How to Perform a Human Resource Audit

Human resource issues are relevant to all businesses, no matter their size. If your organization employs all but one individual then you will have to manage human resource issues and responsibilities.

Human resources concern the management of an organization’s people. It includes everything from company policies and hiring staff to administer benefit packages and wages. Put simply, human resources manage the link between an organization’s management and their employees and generally speaking, it is a field managed by HR professionals.

Proper human resource management can be the difference between your organization thriving or failing. It plays a key role in developing, reinforcing, and changing the culture of an organization and employee performance. When inspired and managed successfully, human resource management enables a company to function better and achieve more.

But how do you know if you’re managing your HR responsibilities properly or adequately take stock of whether there are ways in which you could improve your processes? Well, that’s where an HR audit comes in.

In this article, we’re going to define an HR audit, outline how you can best perform one within your organization, and explain how it differs from other familiar human resources practices.

What Is a Human Resource Audit?

First things first, let’s explain what exactly a human resource audit is.

An HR audit is an objective examination of an organization’s HR policies, practices, and procedures. It aims to pinpoint block spots in your company’s HR measures and identify ways in which you can improve your measures as a whole.

When performed internally by your HR executives, the audit is referred to as an internal audit and when initiated by an outside company, the procedure is referred to as an external audit. Both serve similar functions and are extremely useful and necessary.

Most companies perform audits for their taxes and other procedures, so it is only right that one is completed regularly and thoroughly for HR practices too. Though outlining, performing, and reviewing an HR audit may seem overwhelming and time-consuming, it’s necessary.

It is as important as your other HR management responsibilities such as hiring and onboarding new employees and organizing payroll. Continuously improving your HR policies ensures that your company is improving, compliant with relevant employment laws and regulations, and your workforce is content.

Organizations can use an HR audit to ensure compliance and align HR programs with business objectives. It’s a way for all businesses and groups to take stock of their processes and ensure that they all contribute to an organized, motivated, and optimum performance.

What Are the Methods of a Human Resource Audit?

HR audit processes and methods include examinations of employment records, salary data, eligibility documentation, and performance standards to measure the effectiveness of workplace policies and departmental procedures. We advise having an hr audit checklist of the following issues and policies so that you can ensure your procedures are satisfactory by law.

Compensation Policy

To perform a satisfactory audit of compensation, benefits, and pay practices you require access to and use of employee census records and personnel files. You may also require your employee's salary data if you intend to audit and take stock of your pay practices.

Management Performance

If you would like your organization to run smoothly and ensure employee satisfaction, taking stock of your management performance is fundamental. Top-tier management needs to be held accountable just as much, if not more, than lower-level employees. Organizations that require regular thorough management audits are more successful and perform higher than other groups.

If you are hoping to instill practices of management performance audits, we advise relying on quantitative measurements such as their employee files, performance data, and how often they have performed reviews with other employees too.

Legal Fees

The human resources process for auditing compliance with federal and state employment laws includes reviewing employee relations files. When completing an audit for compliance with equal employment opportunity policies, human resources executives should examine the types of complaints that employees file, not only the complaints themselves.

These can include complaints regarding issues of misconduct such as discrimination, harassment, and unfair employment practices. In response to these allegations, it is important to reference policies such as ADA, FLSA, and FMLA acts.

Employment Eligibility

In addition to hiring and onboarding individuals, performing exit interviews, and onboarding staff, it’s vital to perform employment eligibility audits too. These audits require documentation necessary for establishing eligibility to work in the United States such as citizenship information and eligibility records and must be performed to satisfy legal requirements and record-keeping policies.

What Is the Difference Between an HR Audit and an HR Evaluation?

There is a myriad of HR terms and best practices that your organization should employ and be aware of to create a sound HR procedure. However, differentiating between the sea of HR terms can often be confusing. For this reason, we are going to outline the differences between HR audit and HR evaluation, two common HR processes which are often mistaken for one another.

While auditing refers to a comprehensive and systemic method of evaluation, an HR evaluation is a mechanism to provide feedback and documentation bout an employee's performance during a specific period.

Though both concern and lead to the fulfillment, employment, and performance of your workforce, they review them in different ways and as such, require different data and procedures. Both must be completed regularly and thoroughly to achieve HR compliance and can be completed internally (internal audit) or externally (external audit).

What Are the Benefits of a Human Resource Audit?

Performing an HR audit can benefit your employees, success rate, and of course, your overall business in multiple ways.

Add Value

HR audits can help your organization to pinpoint ways to improve your return on investment, operational effectiveness, profitability,  and resource optimization, efficiently and reveal reasons for low rates of productivity.

Being aware of these areas means that you can structure a model to improve them, improve the welfare of your employees, and transform your organization.

Learn From Best Practices

Even the best HR departments have room for improvement, and performing a regular HR audit helps you pinpoint these areas where you can improve and enhance them.

It compares the current state of your procedures with the very best in industry standards and by doing so, enables you to improve the lacking areas in your field and will give your business a competitive advantage.

Increase Employee Retention

A satisfactory HR audit doesn't just take note of how your current employees are feeling, it identifies how past employees felt when leaving the company and reveals what inspired them to make that decision.

Uncovering trends in your turnover can help you improve future employee retention. By doing this, you are promoting healthy employee relations and a culture of professionalism in your workplace.

Conclusion

So, that concludes our debrief on HR audits, why they’re necessary and what you need to improve your organization’s audit process or implement one from the very start. Whatever industry you are in or challenges your organization is facing, performing a standardized HR audit will directly impact the well-being of your employees, the culture at your workplace, and in the end, your company's success, so make sure to embrace and implement a thorough audit into your company so you can realise your potential.

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