An HR audit is an objective, systematic review of a company’s HR policies, procedures, strategic direction, structure, resources, and ultimately, its contribution to the organization. Such an audit offers the opportunity to protect the company, establish best practices and identify areas for improvement, and can help evaluate whether specific practice areas are adequate, legal and/or effective.
HR audits are essential for companies to ensure that they are avoiding any legal or regulatory liability associated with their HR policies and practices. In addition, audits can also provide the opportunity to benchmark a company’s strategies and practices against the best practices of other companies in its industry.
Types of Audits
There are various types of audits, each designed to accomplish specific objectives. Here are some of the more common types:
- Compliance: Examines how well the company is complying with federal, state and local laws and regulations.
- Best Practices. Compares company practices to those of companies identified as having exceptional HR practices, to help a company maintain or improve its competitive edge.
- Strategic: Assesses the systems and processes within the company to determine whether they align with the company’s strategic plan.
- Function-specific: Focuses on one specific area within the HR function (payroll, performance management, etc.).
Steps of an Audit
Follow these general guidelines for conducting an audit.
- Determine the scope and type of the audit. It may be appropriate to conduct a comprehensive review of the entire HR department and its function; conversely, there may be targeted areas that make more sense for review.
- Develop the audit questionnaire. An audit typically employs a questionnaire to evaluate specified areas. It will help guide the audit team in scrutinizing the designated areas for review, and also may include interviewing HR employees or department managers. See below for sample questions to include in an audit.
- Collect the data. Using the questionnaire as a roadmap, the audit team conducts a thorough, extensive review.
- Benchmark the findings. Comparing the company’s findings to other firms in the industry can offer valuable information in determining the company’s competitiveness among its peers and for developing best practices for the future.
- Provide feedback about the results. After the audit, it is important to report findings to the HR department and senior management, including findings, analysis and recommendations.
- Create action plans. Audits are counter-productive if their results are not translated into action. Using recommendations from the audit team, HR and senior management must plan to implement changes as needed to improve efficiency, compliance or productivity.
- Foster a climate of continuous improvement. Doing one audit is not enough for a company. It is necessary to subscribe to an attitude of continuous evaluation and improvement. It may be helpful to designate one person to stay up-to-date on legal and regulatory issues that may affect the company, as well as to keep track of internal processes to quickly identify problems.