HR Audit

HR Audit Meaning

An HR audit is when you thoroughly examine all your practices, policies, and processes related to human resources.  

In simpler words, is a closer look at the policies, practices, and operations related to human resources. It helps you find the exact issues in your human resources department and address them smartly.

With timely audits, you can effortlessly understand the exact issues with your HR department. As a result, you can address and fix HR challenges before it is too late.

Human resources is a critical part of every business, be it small or large. It is responsible for several value-adding business processes. Now, an audit gives you a clear picture of the overall performance of your HR department.  

If you know how to do an HR audit, you can help your company enhance its HR tasks and reap desired results effortlessly.  

So, are you ready to know what is HR audit and the right way to do it? 

Let’s explore:

• Objectives of HR audit
• Scope of HR audit
• HR Audit Process
• Importance of HR Audit
• Types of HR Audits
• Benefits of HR Audit in HRM
• Tips for an Effective HR Audit Process

Objectives of HR audit 

Major objectives of HR audit are: 

• Ensure compliance with regulatory standards 
• Evaluate and enhance efficiency of HR processes and procedures 
• Strengthen employee-employer relationship 
• Better alignment of organisational goals with individuals’ objectives 
• Foster culture of continuous improvement and keep with evolving changes

Scope of HR audit 

The extensive scope of HR audit involves various aspects of HR management. It includes evaluation and assessment of- 

• Effectiveness and compliances of HR policies and procedures 
• Alignment of employees’ recruitment and onboarding process 
• Performance management system including goal setting, review process and appraisal 
• Upskilling and reskilling training and development programs to ensure growth of both employees and employers 
• Payroll policies related to compensation structures, benefits programs and statutory compliances

HR Audit Process 

HR audit process majorly involves 5 major steps: 

• Step 1: Preparation

  As an employer, you must define objectives of HR audit to the third-party hired for the purpose. Delegate various tasks like- identification of key areas and policies for assessment to your HR professionals.

• Step 2: Gather Data

  Save all the required documents like employees’ records, HR handbook, policies implemented, and more in one folder with limited access to avoid any last-minute hustle and streamlined HR audit process.

• Step 3: Assessment and Analysis

  Once the database is collected, let third party start assessing your data with the established guidelines, benchmarks and legal requirements before handing over the process to a third party. They will analyse gaps, find ways for optimization and make a record of everything missing during analysis.

• Step 4: Reporting

  Highlight findings, recommendations, action plans, strengths and weaknesses and anything that seems important and create a detailed report.

• Step 5: Implementation

  After their report, implement recommendations with proper change management policies. Make sure your employees are comfortable in transition state and help in improving their effectiveness.

Importance of HR Audit

HR audits keep a company safe and lower compliance risk in the long run. The process makes sure you’re up-to-date, compliant, and doing the right thing when it comes to employment law.  

Carrying out HR audits will help you make sure that all your processes are aligned with the goals of your organization. Most importantly, an HR audit can help you identify specific areas that need to be improved for better results. 

Types of HR Audits 

Look at some common types of HR audits:  

Benefits of HR Audit in HRM 

There are many but here are the top benefits of HR audits you must be aware of 

• Fill Efficiency Gaps

  The audit looks at HR policies, procedures, and employee performance to find problems like training holes, slow processes, or bad management. This lets businesses make targeted changes that make their processes easier and their general efficiency better.

• Stay Ahead of the Curve

  An HR audit lets companies compare their HR practices to best practices and standards. This helps find places to improve, which improves HR skills, brings in top people, and builds a good company brand.

• Stay Compliant

  An HR audit helps businesses keep up with the laws and rules. Non-compliance problems can be easily found so that you can take strategic steps to fix them. This way, legal risks are reduced, and fines or lawsuits are avoided.

• Retain Top Talent

  It is found that there are gaps in pay and benefits, job growth, work-life balance, and programs that get employees involved. This helps solve problems and make the workplace better. Finding out why people leave can help you keep your employees happier. As a result, employees stay with the company longer.

