resources policies, procedures, documentation and systems to identify needs for improvement and enhancement of the HR function as well as to assess compliance with ever-changing rules and regulations.

An HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the company’s status quo can help you evaluate whether specific practice areas are adequate, legal and/or effective. The results can provide decision-makers with the information necessary to decide what areas need improvement.

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What should I review in an HR audit?
  • Job descriptions
  • Hiring and Onboarding, Induction and training
  • Benefits and compensation
  • Performance evaluation process
  • Termination process and exit interviews
  • Labor contracts, internal rules and procedures
  • Personnel file review
Why should my company have this audit?

The purpose of an HR Audit is to recognize strengths and identify any needs for improvement in the human resources function. A properly executed Audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems. Things that are subject to audit are:

  • Ensuring the effective utilization of the organization’s human resources
  • Reviewing compliance in relation to administration of the organization
  • Instilling a sense of confidence in management and the human resources function
  • Maintaining or enhancing the organization and the department’s reputation in the community
  • Performing “due diligence” review for shareholders or potential investors/owners
  • Establishing a baseline for future improvement for the function
What type of audits does my company need to undergo to have a full picture of HR?

A HR audit can be structured to be either comprehensive or specifically focused, within the constraints of time, budgets and staff. There are several types of audits, and each is designed to accomplish different objectives. Some of the more common types are:

  • Compliance: Focuses on how well the company is complying with current state and local laws and regulations.
  • Best Practices: Helps the organization maintain or improve a competitive advantage by comparing its practices with those of companies identified as having exceptional HR practices.
  • Strategic: Focuses on the strengths and weaknesses of systems and processes to determine whether they align with the HR department’s and/or the company’s strategic plan.

Function-Specific: Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention, etc.).

When should my company undergo an audit?

Given the resources required for a full-scale audit, most organizations will not want to go through this process more than once a year; however, mini-audits that allow for some course correction can be accomplished without too much departmental pain approximately every six months. Scheduling annual checkups to maintain the discipline of a regular review is preferable to only occasional or panic audits (e.g., those that take place only when a potential problem is bursting). Another strategy is to conduct an audit following any significant event (e.g., new plans, management changes).

What can I expect from my HR audit?

A comprehensive audit is a time-consuming and intensely focused project, that may require the review of numerous documents and policies, as well as soliciting feedback from HR staff, selected employees and managers from other departments. The amount of time involved and the effort required depend on the size and type of your organization, the type of information the organization hopes to glean, the scope of the audit and the number of people on the audit team.

Who Should Conduct an Audit?

The organization’s HR professionals can perform an audit in-house if they have the expertise, the time, a willingness to objectively acknowledge inadequacies in current procedures and, most importantly, the clout to make or influence the necessary organizational changes. However, if the audit is conducted with internal resources or even with an outside consultant who is not a lawyer, everything connected with the audit is subject to discovery in litigation relating to employment practices.

Therefore, we highly recommend to perform the audit with external resources for objectivity reason and better control of the final result.

Still not convinced? Then continue reading the benefits of Human Resource Audit

An audit reminds member of HR department and others its contribution, creating a more professional image of the department among manager and specialist. The audit helps clarify the department’s role and leads to greater uniformity, especially in the geographically scattered and decentralized HR function of large organisations. Perhaps most important, it finds problems and ensures compliance with a variety of laws and strategic plans in an organization.

  • Identifies the contribution of Human Resource department to the organization
  • Improves the professional image of the Human Resource department.
  • Encourages greater responsibility and professionalism among member of the Human Resource department.
  • Clarifies the HR department’s duties and responsibilities.
  • Stimulates uniformity of HR policies and practices.
  • Finds critical HR problems.
  • Ensures timely compliance with legal requirements.
  • Reduces human resource cost through more effective Human Resource procedure.
  • Creates increased acceptance of needed change in the Human Resource department.
  • Requires thorough review of Human Resource department’s information system.

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