Human Resource Audit

Human resource audits help identify whether the specific practice of an HR department or process is sufficient, just, and effective. The results obtained from this inspection can help recognize gaps in HR systems. HR can then prioritize these gaps to reduce lawsuits and regulatory violations and produce and maintain world-class competitiveness in key HR practice areas.

What is a human resource audit?

Human Resource (HR) Audit is a systematic, well-organized method of fair verification of present works, documentation, policies, and procedures prevailing in the company's human resource system. An efficient HR audit helps identify the need for improvement and enhancement of the human resource function. It also guides the company in maintaining compliance with ever-changing customs and regulations. It benefits in investigating the gap between the present HR function and the potential improvement in the organization.

Is human resource audit mandatory?

Unlike financial auditing, human resources auditing is not mandatory, but the organizations favour conducting regular HR audits. The top management requires us to monitor the conduct of the HR policies. They must establish the scope of conducting a transparent audit to the external firm.

How is HR audit necessary?

Human resource audits are helpful to avoid any regulatory or legal liability. Moreover, the probable risk identification, the necessity of audits, providing inputs about the competitiveness in the market in respect of the work culture is conducted by the HR audit. 
In the competitive market in the present period, the challenge to the HR policies is not only limited to the laws and regulations. It involves a significant influence on the productivity and profitability of the company. For example, when a work from home opportunity to an employee, they deliver better work and can accordingly prepare HR policies. This policy increases productivity and decreases the company's transportation, office arrangements, and other costs.

What are the points of note for the HR audit?

Generally, four points are analyzed in an HR audit, and they are as follows:

  • Best of practice: This helps the company improve and maintain a competitive advantage. As employee retention increases, the best HR policies attract more candidates, allowing an opportunity to choose the best person for the work.
  • Strategy: The strategy of the HR policy must highlight the company's weakness and suggest the appropriate solution to it. Strategically, the HR policy must be in alignment with the company policy.
  • Function specific: Focussing on the functional areas of HR - payroll, management, retention, performance, record, etc.
  • Compliance: The compliance of the HR policy with the law of the land and regulatory provisions will be tested during the HR audit.

How are HR audits conducted?

In two parts, the HR compliance audit is conducted:

Part one: The analysis of the operational HR policies of the company. The focus remains on the deliverables of the HR department - internal and external recruitment, retention of the employees, salary, employment benefits, performance monitoring and analysis, employer-employee relationships, training, and scope of growth.

Part Two: The analysis and report of the indicators for the HR actions - number of vacancies, the duration for which a position is vacant, employee satisfaction, internal grievance management, management of the internal complaint and legal complaints, and evaluation of the employee performance.

The HR audit takes place through a questionnaire circulated among the employees and based on the responses from the employees. The responses are often anonymous to ensure the freedom to give honest negative reviews, if necessary.

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