An HR audit involves reviewing an organization’s human resources policies and processes to determine where they are performing well and where improvements can be made. From ensuring compliance to aligning human resources with business objectives, these audits play a crucial role in organizational performance.
HR audits can provide the organization with a report on how effective their human resources department is and where improvements can be made to decrease risk. This allows organizations to optimize their processes for components such as recruitment, salary and compensation, performance management, onboarding and training, and employee retention.
How to Carry Out an Effective HR Audit
Outlined below are the steps that organizations can take to carry out an effective human resources audit.
Determine What to Audit
There are many areas an organization can concentrate on within human resources when conducting an audit. For example, there are audits of human resources functions, records, policies, safety, and compliance. Experts recommend focusing on just one or two areas in the audit to avoid being overwhelmed; other aspects can be reserved for future audits. Begin the process by determining the audit’s goals for the organization as well as an expected timeline.
Get Management on Board
Without the organization’s executive management on board, it will be difficult to implement enduring change that has a tangible impact. Be sure to obtain their support, particularly if the services of a third party will be needed for conducting the audit.
While some leaders might have a high tolerance for risk and fail to see the benefits of this effort, it is essential to explain how identifying problems can prevent the organization from facing legal or safety concerns that could compromise their workforce or hurt the bottom line.
Decide Who Will Be Tasked with the Audit
Some organizations may have an employee who is qualified to perform the audit, but many choose to work with an outside party for a more objective view and a professional opinion. Determine who will be responsible for which parts of the project, and set clear expectations from the outset.
Collect Relevant Data
Once the details of how the audit will be performed have been decided, it is time to gather all of the data the organization has access to that relates to the aspect of the business being audited. For example, if recruitment is being audited, data from the organization’s Applicant Tracking System (ATS) can prove valuable. However, it is essential to ensure that the party conducting the audit has permission to use this data.
Analyze and Review the Findings
One of the most complicated aspects of performing a human resources audit is analyzing the information and data that has been collected. It must be organized properly in order to carry out an effective analysis. The process should also entail identifying potential issues and areas where improvements can be made.
Keep in mind that many lawsuits relate to hiring, employee termination, and discipline. Other areas that deserve attention include misclassification of exempt and nonexempt positions, inaccurate time records, improper record retention, outdated labor and employment law posters, and improperly maintained personnel files.
Once the areas of improvement have been identified, they should be prioritized so that the most pressing concerns can be addressed first. For most organizations, these are problems that could lead to legal ramifications or workplace injuries.
Next, work systematically down the list of priorities to improve all of the policies and processes that were identified by the audit. Work through one issue at a time and ensure that it is fully corrected before moving onto the next priority. This is considered to be the most efficient approach.
Communicate Changes to the Organization
Be sure to communicate the improvements and changes being made to human resources processes to employees. Even if certain changes may not impact them directly, demonstrating proactivity in improving processes can boost employee satisfaction and retention.
The Benefits of Conducting an HR Audit
Although this is a complex process, it benefits organizations in many ways. Here are some of the top reasons to perform an HR audit.
It Can Ensure Corporate Compliance
Employment laws are constantly changing, and remaining compliant and avoiding lawsuits requires staying ahead of these changes and identifying potential areas of risk so they can be addressed before they become a major problem.
It Can Identify Inefficiencies
An HR audit is a valuable tool for identifying systems and practices that are redundant or inefficient, which can be a poor use of resources and may lead to mistakes.
It Can Improve Processes that Impact Employees
A human resources audit can help an organization improve the policies and processes that directly impact their employees, empowering and engaging them and increasing employee retention.