An HR audit is a process to review implementation of your institutions policies and procedures, ensure compliance with employment law, eliminate liabilities, implement best practices and educate your managers.

HR Audit means the systematic verification of job analysis and design, recruitment and selection,

orientation and placement, training and development, performance appraisal and job evaluation, employee and executive remuneration, motivation and morale, participative management, communication, welfare and social security, safety and health, industrial relations, trade unionism, and disputes and their resolution.

HR audit is very much useful to achieve the organizational goal and also is a vital tool which helps to assess the effectiveness of HR functions of an organization.

Scope of 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. It covers the following HR areas:

• Audit of all the HR function. • Audit of managerial compliance of personnel policies, procedures and legal provisions. • Audit of corporate strategy regarding HR planning, staffing, IRs, remuneration and other HR activities. • Audit of the HR climate on employee motivation, morale and job satisfaction.

Benefits of HR Audit:
It provides the various benefits to the organization. These are:

• It helps to find out the proper contribution of the HR department towards the organization. • Development of the professional image of the HR department of the organization. • Reduce the HR cost. • Motivation of the HR personnel.

• Find out the problems and solve them smoothly. • Provides timely legal requirement. • Sound Performance Appraisal Systems. • Systematic job analysis.

Smooth adoption of the changing mindset.




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Nature of Human Resource Audit
An HR audit is a tool for evaluating the personnel activities of an organisation. The audit may include one division or an entire company. It gives feedback about the HR functions to operating managers and HR specialists. It also provides feedback about how well managers are meeting their HR duties. In short, the audit is an overall quality control check on HR activities in a division or company and an evaluation of how these activities support the organisation’s strategy


• How did the work force get to be the current size? • What are some of your organization’s 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?

• 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?


• Where and with whom are the personnel files currently held? • What documents are held in personnel files? • How are the following documented by your organization? ○ Hiring: Application, Interviewing, and Reference Checks ○ Compensation and Benefits ○ Transitions ○ Paid Time Off ○ Training ○ Discipline ○ Work History ○ Work Assignments ○ Significant accomplishments ○ Emergency contact information ○ Performance evaluation and performance management ○ Termination • 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?

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?

Health 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? • Which of the following health and wellness benefits are offered, and what are the limits and requirements for coverage? ○ Dental ○ Vision ○ Disability ○ Employee Assistance Program

○ Life Insurance ○ Other wellness benefits ○ Flex benefit plan ○ Other benefits

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 (360o– supervisor only–peer evaluation– outcome)? • 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? • How often and consistently is the process used?

An HR audit is dreaded by many a human resources department head, but for the skilled HR representative, it is a valuable tool that points to areas in need of employee development. In some cases an HR audit may even help a company find areas where savings could be realized with the help of job cuts and the funds may then be allocated to different departments in an effort to either streamline productivity or launch a new program or product line by either moving personnel there or hiring additional staff. Learning how to define an HR audit is not hard, and when you follow these simple steps, you are well on your way to drafting a hard hitting audit that provides an abundance of facts with respect to

educational standards being met as well as indicators where training improvement is needed the most. •

Prevalence of HR Audit
Audit of Managerial Compliance

This involves audit of managerial compliance of personnel policies, procedures and legal provisions. How well are these complied with should be uncovered by the audit so that corrective action can be taken. Compliance with the legal provisions is particularly important as any violation makes the management guilty of an offence Audit of the Human Resource Climate The HRM climate has an impact on employee motivation,

morale and job satisfaction. The quality of this climate can be measured by examining employee turnover, absenteeism, safety records and attitude surveys. Employee Turnover Employee turnover refers to the process of employees leaving an organization and requiring to be replaced. High turnover involves increased costs on recruitment, selection and training. In addition, high labour turnover may lead to disruption of production, problems in quality control, and difficulty in building teamwork and morale. Certain percentage of labour turnover is unavoidable. Resignation, retirement, death and transfers do take place causing displacement in workforce. Similarly, business expansion necessitates hiring of

Approaches to Human Resource Audit
Auditors may adopt any of the five approaches for the purpose of evaluation: • Comparative approach • Outside authority approach

• Statistical approach • Compliance approach • Management by objective approach. In the comparative approach the auditors identify another company as the model. The results of their organisation are compared with those of the model company. Often, the auditors use standards set by an outside consultant as benchmark for comparison of own results. This approach is called the outside authority approach. The third approach is the statistical approach. Here, statistical measures of performance are developed based on the company’s existing information. compliance approach, auditors review past actions to determine if those activities comply with legal requirements and company policies and procedures. A final approach is for specialists and

operating managers to set objectives in their areas of responsibility. The MBO approach creates specific goals against which performance can be measured. Then the audit team researches


The auditors always prepare and submit an audit report to authority of the organization, which may be clean or qualified. The clean report indicates the appreciative of the department's function, but the latter one represents the gaps in performance and therefore contains remarks and remedial measures. HR Audit is very much helpful to face the challenges and to increase the potentiality of the HR personnel in the organization.

Compensation and Benefits 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 COLA’s 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? How is the compensation program and total compensation package communicated to employees? What are the “cultural issues” or beliefs related to compensation in your organization? How is employee communication regarding compensation and benefits delivered in your organization

How should it be conducted?

The audit process consists of a series of questions covering the eight primary components of the HR function: Roles, head count, and HR information systems (HRIS) Recruitment Documentation Training, development, and career management Compensation and benefits Performance measurement and evaluation Termination and transition Legal issues and personnel policies

Roles, Head Count, & 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 don’t have descriptions? Are independent contractors used? If so, how many are being used? And, for what functions

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 (360o–supervisor only–peer evaluation–outcome)? 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? How often and consistently is the process used?

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?

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? How are references handled in your organization? Who is responsible for internal communications regarding difficult terminations? (i.e., communicating the termination to other employees.)

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