HR Audit Process: Ensuring Compliance and Efficiency

An HR audit evaluates policies and procedures to ensure compliance and improve organizational efficiency. Regular HR audits reduce legal risks, enhance employee processes, and strengthen overall business performance.

By Brad Nakase, Attorney

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Table of Contents

1. What is an HR audit?

2. What is the purpose of an HR audit?

3. What time is best to carry out an HR audit?

4. Seven steps to a successful HR audit process

5. In summary

What is an HR audit?

Does your organization regularly carry out HR audits? Inadequate HR procedures, frameworks, and guidelines may be detrimental to your company. A company may run afoul of employment regulations if these criteria are not continuously examined. You could, for example, find yourself paying heavy fines for failing to implement an employee safety program. By carrying out an HR audit, you can make sure that your company and its workers are positioned for long-term success and compliance.

It’s possible that you’ve forgotten the advantages HR audits can bring to your company because it’s been so long since you took part in one. A lot can change quickly in a business with its employees, especially as we approach a post-pandemic era.

For this to happen, it is necessary to quickly stand back and assess the organization’s current state of human capital management.

An HR audit looks over the policies and procedures related to human resources in order to determine what is working properly and what may require improvement. An HR audit is a tool that organizations can use to make sure that HR policies and procedures are in line with company goals. They are ensuring that these procedures actually improve the functioning of the organization.

An internal process audit is similar to a human resource audit. To put it simply, it’s similar to assigning an effectiveness report card to your human resources department. To lower the risk to the company, conducting an audit of your HR department also identifies non-compliance issues.

An HR audit is essentially a chance to streamline procedures so that areas like as hiring, onboarding, salary and compensation, training, payroll, and performance management all receive the necessary attention.

It may appear to require a lot of effort. Ultimately, don’t you already have a lot on your mind with hiring, onboarding, and monitoring personnel members? On the other hand, keeping your HR procedures up to date can help you make sure that they support both the success of your staff and your company, in addition to being in compliance with legal requirements.

What is the purpose of an HR audit?

An HR audit has many objectives. Every HR department that is reviewed gains from having made this effort, even if it is not required. Audits examine the effectiveness of the HR department’s current procedures, rules, and processes as they relate to the most recent changes and developments in employment and labor law, according to Mark S. Floyd, a partner with the Cleveland law firm Walter & Haverfield. Furthermore, he states that to ensure that the company’s overall business strategy complies with the many complicated laws and regulations that control the workplace environment, senior leadership significantly relies on the HR department.

Not yet convinced? The following justifies giving HR audits top importance in your company:

Improves employee-related processes and policies: An HR audit provides an opportunity to improve areas of company policies and procedures that have the most impact on employees. This gives employees more authority, helps in their retention, and strengthens the business overall.
Guarantees adherence to business policies: Never assume that your policies abide by all applicable laws. Laws are always changing and being amended, including those pertaining to work. HR compliance assessments that pinpoint any possible risk areas can help you stay ahead of the game and stay compliant while avoiding unwelcome lawsuits.
Gives strategic meaning to HR data: Apply all that HR data by making a connection between it and the actual HR regulations and processes.
Helps shield employment practices from negative effects: By conducting audits, you may lessen issues pertaining to unequal effects on applicants during the hiring process, as well as on candidates during wage and compensation negotiations, succession planning, and other stages of the employee lifecycle. Audits can help to avoid problems with differential impacts on candidates throughout recruitment, succession planning, salary and compensation, and throughout the employee lifecycle.
Produces just and equitable compensation: Assessing the equity and competitiveness of your wage and compensation packages can also be a smart practice throughout your financial audits and compensation analyses. In addition to preventing complaints, this can help with recruitment and retention initiatives.
Finds inefficiencies in processes and structures: HR audits can at the very least assist in identifying any inefficient procedures or processes. Errors might occur as a result of prolonged or redundant processes.

What time is best to carry out an HR audit?

Don’t wait for problems to arise before carrying out an HR audit. It is always preferable to be proactive rather than reactive. According to Lauren Brown, aPHR, who writes for the Bernard Health blog, the organization’s needs and schedule will determine the best time of year to conduct an audit. A slower season could yield greater results than the company’s peak time. Similarly, a business might benefit from measuring improvements at the beginning or end of the year.

Select the season that best suits your workload and organizational structure.

Seven steps to a successful HR audit process

Are you unsure of how to carry out an HR audit? Here’s a helpful HR audit starter kit to get you going:

Step 1. Decide what you want to have audited.

You can concentrate on a wide variety of HR audits. However, you should be very clear about your organization’s audit goals for this purpose. Try not to take on too much at once. Establish a deadline for completion.

Step 2: Obtain management support.

Having the support of your top management team is the only way to bring about a long-lasting transformation that will benefit your company. Their assistance will be necessary, particularly if you ask to have the audit done by a third party.

Step 3: Choose the person who will carry out the audit.

Will you employ someone from outside the company to complete the audit, or will you try to do it yourself? If it’s a group endeavor, decide who is in charge of what. From the outset, establish expectations for your evaluation.

Step 4: Gather the details.

The first thing you must do is gather any relevant data related to the audit. When reviewing your hiring procedures, for instance, you can use information from your applicant tracking system. Check if you have authorization to use the information.

Step 5: Analyze your results.

Give the material you have found some thought and organize and examine it. Look for any possible problems and areas that could use improvement. To avert future accidents, you may, for instance, raise the frequency with which the business places worker PPE orders.

Step 6: Make your improvements and put them into action.

Prioritize the most troublesome areas first, such as those that could land your company in legal hot water. After that, work your way down your list of goals to strengthen any weak policies and procedures.

Step 7: Communicate changes openly.

Your employees will be curious to learn about the improvements and changes you’re making to your HR procedures. Look for ways to let them know about these changes, and request that supervisors inform staff members.

In summary

Indeed, conducting an HR audit may be a challenging and time- and resource-consuming process. But the advantages are well worth the work. You can rework the systems and procedures in your organization to help achieve your company’s goals and objectives.

Have a quick question? We answered nearly 2000 FAQs.

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