HR Audits Made Simple: A Complete Guide to Process, Types, and Best Practices

 

HR Audits

In an HR audit, an organization's HR policies, practices, procedures, and strategies undergo a systematic and comprehensive evaluation to establish whether specific HR practices are adequate to achieve the function's goals. For example, policies must be aligned with current organizational goals. Audit results help to identify gaps, which can then be prioritized for corrective action.

Decisions about what to audit can result from a variety of internal and external factors. Poor KPI results may require closer analysis of processes to identify possible causes. Changes in organizational strategy may require realignment of HR policies and practices. New laws and technology can change the way work is done and introduce vulnerabilities that must be managed. The audit targets are prioritized depending on the constraints of time, available resources, and/or budget. Keeping a log of issues that have arisen may help identify areas of weakness that can be examined and addressed during the audit process.

Types of HR Audits

There are different types of HR audits, and each is designed to examine different types of HR goals-for example, to use resources efficiently or to maintain compliance with local laws and regulations. Exhibit lists the more common types.

                                                                      Exhibit: Types of HR Audits

Audit Type	Description
Compliance	Focuses on how well the organization is complying with current employment laws and regulations
Best practices	Helps the organization maintain or improve a competitive advantage by comparing its practices to those of employers identified as having exceptional HR practices
Strategic	Focuses on the strengths and weaknesses of systems and processes to determine whether they align with the HR departmental and/or the organizational strategic plan
Function-specific	Focuses on a specific area in the HR function (such as payroll, performance management, records retention, etc.)

 

The Audit Process

The actual process of conducting an audit typically follows these steps:

·          Determine the scope and type of audit. Will the audit examine all or only specified policies and processes?

·          Develop the audit questionnaire. This tool helps ensure that all necessary data is collected in a consistent manner.

·          Collect the data. The process should be designed for efficiency. It should be thorough but should aim at creating minimal disruption.

·          Benchmark the findings. The findings are compared with agreed benchmarks, which may be policy or legal requirements or best practices.

·          Provide feedback about results. It is an ethical obligation to describe audit findings to management. Areas of poor performance are prioritized in terms of their strategic or risk impact.

·          Develop action plans. The audit generally includes recommendations for addressing the issues identified. Ownership is assigned for the plans, and a time frame for action is set. The actions taken are reviewed. If the plans have not been fulfilled, management may be involved.

·          Foster a climate of continuous improvement. Audits are a key part of a quality improvement process-a cyclical process of planning, acting, and checking.

Exhibit summarizes the audit process steps.

                                                          Exhibit: The HR Audit Process

Audit Step	Description
Determine the scope and type of audit.	Identification of exactly what areas should be targeted for review (such as comprehensive review of all practice areas or a limited review of the adequacy of a specific process or policy)
Develop the audit questionnaire.	Development of a comprehensive document that elicits information during the inquiry (for example, a list of specific questions)
Collect the data.	Use of the audit questionnaire as a "road map" to collect information
Benchmark the findings.	Comparison of the audit findings with HR benchmarks (such as results for other similarly sized employers, national standards, or internal organizational data)
Provide feedback about the results.	Review of data and presentation of summarized findings and recommendations (such as a written report and discussions) for the organization's HR professionals and senior management team. Prioritization of recommendations based on the risk level (for example, high, medium, and low) Development of a time line for required action(s)
Develop action plans.	Development of action plans for implementing the changes suggested by the audit, with the findings separated by order of importance: high, medium, and low
Foster a climate of continuous improvement.	Constant observation and continuous improvement of the organization's policies, procedures, and practices (such as continuous monitoring of HR systems to ensure that they are up-to-date and have follow-up mechanisms)