An audit is an official inspection of a certain aspect of a company, and a human resources audit looks specifically at an organization’s HR practices, policies, and procedures. HR audits can be performed by independent companies or internally by the HR department itself. HR audits can help organizations identify areas of weakness and show areas to focus on that will lead to success. This article will break down the different types of HR audits and show how they are beneficial to organizations.
Types of HR Audits
While there are a variety of HR audits, common audits include the following:
A compliance audit examines whether organizations are staying in compliance with local, state, and federal laws and regulations. Examples of regulations include:
- Family and Medical Leave Act (FMLA)
- Fair Labors Standards Act (FLSA)
- Americans with Disabilities Act (ADA)
- Immigration Reform and Control Act (IRCA) of 1986
Another important aspect of compliance is looking at anti-discrimination and anti-harassment policies that include all protected classes and help ensure a safe working environment for all. It’s important that companies also examine whether there is training to correspond with these policies and if that training is up-to-date and relevant.
Best Practices Audit
Is an organization’s handbook out-of-date? Are job postings clear and concise? A best practices audit examines other organizations with outstanding HR departments and compares their HR practices with that of the competing company’s HR practices. Conducting this type of audit allows organizations to gain a competitive edge and to see where they fall when it comes to industry standards.
Similar to a best practice audit, a competitive audit looks specifically at employee compensation to see if a company is truly attracting the best and brightest employees. Aspects of this audit include compensation, benefits, work schedules, and telecommuting opportunities. If a company finds that it is consistently losing candidates to competing companies, it can perform a competitive audit to see what tweaks can be made in their compensation.
These customizable audits look at one specific area of an HR department and are only performed as needed. Examples include auditing payroll management, record-keeping efficiency, or performance management.
Why are HR Audits Important?
Companies can never grow if they don’t address their areas of weakness. Performing HR audits can provide concrete evidence whether HR policies are actively hurting or helping the overall success of an organization. HR audits are especially important if a company is danger of a lawsuit or criminal suit, if systems are not operating at peak efficiency, if the best employees are not getting hired, or if current employees are not living up to their potential.
Audits can also prepare companies for large-scale workforce changes that will impact their companies. One such example is the changing expectations of millennial employees. If companies are blind to these new expectations and don’t adapt accordingly, they won’t be able to hire strong candidates, and their company will suffer as a result.
How to Perform an HR Audit
When performing an HR audit, companies can choose to hire an external company or conduct the audit themselves. There are a variety of free, online resources to help companies perform their own HR audit.
- Scope: Companies should decide what to evaluate for their HR audit. Are they looking to see if they are in compliance with laws, or are they looking to see why their employees are consistently not meeting deadlines and goals? If an organization has never conducted an HR audit, they should perform a comprehensive audit that reviews all policies, practices, and procedures.
- Plan: Once companies know what they want to audit, they must determine how to conduct the audit. Often, an audit team is assembled and will work to create a timeline for the audit.
- Gather & Analyze: The audit team gathers information needed for the audit. This information can come in the form of documents, laws, interviews, HR software, and more.
- Report: The audit team synthesizes their findings into a report that can be understood by upper-level management, who will use the report to make policy changes and other decisions. The repot can also include specific recommendations from the audit team who often has a clearer understanding of HR departments.
- Plan: Once upper-level management understands findings from the report, they make changes as necessary, which can include changes to policy, updated procedures, new hires, and more.
- Evaluate: The organization should monitor the progress of changes that were implemented after the audit was conducted. From here, companies can determine if the changes are leading to positive change and can make more changes as necessary.
It’s important that organizations perform regular HR audits and study the results. Contact Bhr Consulting to find out whether your company should hire an external company to perform audits or if your company can perform an internal audit. Our experts will help ensure that you conduct a thorough audit and make changes that will lead to your company’s success and longevity!