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1. Introduction
Human resource management emerged from traditional personnel Management in the
1980s. Traditional personnel management was viewed largely as involving the
performance of basic staffing functions, often conducted without regard to other
organizational activities and without alignment to organizational objectives. Human
resource management as a profession evolved as an extension of the traditional personnel
role into a more effective organizational activity. Within the field of human resource
management, a human resource audit is one method of evaluating or assessing activities.
The word audit comes from the Latin, ‘audire’ (to listen). Auditing has existed for centuries
and can be traced to ancient Egypt, Babylon and Rome. The auditor’s role was to ‘listen’
to the records and the notion of an independent outsider ‘looking in’ is central to auditing
(Higgins, H. N, 1997). It is not the function of an auditor to take the role of management;
the audit role is one of examination and of critiquing management systems and procedures
(Clardy 2004). In this study the term ‘human resource audit’ describes the professional
practice of auditing applied to human resources management activities.
Human resource auditing is located both within and between each of the fields of human
resource management and auditing. This case has two parent disciplines: auditing and
human resource management. Auditing is described as an investigative and information
processing activity, which evolved in response to the need for independently v erified
stewardship reports (McBrayne, I 1990). Within the discipline of auditing a human
resource audit is a functional or activity audit conducted within or across a range of
defined auditing types.
This paper focuses on the uses of HR auditing to evaluate the contribution of human
resource management activities, as defined in the audit scope, to a corporation’s current
and future objectives. It will demonstrate that a human resource management audit can
identify areas where additional value can be obtained from a valued, well regarded human
resource department.
structured and thorough manner. This covers the fields of staffing (hiring people),
retention of people, pay and perks setting and management, performance management,
change management and taking care of exits from the company to round off the activities.
The Society for Human Resource Management describe human resource management as
“the formal structure within an organization responsible for all the decisions, strategies,
factors, principles, operations practices, functions, activities and methods related to the
management of people” (SHRM 2007a).
HRP is the process including forecasting, developing and controlling-by which a firm
ensures that it has the right number of people and the right kind of people, at the right
places at the right time, doing work for which they are economically most useful.
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Employee compensation refers to all forms of pay or rewards going to employees and
arising from their employment, and it has two main components: direct financial payments
(in the form of wages, salaries, incentives, commissions, and bonuses) and indirect
payments (in the form of financial benefits like employer-paid insurance and vacations).
Benefits are forms of value, other than payment, that are provided to the employee in
return for their contribution to the organization, that is, for doing their job. Prominent
examples of benefits are insurance (medical, life, dental, disability, unemployment, and
worker's compensation), vacation pay, holiday pay, and maternity leave, contribution to
retirement (pension pay), profit sharing, stock options, and bonuses.
Training refers to the methods used to give new or present employees, the skills they need
to perform their jobs. Provision of training to the management members as well as to
employees, with the aim of enhancing their knowledge, skill, and ability in making them
always competent and responsive in performing their duties, is one of the key strategies
that enhance the Corporation’s efforts to achieve its objectives.
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Creating a safe, healthy, and happy workplace will ensure that your employees feel homely
and stay with your organization for a very long time.
3. Definition of HR auditing
The word audit comes from the Latin verb audire to listen; the auditor’s role was to ‘listen
to the records’ (Higgins, H. N, 1997). Auditing has been defined as: the accumulation and
evaluation of evidence about information to determine and report on the degree of
correspondence between the information and established criteria. Auditing should be
performed by a competent, independent person. (Clardy, A 2004).
The audit is a diagnostic tool, not a prescriptive instrument. It will help the managers to
identify what is missing or need to improve in the organization, but it can’t tell what else is
necessary 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 it’s full potential to
support the organization’s mission and objectives can be realized.
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An HR audit helps a company's senior management evaluate the efficiency of its human
resources department and programs. Depending on the needs of the individual company,
an HR audit evaluates the department's effects, services and its place in the achievement
of company goals and objectives. It also assesses HR compliance with state and federal
laws and determines any weaknesses in the human resources management program.
Senior management can use the audit to make any necessary changes and evaluate its
overall approach to the human resources function (Phillips, J, 1996). Encyclopedic
Dictionary of Human Resource Management (Mark A. Huselid, 1998) human resource
audit is defined as:
The review process should provide answers to several important questions regarding the
application of company’s policies. The audit’s goals are to determine whether company’s
policies are being applied consistently, whether they are the norm for companies and
branch location, and whether they are consistently communicated to all employees. The
audit should also provide insight as to which individuals are responsible for the
implementation and enforcement of policies. Finally, it should distinguish between policies
that are applicable to non-union employees, and the terms and conditions of employment
for employees who are represented by a labour organization.
Human resource audit also provides an opportunity to assess the financial advantages
and disadvantages of human resource functions, benchmark the function, evaluate the
effectiveness of the function, ensure compliance, establish standards, promote change.
and creativity, bring human resources closer to line managers, focus staff on critical
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human resources issues and to improve the quality, image and contributions of the human
resource function (Walker, J. W, 1998).
