Human Resource

What exactly is an HR Audit

An HR Audit is a comprehensive tool for systematic verification of current practices, documentation, policies, and procedures prevalent in the HR system of the organization. Auditing is a formal process to conduct a routine exercise in finance, mainly because of a statutory obligation. However, in the case of Human Resource Audit, there is no legal binding to auditing. Some companies prefer to conduct Human Resource audits to examine the strategies, policies, procedures, documentation, structure, systems, and practices concerning human resource management in a company. The Audit systematically assesses the strengths, sets limitations, and proceeds with developmental needs to enhance organizational operations.

The human resource audit processes are dynamic and continuous and can be redirected and revitalized to remain responsive to ever-changing needs. Such, Audits are not routine practices aimed at problem-solving. The Audit’s primary focus is on solving problems and providing insights into future problems; HR audits, like financial audits^[1], help the audits to aid the organization’s decision-making and are usually internal documents that must be kept private from the public.

Moreover, unlike Financial Audits, which are routine, regulated, and standardized, HR Audits are non-routine. They may be designed to cater to the organization’s unique needs at a particular period. The Audit conducted could vary from self-directed surveys to the intervention of outsiders.

An HR Audit is conducted annually to check the financial report of a company. Instilling confidence in an organization’s management and HR functions is vital.

Roles

An HR Audit is required to achieve the organizational goal and helps to assess the effectiveness of the HR functions of an organization. It also goes beyond looking at the hiring process into areas like employee retention, budgeting, training, employee compensation, management/employee relations, and virtually any process or practice within the company that affects its people. Human Recourses Audit is very significant for any organization. Some of its essential roles are as follows:

• Promoting Critical Business Plans:

Every organization follows specific strategic plans to achieve organizational goals. The auditor’s responsibility is to convince Management to disclose these plans to employees of the organization so that they can participate comfortably in the company’s decision-making process. The aim is for employees to contribute their point of view about these plans and involve themselves ultimately.

• Role Clarity of HR Functions:

People working in the HR department must be very clear about their roles and responsibilities. According to HR Audit, they should clearly understand that their priority should be in the organization’s interest. The role transparency function is performed by HR audit to ensure they understand their role.

• Improving Organizational Competency:

 An HR Audit helps in identifying the strength and weaknesses of the present administrative system. If there is any drawback in the system’s functioning, the HR audit tries to develop techniques by which productivity can be increased. These positive impacts are also visible in HRIS, working procedures, delegation, and clarifying roles and responsibilities.

• Analysis of HR Functions:

 An HR Audit plays a crucial role in analyzing the functioning of the HR department. It helps evaluate the employees’ performance and develop their leadership qualities. The HR audit also helps redesign the HR department’s development system if necessary.

Purpose

The company conducted an HR Audit to cover more than one area, depending on the company’s concerns, financial budget, and within time framework.

Compliance

The human resource leadership team in every company is concerned with the rules and procedures. An HR compliance audit objective is that it must comply with current local, state, and federal employment laws and regulations. This is a risk mitigation audit. One must ensure the company is not violating laws and complying with all procedures prescribed.

Practice

An HR team practices audits and compares processes and policies with the accepted industry standards. This type of Audit can significantly benefit a growing company because it can help increase payroll, create handbooks, establish job opportunities, and set standards for the future.

Performance

The manager conducts an HR performance audit, which involves a review of personnel files to evaluate the quality feedback of work. A lack of quality feedback can restrain the growth of employees. It can identify problems from the review and feedback process that may injure the developmental process.

Competitiveness

 An HR competitiveness audit verifies employee compensation and benefits to assess whether an Organization benefits qualified employees. A competitive Audit can identify the wages or salaries and other areas (such as telecommuting opportunities and flexible work schedules) that can improve the organizational standard.

Function-Specific

A function-specific audit is a mini-audit examining the HR processes or policies and investigating payroll management, employee review policies, record-keeping efficiency, etc.

An HR Audit is the only way to fully assess whether the HR processes and policies benefit or harm the overall business. An HR system needs to be more efficient to attract the right employees, otherwise, the business will suffer. Improve those areas, and you can improve your chances of success.

Conclusion

While HR Audits are vital, managing human resources requires much more than examining processes and policies. Sometimes, HR audits can be complex, time-consuming, and resource-intensive. However, the benefits far outweigh the effort. The company may redesign the processes and systems to support business objectives and goals in areas like employee retention, budgeting, training, and employee compensation. It also helps the entity to assess future and current problems. It estimates what needs to be done to improve the HR audit function. Organizations can use an HR Audit to ensure compliance and align HR programs with business objectives. They are making sure that these processes truly contribute to Organizational performance.

Read our Article: Detailed Overview of HR Audit Process for a Business