Human Resource Audit

Human resource audits are a vital means of avoiding legal and regulatory liability that may arise from an organization's HR policies and practices. In addition to identifying areas of legal risk, audits are often designed to provide a company with information about the competitiveness of its HR strategies by looking at the best practices of other employers in its industry. In essence, an HR audit involves identifying issues and finding solutions to problems before they become unmanageable. It is an opportunity to assess what an organization is doing right, as well as how things might be done differently, more efficiently or at a reduced cost.

In today's competitive climate, organizations operate within the confines of a heavily regulated employee environment. This challenge includes dealing with myriad complex laws and regulations. The scope of the HR function includes establishing and administering a host of policies and practices—many of which involve compliance implications—that significantly influence the productivity and profitability of the enterprise.

HR Audit Defined

An HR audit involves devoting time and resources to taking an intensely objective look at the organization's HR policies, practices, procedures and strategies to protect the organization, establish best practices and identify opportunities for improvement. An objective review of the employer's current state can help HR evaluate whether specific practice areas are adequate, legal and effective. The results can provide decision-makers with the information necessary to decide which areas need improvement.

An HR compliance audit generally consists of two main parts:

• An evaluation of the organization's operational HR policies, practices and processes with a focus on key HR department delivery areas (e.g., recruiting—both internal and external, employee retention, compensation, employee benefits, performance management, employee relations, training and development).
• A review of current HR indicators (e.g., number of unfilled positions, the time it takes to filla new position, turnover, employee satisfaction, internal grievances filed, number of legal complaints, absenteeism rates).

Types of Audits

An 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 organization is complying with current federal, 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 strengths and weaknesses of systems and processes to determine whether they align with the HR department's and the organization's strategic plan.
• Function-specific. Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention).

 

When to 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 brewing). Another strategy is to conduct an audit following any significant event (e.g., new plans, management changes).

 

Source: www.shrm.org  with selective paragraphs