There are five common approaches for the purpose of auditing of HR in any organization:
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3.3.2. External audit: In this approach, standards set by a consultant or taken from
published research findings serve as the benchmark for the audit team. The consultant or
research findings may help diagnose the cause of problems.
3.3.3. Statistical: This approach relies on performance measures drawn from the
company’s existing information system. From existing records, the audit team generates
statistical standards against which activities and programs are evaluated. With the
mathematical standards as a base, the team may uncover errors while they are still minor.
Often this approach is supplemented with comparative data from external sources such
as other firms, or industry association surveys. The information is usually expressed in
ratios or formulas that are easy to compute and use.
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Gaps between what are being practices and what is desirable can always only are
identified in a better way by external HR expert. Being independent, his views are always
considered to be better than internal person’s opinion.
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HR AUDIT QUESTIONNAIRE/CHECKLIST
Disagree
Disagree
Strongly
Strongly
HR AUDŤT question/CHECKLŤST
Neutral
Agree
Agree
Human Resource Planning
The organization have plans for ensuring its development
Are the workweeks clearly defined?
The organization estimates the size and composition of its future to ensure survival
and growth
for sustainable competition with others
Job analysis provides information about jobs currently being done in organization
Are the working hours clearly defined?
Does the company keep tract of labor turnover, retirement, resignation, termination?
Recruitment and Selection
There is a policy in place stating the organization philosophy on recruitment and
selection
The policy contains procedures to guide managers through the recruitment and
selection process
There is a formal process in place for identifying job vacancies
Recruitment was done proactively from a planning mode as well as reactively to
immediate replacement and new job openings
Mobility of human resources and expansion of the company are the factors that
necessitate for new vacancy(recruitment)
HR department does perform all initial screening of candidates
Exams and personality profiles are used in the selection process of the company
Compensation and Benefit
The compensation policy of the company contains procedures to guide managers on
how to implement the compensation system
Distribution of compensation among departments are reviewed by management for
consistency and equity before awarding increases
The organization have a policy clearly stating its position on employee’s
compensation(salary)
The organization compensation philosophy clearly communicated to all employees
The organization have a clear policy regarding employee benefits
Performance Management and Evaluation
Performance appraisal do reflect an employee's positive behavior as well as results
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Disagree
Disagree
Strongly
Strongly
HR AUDŤT QUESTŤON/CHECKLŤST
Neutral
Agree
Agree
The company's performance appraisal includes a written plan to improveemployees
knowledge and skills
The company's performance evaluation establishes clear objectives, expectations
and performance measurement criteria linked to the specific job
Employee who are better performers receive higher pay increase than poor
performers
Staff Socialization
The HR department fulfill their responsibilities by guiding and giving a full
information for the selected employees to socialize shortly with the environment
The company has practiced and allocated budget for welcoming program fornew
selected employees
Training and Development
There is a policy that states the organization philosophy on employee training &
development
There is a process for assessing the organizations immediate training needs and
individual development needs
There is also a process to assess the organization's future training needs
Job skills, knowledge and ability are considered in assessing training needs
New technologies, processes, products, services, market changes andcommunity
needs are considered in assessing training needs
All training programs and opportunities well communicated to employees
The results of training programs are monitored and evaluated
The organization has to give a sponsorship for employee to study in highereducation
Employee/Labor-Management Relations
The organization has clearly stated its philosophy on labor relations andimplement
guiding procedures for managers
Top management is informed and supportive of labor management strategies and
goals
There is an atmosphere of management respect for union representation
Company encourages employees to play a proactive role in improving the
labor-management relationship
The management has assessed the employees motivation and job satisfaction
towards employees benefit and company's productivity
There is an atmosphere of management respect for union representation
The management body understand the laws that govern collective bargaining
Employees are given the opportunity to exchange information with superiorsas well
as assimilate information being transmitted from the top down
There is a program that provides for management and employee participationin the
discipline process
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Disagree
Disagree
Strongly
Strongly
Neutral
HR AUDŤT QUESTŤON/CHECKLŤST
Agree
Agree
Safety and Security
safety hazards reported to the appropriate personnel
Workplace accidents, near-misses, injuries, and illnesses reported and
investigated
Measures are in place to prevent intruders from entering the grounds or
buildings
There is a reliable response system in place in the event an alarm is triggered
Employees are encouraged to promptly report incidents, and suggest ways to
reduce or eliminate risks
Structures are readily accessible to disabled employees
Recordkeeping and other documentation
personnel files are current
Personnel files are completed accurately and on time and currently held
Documents regarding employees are kept for their required duration
All appropriate labor posters are displayed in an easily visible place
HRIS system are being used
There is training of managers and employees about personnel files, andpolicies and
procedures for accessing them?
Employee Communication
Company creates an environment of open communication betweenemployees
and management
The corporate capture the creative insight of employees by soliciting theirideas for
improvement?
Company create environment to delegate decision making to the lowest levelpossible
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