Tips for an Effective HR Audit Process  

Here’s a step-by-step process to ensure an effective HR audit process: 

• Choose What You Want to Audit

  We already told you that there are different kinds of HR checks that you can do. To do this, though, you will need to be very clear about what your audit goals are. Do not try to do too many things at once. Set a due date for finishing.

• Get Managers on Board

  Getting the support of your top management team is the only way to make a change that will last and help your organization. You will need their help, especially if you want to hire someone else to do the audit.

• Figure Out Who’ll Do the Audit

  Are you going to try to do the audit yourself, or are you going to hire someone from outside the company? If you are working together, decide who oversees what jobs. From the start, make sure you know what you want from your review.

• Get the Information

  First, you’ll need to gather all the information you need about the thing you’re reviewing. For instance, if you are checking how, you hire people, you can use statistics from your ATS. Make sure the info is okay for you to use.

• Check What You Found

  Take the time to put the information you’ve found in order and think about it. Try to think of any possible problems and ways to make things better.

• Plan Your Changes & Put Them into Action

  Start by putting the most troublesome areas at the top of the list. For example, focus on the ones that could get your organization into the most legal trouble. Then, start with the most important things on your list and work your way down to find and fix weak policies and procedures.

• Tell Everyone About the Changes

  People who work for you will be interested in the changes and improvements you’re making to HR. Find ways to let them know about these changes and ask bosses to do the same.

HR Audit Checklist 

HR audit checklist simplifies the document collection and review process. Here is the checklist for your guidance: 

• HR policies and procedures: Employee handbook, policy updates and documentation 
• Recruitment: Processes like job postings, candidate’s hiring and onboarding procedure 
• Performance: Appraisal system, review guidelines, goal setting process, latest tools and technologies deployed, communication channels involved, hierarchical process 
• Training and development programs along with selection process and benefits 
• Payroll management system including benefits, processes and statutory compliances 
• Employee lifecycle processes right from entry to F&F settlement 
• Diversity, equity and inclusive programs and policies 

While wrapping up the discussion of HR audit, we suggest you implement HCM suite to simplify your process right from managing, tracking, administering and reporting. 

With HCM suite, you can ensure utmost transparency and hassle-free procedure! 

FAQs 

Q1. Why is conducting an HR audit important for organisations? 

A. Conducting HR audit is important for organisations due to four major reasons: 

• Ensure statutory and regulatory compliances 
• Identify and optimise HR policies as per the evolving needs and trends 
• Reinvent efficiency of employee lifecycle and boost their confidence 
• Improving metrics like-retention, attrition, exit-rate and more

Q2. What aspects of HR are typically covered in an HR audit? 

A. HR audit involves various aspects of- 

• Recruitment: Hiring process, onboarding journey, candidate’s experience, documentation process 
• Performance Management: review procedures and processes, compensation, benefit programs, etc 
• Payroll Process: Payroll processing, statutory compliances, reports and metrics, database security 
• Record keeping: Documentation process, security guidelines, privacy rules and much more 

Various other aspects like training and development programs, POSH policy and other guidelines are reviewed to see if they are followed or not.

Q3. How often should organisations conduct HR audits? 

A. Conducting HR audit annually is the recommended practice. Though employees can vary the frequency as per their requirements, changing business landscape and evolving need of employee centricity.

Q4. Who is typically involved in the HR audit process? 

A.HR audit involves the collaboration of following stakeholders: 

• HR professionals for specifying the valuable insights required for HR audit 
• Internal auditors (if available) for evaluation and assessment purposes 
• Third-party consultants for offering bird-eye view of reports of HR audit 
• C-suite involved in decision making after the findings of HR audit

Q5. How is the confidentiality of HR audit findings maintained? 

A. The confidentiality of HR findings must be maintained to protect confidential insights and valuable data associated. Some of the methods of maintaining confidentiality are: 

• Limited/ selective accessibility 
• Non-disclosure agreements 
• Protocols related to communication (channel, method, etc.)