HR Auditing

By Laxmi Narasimha Boddu DOMS, IIT Roorkee

HR Audit


The Human Resources (HR) Audit is a process of examining policies, procedures, documentation, systems, and practices with respect to an organizations HR functions

HR Capacity HR Audit

HR Efficiency

HR Effectiveness

Objective of HR Audit


  

To review the organizational system, Human resources subsystem in order to find out the efficiency of the organization in attracting and retaining human resources. To find out the effectiveness of various personnel policies and practices. To know how various units are functioning and how they have been able to implement the personnel policies To review the personnel system in comparison with organizations and modify them to meet the challenges in personal management.

What does HR Audit do?

   

Audit reveals the strengths and weaknesses in the human resources system, and any issues needing resolution. The audit works best when the focus is on analyzing and improving the HR function in the organization. The audit itself is a diagnostic tool, not a prescriptive instrument. Audit will help you identify what you are missing or need to improve, but it cant tell you what you need to do to address these issues. It is most useful when an organization is ready to act on the findings, and to evolve its HR function to a level where its full potential to support the organizations mission and objectives can be realized.

Scope of HR Audit


Generally, no one can measure the attitude of human being and also their problems are not confined to the HR department alone. So it is very much broad in nature. Goal of the HR audit includes two different analyses and valuations:
1. 2.

HR policies and their level of fit with the strategy of the firm The characteristics of human capital.

Several criteria have been used to assess different HR policies. Nevertheless, the measurement of the value that human capital brings to the firm is a very complex topic.

As per Dale Yoder



Scope of HR audit is very wide, it covers Personnel Philosophy Policies Programmers Practices Personnel results

As per Dale Yoder Scope of HR Audit also includes



Major areas of personnel audit Programming Forecasting Scheduling Audit also includes recruitment, selection, careers, promotions, training, development Further the areas of leadership, welfare, grievance, performance appraisal, employee mobility, industrial relations.

Who will conduct the HR Audit



Internal
Internal audit team will include a cross-section of the organizations staff, including line staff, middle and upper management, and those responsible for HR functions

External
Experts and Consultants Example : Drake International, Mercer, Ernst & Young etc.

HR Audit tools


Interview Document review Questionnaire Sampling

Methodology of HR Auditing
 

Individual Interviews Group Interview

Group interviews are used when organization is having thousands of employees Usually uses open ended questions

Workshops
In some cases interviews are substituted to include more people in the audit process

   

Questionnaire method Observation Analysis of secondary data Analysis of reports, records, manual and other published literature

Source:www.exploreHR.org

How should it be conducted?



The audit process consists of a series of questions covering the eight primary components of the HR function: 1. Roles, head count, and HR information systems (HRIS) 2. Recruitment 3. Documentation 4. Training, development, and career management 5. Compensation and benefits 6. Performance measurement and evaluation 7. Termination and transition 8. Legal issues and personnel policies 9. Health / Welfare systems 10.Employee Relations 11. Safety 12. Resourcing

How are needed improvements identified?



Once information is gathered, the audit team reviews each major section and notes disparities between paper (what we think or say we do) and practice (what we actually do, as revealed by the answers to the audit questions). This can then be compared to best practice (what we should do to best support our organizations mission).

How is follow-up and correction done?



Improving the HR system takes some time. A work plan with a timeline, accountability, and deliverables should be created after the team reviews the completed audit and identifies areas where improvement is needed. Follow-up and review should be a regular management function, performed on an ongoing basis.

HR Audit section wise



HR Audit takes care of every functions of HR like

HRIS Recruitment Documentation Training, Development and Career Management Compensation and Benefits Health / Welfare systems Employee Relations Safety Resourcing Performance Management and evaluation

1. Human Resource Information Systems (HRIS)

How many employees are currently on staff?  How many employees are:


Regular Probationary Temporary Full Time Part Time Exempt Non-Exempt

        

What is the definition of a part-time employee? (i.e., What is the maximum number of hours an employee can work to be considered part-time?) What is the minimum number of hours an employee has to work to be considered full-time? How long is the probationary period? Are employees aware of their status? How long can an employee be temporary? How many employees have supervisory responsibility? Are there currently up-to-date job descriptions for all employees? If not, which ones dont have descriptions? Are independent contractors used? If so, how many are being used? And, for what functions? Is the point test for Independent Consultants being used for classification? Have issues related to classification of employees been raised?

