What is a Human Resources Audit?

A Human Resources Audit is a comprehensive method (or means) to review current human resources policies, procedures, documentation and systems to identify needs for improvement and enhancement of the HR function as well as to ensure compliance with ever-changing rules and regulations. An Audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion. Sections of review include:

Hiring and Orientation Benefits Compensation Performance evaluation process Termination process and exit interviews Job descriptions Form review Personnel file review

The purpose of an HR Audit is to recognize strengths and identify any needs for improvement in the human resources function. A properly executed Audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems. Some of the reasons to conduct such a review include:

Ensuring the effective utilization of the organizations human resources Reviewing compliance concerns with a myriad of administrative regulations Instilling a sense of confidence in management and the human resources function Maintaining or enhancing the organizations and the departments reputation in the community Performing due diligence review for shareholders or potential investors/owners
Establishing a baseline for future improvement for the function

The audit process The HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organization will have a very strong overview of the health of the HR function, at the conclusion of the audit. These phases include: Pre-Audit Information: This phase involves the acquiring and review of relevant HR manuals, handbooks, forms, reports and other information. A preaudit information request is forwarded to the client who compiles the necessary information for review by auditors. Pre-Audit Self-Assessment: In order to maximize the time spent during subsequent portions of the audit, a pre-audit self-assessment form, if sent to the client can be of use. The self-administered yes/no questionnaire asks a number of questions about current HR policies and practices. The completion of this self-administered questionnaire allows auditors to identify key areas for focus during the HR audit. On-site Review: This phase involves an on-site visit at the client's facility interviewing staff regarding HR policies and practices. A very in-depth HR audit checklist is completed. Records Review: During the on-site visit, a separate review is conducted of HR records and postings. Employee personnel files are randomly examined as well as compensation, employee claims, disciplinary actions, grievances and other relevant HR related information are checked. Audit Report: The information gathered is used to develop an HR audit report. The audit report categorizes action needs into three separate areas. The areas that are urgent and important (UI), not urgent needs but important (NUI), not urgent but not important needs (NNI)), and important opportunities needs (IO). As a result of this scheme of classification, managements can prioritize their steps.