What are HR Audits and Its Checklist?

Minakshi Bindhani

27 Feb, 2023

The HR (Human Resource) Audits evaluates the human resource department’s organisational performance. It examines various aspects of HR performance in an organization. There can be processes, procedures, policies,  systems and documentation.

An HR Audit studied the human resource personnel’s work to ascertain results. Here is some following work:

• Hiring Procedure
• Employee Onboarding
• Benefits Package
• Performance Review
• Termination of Tenure
• Compensation Plan
•  Interview, etc

These processes form a crucial part of the audit functions in an organization. However,  to study the HR performance in an organization other than reviewing the HR professional work,  an audit serves many other purposes.  

Purposes

To ensure the organization complied with the governing laws and statutory laws.

• Helping the HR department to improve.
• Reviewing and verifying the resource allocation to the HR department.
• The HR department must conduct due diligence as potential stakeholders and investors help build better future improvements.

However, based on the different purposes, there are also different HR Audits types to consider. Some of these are as follows.

Types

1. Audit
   The audits take place to ensure that there is an I-9 form for all employees in the organization. The I-9 form requires companies to verify that all employees have valid employment authorization.
    I-9 audit identifies mistakes or other filling default procedures in the form. It also checks into the need for further documentation in the future.
2. Policies
   An audit of policies reviews current and upcoming policies to ensure consistency. Policy audits are also necessary to ensure they fully comply with the governing legal norms.
3. Legal Compliance Audit
   Compliance Audits ensure that the company’s practices comply with all employment laws. These audits examine the disability structure, leave structure, health and safety,  payroll, HR policies etc.
4. Departmental audit
   This kind of audit describes all its efforts in one department. It can be performance, benefits, payroll, etc. The audit keeps on changing departments to review different divisions of a company.
5. Salary and Working Hours
   The audit examines mistakes in the organization’s salary structure and working hours for its employees. It reviews the legal working hours for every employee,  overtime compensation calculations, salary computation etc.
6. Safety
   This audit looks into the steps necessary to ensure employee health. While working onsite or at the office, an employee may be vulnerable to many aspects of challenging health. This audit ensures limit the risk in an organization
7. Hiring Audit
   A hiring audit reviews an organization’s hiring process and ensures that the hiring strategies are consistent, effective, efficient, and fair.
8. Employee Training
   The audit verifies an organization’s employee training and development programs, identifies the necessary new training programs and how to improve the old training programs.
9. Compensation and Benefit package
   A  compensation and benefits package audit examines the salary and benefits package. This audit looks at minimum wage compensation per the organization’s standard and objectives to provide appropriate employee benefits, compensation packages, etc.
   There were a few HR Audits that a company must undertake to review its legal standpoint and performance. While performing these checks, the HR department also checks on a few other things.

Audit Checklist

While performing HR Audits on different divisions, the HR Audit checklist is generally extensive, but here are some critical points for various departments.

1. Employee Records
   • First, identify the working of the Human Resource Information System (HRIS). The HRIS helps to track and search the information efficiently.
   • Ensure to have the I-9 forms and all other personnel files in an organization.
   • Protect the sensitive information of the employees. For instance, the health information of the employees.
2. Check on the employee handbook
   Conduct an annual checkup on the handbook to ensure everything runs smoothly in an organization. Making the workforce aware of new changes in the handbook and getting their acknowledgement.
3. Hiring & Onboarding Process
   • Review the Applicant Tracking System (ATS)^[1] works at par and as per the requirements of a company.
   • Examine and verify the viability of the company’s recruitment tools to appraise the idea of implementing a buddy or mentor system for new hires.
4. Compensation
   • Verify the pay scale to offer a competitive salary package and locate any pay disparity based on race, disability, gender, caste, etc.
   • Build up a system to establish to determine a salary increase.
   • Review the governing salary law to check issues like average salary, minimum wages, etc.
5. Performance Evaluations
   • The performance appraisal is necessary to meet the requirements of the organisation. Evaluate the appropriate period to judge the performance of the workforce. Also, decide on a system to determine employee promotion and employee demotion.
   • Check up on any favouritism harming the performance appraisal process.
6. Benefits
   • Identify and update the current employee benefits package to offer a more competitive package to the employees.
   • Effectively communicate the benefits package to the working staff. For instance, most individuals need to learn to use the ESIC benefits.
7. Training
   • Decide on the training programs for new hires in every department.
   • Consider having a mentorship program within a company to train juniors by seniors.
   • Conducting yearly corporate Equal Employment Opportunity (EEO) training.

Conclusion

HR Audit is significant in conducting and determining a proper action plan. Improper audits sometimes provide misleading results, leading to wrong management decisions. Therefore, it is essential to understand what is happening in the HR department by reviewing, interrogating and through inspection and practices. The HR audit checklist template to hand, and provide a shortcut to some of the preliminary research and get straight down to business.

Also Read:
What exactly is an HR Audit
The Value of HR Audit and why it is Important
Detailed Overview of HR Audit Process for a Business