2. Recruitment
         

How did the work force get to be the current size? What are some of your organizations future needs for personnel? What are the procedures for hiring in your organization? What recruitment sources are used? (e.g., advertisements, referrals from other agencies, personal contacts) Are current employees given appropriate consideration for promotion or lateral position changes? Who does the preliminary screening of candidates? Who selects candidates for interviews? Is training provided for those who conduct interviews? How is the recruitment, screening, and selection process documented?

2. Recruitment (Continued)
        

What is the interview process that is used (e.g., individual, sequential, panel)? Who holds final authority to hire? Who checks references? How are the reference checks documented? Who makes the offer of employment? Where is the hiring paperwork generated? Who negotiates compensation packages? List the practices you believe are unique to your organization. What is the turnover rate (percent of employees leaving each year) in your organization? Has this changed over time? Who gives references for former employees?

3.Documentation
       

How long are files held and where are they stored after employees leave? What is the interface between HR and Finance? Is a payroll service used, and if so, which one? Does the payroll service provide all governmental employment filings? Is there training of managers and employees about personnel files, and policies and procedures for accessing them? How is Paid Time Off documented? When requests for information are made to your organization, who fills the request? Is an HRIS system being used, and if so, which one?

4.Training, Development and Career Management

       

Who is responsible for new employee orientation? What are the elements of the new employee orientation program? Where and to whom do new employees go when they have questions about your organization or their jobs? Is there a formal training program for employees and managers? If so, please describe it. What training and development initiatives have occurred in your organization? How are managers and supervisors trained and prepared for their roles? What is the average length of time an employee stays with your organization? Does this vary by position type? How much does your organization spend annually (in total and per employee) on employee training and development? Does this vary by position type?

5.Compensation and Benefits



5a.Basic Compensation Questions

Is there a formal compensation program? How are wages set? Are formal salary ranges set? If formal salary ranges are set, are they made public to employees? How are jobs rated? How frequently are jobs re-evaluated or updated? Are any salary surveys used? If so, which ones? Are pay ranges revised as a result of these surveys? How frequently? Who in your organization (what position) administers the compensation program? Are COLAs given, and if so what is the basis for the COLA? Are merit increases given, and if so, are they integrated with performance evaluation? Is there a bonus system, and if so how is it structured?

5 Compensation and Benefits



5bHealth and Welfare Benefits

Describe the health insurance program provided by your organization. Are dependents covered, and if so, in part or in full? Are domestic partners covered? What are the eligibility requirements for health insurance and other benefits? requirements for coverage?
       

Dental Vision Disability Employee Assistance Program Life Insurance Other wellness benefits Flex benefit plan Other benefits

5 Compensation and Benefits



5 c. Pension and Retirement

What is the pension or retirement plan? What is the vesting period? Can employees contribute? Can pretax dollars be put into some form of deferment plan?

5 Compensation and Benefits



5 d.Paid Time Off [ PTO]

What holidays are paid and who is eligible for them? Is there a PTO system, or is it split between vacation and sick leave? If it is straight PTO, what are the rates of accrual and caps? What is the vacation schedule, and how is it earned? What is the eligibility requirement for vacation? Is there a cap to limit the amount of vacation accrued? Are employees permitted to substitute sick leave for vacation? How is unused accrued vacation treated? Can employees contribute sick leave to other employees, and if so, what are the limits?

6.Performance Management And Evaluation

 

   

Describe the past and current performance appraisal system in your organization. If a performance appraisal instrument is used, please attach a copy. (If the instrument differs by position, please attach all instruments.) What type of process is used (360osupervisor only peer evaluationoutcome)? What type of training is used in relationship to performance evaluation? What is the role of the supervisor/manager in performance appraisal? What is the focus of performance management in your organization?

7.Termination And Transition

  

Is your organization an at-will employer? What other causes or conditions of termination of employment exists? What procedures are used for
Termination for Cause Job Closure Resignation

   

What level of approval is needed before a termination can occur? Is there any formal checklist or legal review prior to termination? Are exit interviews performed for all employees who leave? What documentation is required for all employee transitions?

8.Legal Issues / Personnel Policies

      

To your knowledge, are all employees appropriately classified? What personnel policies are currently being used? (Please attach a copy) When was the last time these policies were reviewed and updated? Is there a disparity between policies and practices? Who has organizational responsibility for legal or employment questions? Is harassment training regularly provided? How are employee grievances dealt with?

9. Health / Welfare systems 10.Employee Relations 11. Safety 12. Resourcing

References
VSP Rao Second edition (609-622)  www.exploreHR.org  http://www.drakeintl.com  www.workinfo.com


Thank You