HR audits are key for companies to make sure that they avoid any legal or regulatory liability due to their HR policies and practices. Audits provide the opportunity to compare a company’s HR policies to other companies in their industry. This does not only help to protect the company, but helps them identify areas for improvement and establish best practices.
Follow these general steps to conduct an audit for your company:
1. Determine the type and scope of the audit – Will your audit be a deep review of the entire HR department and how it functions; or will it be a more targeted approach towards specific areas.
2. Create the audit questionnaire – The questionnaire will help guide the audit team in evaluating the specified areas. Part of the evaluation may be interviewing HR employees or department managers. See the sample audit questions below.
3. Collect the data – The audit team conducts a thorough review using the questions as a guide.
4. Benchmark the findings – Compare results to other companies in the industry to see how you match up against the best practices of your peers. This will help you in the future.
5. Provide feedback on the results – Report results, analysis, and recommendations to the HR department and senior management.
6. Develop action plans – Using the results and the recommendations from the audit team, HR and senior management need to create a plan to implement changes needed to improve compliance and efficiency.
7. Create a culture of continuous improvement – A company can’t stop after one audit. A culture of continuous evaluation and improvement needs to be developed. One person could be designated to stay up-to-date on legal and regulatory changes that could affect the company. Another person could be designated to keep track of internal processes to quickly identify problems as they arise.
Questions concerning organization and structure:
- Is there an organizational chart?
- Does the chart include employees’ names and position titles?
- Does the chart show reporting hierarchy?
- Does the structure change as the needs of the organization change?
Questions for HR department organization:
- Is the HR department sufficiently staffed for the size of the organization and industry?
- Is the budget comparable to other organizations of similar size and industry?
- Has the company been involved with any employment lawsuits?
- If there have been lawsuits, what were the outcomes?
- Does each position in the department have a job description?
- To what position does the highest HR position report?
- Does the HR department have a mission statement?
- Is the HR mission statement consistent with the mission and vision of the organization?
Functions of the HR department:
- What functions is the HR department responsible? (i.e. Payroll, benefits, salary administration, recruitment, training, labor relations, safety, others?)
- Should the HR department be responsible for all of the functions listed above?
- Should the HR department be responsible for any functions not listed above?