HR Audit

 Like any other function, the performance and contribution of HR should be

audited regularly. The questions to which answers should be obtained are:
1. What strategic contribution is being made by HR to the achievement of
business/corporate objectives?
2.To what extent are there well articulated and agreed HR strategies
which are aligned to the business strategy and which are integrated
with one another?
3.What role does HR currently play? Is this role appropriate in the context
of the organization?
4.To what extent has the responsibility for HR issues been devolved to
the management?
5.How well does HR reconcile the need for devolution with the need to
ensure that organizational, ethical and legal obligations and
requirements are being mf consistently?
 HR Audit
6.What evidence exists that HR is being innovative in a practical and business way, based
on an analysis of the business and people needs of the organizational and benchmarking?
7.How well is HR performing by reference to quantitative measures such as added value
per employee, absenteeism and attrition?
8.How well is HR performing in terms of service delivery in fields such as recruitment,
training, reward management, health and safety, the management of equal opportunity
and diversity, advice on employment law and legal obligations, the provision of employee
assistance programmes and the maintenance and use of personnel information systems?
9.To what extent does HR express proper concern for ethical considerations, the interests
of all stakeholders (employees as well as management), enhancing the quality of working
life and achieving a satisfactory work/life balance?
10.What ' contribution has HR made to the improvement of the employee relations
climate?
11.How well is HR regarded by its customers ‑ management, line managers, employees
generally, employee representatives, as measured by formal assessments or opinion
surveys?
12.Is the HR function well organized and properly staffed with qualified professionals who
are actively concerned with continuous professional development?
Human Resources (HR) Audit

 The Human Resources (HR) Audit is a process

of examining policies, procedures,
documentation, systems, and practices with
respect to an organization’s HR functions.
 An HR audit is a process to review
implementation of institutions’ policies and
procedures, ensuring compliance with
employment laws, implement best practices
and educate managers.
PURPOSE OF HR AUDIT

 The purpose of the audit is to reveal the

strengths and weaknesses in the
organization's human resources system and
issues needing resolution.
 The audit works best when the focus is on
analyzing and improving the HR function in
the organization
OBJECTIVES OF HR AUDIT

1. Effectiveness: To review performance of HR

Department and its activities to determine
effectiveness.
2. Implementation: To locate gaps & failings in
applying Polices, Procedures & Practices.
3. Rectification: To take corrective steps to
rectify shortcomings
Who should conduct?

 The team that is responsible for the audit

should represent a cross-section of the
organization’s staff, including line staff,
middle and upper management, and those
responsible for HR functions or you may use
an external consultant to assist
 How it should be conducted?
Step 1: Collect information
Step 2: Identify needed Improvements
Step 3: Follow-up and Correction
Step 1: Collect information

 The team works to collect information to

answer the HR audit questions.
 The focus is on how these activities and tasks
are actually performed in the organization.
 The first step is to collect all the pertinent
information. The process of getting
information, in and of itself, can be quite
informative.
Step 2:
Identify needed Improvements
 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
organization’s mission).
Step 3: Follow-up and
Correction
 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

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
 1.Roles, Head Count
1.Roles, Head Count, & Human Resource  How long is the probationary period?
Information Systems (HRIS)  How long can an employee be
 How many employees are currently on temporary?
staff?
 How many employees have
 How many employees are:
supervisory responsibility?
Regular / Probationary
 Are there currently up-to-date job
Temporary
descriptions for all employees? If
Full Time / Part Time
not, which ones don’t have
Exempt / Non-Exempt
descriptions?
 What is the definition of a part-time  Are independent contractors used? If
employee? (i.e., What is the maximum
so, how many are being used? And,
number of hours an employee can
work to be considered part-time?)
for what functions?
 Have issues related to classification
 What is the minimum number of hours
an employee has to work to be of employees been raised?
considered full-time?
 2. Recruitment
 What are some of your organization’s  What is the interview process that is used
future needs for personnel? (e.g., individual, sequential, panel)?
 What are the procedures for hiring in your  Who holds final authority to hire?
organization?
 Who checks references?
 What recruitment sources are used? (e.g.,
advertisements, referrals from other  Who makes the offer of employment?
agencies, personal contacts)  Who negotiates compensation
 Are current employees given appropriate packages?
consideration for promotion or lateral  List the practices you believe are unique
position changes?
to your organization.
 Who does the preliminary screening of
 What is the turnover rate (percent of
candidates?
employees leaving each year) in your
 Who selects candidates for interviews?
organization? Has this changed over
 Is training provided for those who conduct time?
interviews?
 Who gives references for former
 How is the recruitment, screening, and
employees?
selection process documented?
 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?
 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?
 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 Questi ons:  5bHealth and Welfare Benefits:
 How are wages set?  Describe the health insurance
 If formal salary ranges are set, are they made public to program provided by your
employees?
organization.
 How are jobs rated?
 Are dependents covered, and if so, in
 How frequently are jobs re-evaluated or updated?
part or in full?
 Are any salary surveys used? If so, which ones?
 What are the eligibility requirements
 Are pay ranges revised as a result of these surveys?
How frequently? for health insurance and other
 Who in your organization (what position) administers benefits?
the compensation program?  Requirements for coverage?
 Are merit increases given, and if so, are they
integrated with performance evaluation?
 Dental
 Is there a bonus system, and if so how is it structured?  Vision
 How is the compensation program and total  Disability
compensation package communicated to employees?  Life Insurance
 What are the “cultural issues” or beliefs related to
compensation in your organization?
 Other wellness benefits
 Other benefits
5. Compensation and Benefits
5 d. Pai d Ti me Off
 What holidays are paid and who is
5 c. Pension and eligible for them?
 Is there a PTO system, or is it split
Retirement between vacation and sick leave?
 What is the vacation schedule,
 What is the and how is it earned?
pension or  What is the eligibility requirement
for vacation?
retirement plan?  Are employees permitted to
substitute sick leave for vacation?
 Can employees  How is unused accrued vacation
contribute? treated?
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 (360 degree–supervisor only–
peer evaluation–outcome)?
 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?
7. Termination & Transition
 What 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.)
 8. Legal issues / Personal
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?
 Benefits of HR Audit

1. Helps in identifying the Gaps between the current

state and the standard.
2. Improves HR Department’s Professional Image.
3. Encouragement of greater responsibility and
professionalism among HR members.
4. Reduction of HR costs through more effective
personnel procedures.
5. A thorough review of HR information systems.
6. Uniformity of HR policies and practices
7. Clarification of HR duties and responsibilities
 Frequency of HR audit

 It is best to have a HR audit once in a year.

The HR audit, if conducted continuously and
regularly, then it becomes a fairly managed
process.
 Usually, the frequency of the audit being
conducted depends on the company.
 Management must see to it that a well
efficient audit is done on yearly basis