Your Practical Guide to an Effective HR Audit

An HR audit is a method through which the company’s policies, internal procedures, documentation, and human resources processes are reviewed. Otherwise known as systematically reviewing all aspects of the company. An audit of this type is valuable for identifying the key areas for improvement within the organization. 

Under federal laws, in some countries, companies are advised to conduct audits to ensure HR compliance. Conducting an audit of this type may also serve as proof the company is abiding by certain labor rules and regulations. We advise that you review the laws in your jurisdiction to know whether an audit of human resources is required by law. And, even if not mandatory, it is advisable for all companies to conduct an audit of their HR processes.

• Why Perform an HR Audit?
• Types of Human Resources Audits
• Steps to Perform an HR Audit
• Benefits of Conducting an HR Audit
• Ensuring Compliance with an HR Audit Checklist

Why Perform an HR Audit

If you’re still wondering why you should consider performing a human resources audit, continue reading on to find out more. We’ll take you through the most common types of audits, the steps to perform a successful audit of HR, and the benefits of an audit. We’ve even added an HR audit checklist to help you along. 

Types of Human Resources Audits

There are four main types of human resources audits that are most commonly conducted. All of the following audit types involve systematically reviewing the human resources function of the company. 

• Comparative Approach Audit (Internal): In this type of audit, two human resources management departments are compared. The first is your company, who is performing the actual audit. The second department to compare is that of another company, in which changes have already been applied after an audit. Using the competitive approach is best when a company is new to performing HR Audits and is unsure of how to create a plan of action following an audit. Mirroring the successful plan of action of another company is often a good place to start.
• Expert Audit (External): In this case, auditing a human resource management process is carried out by an individual or external company outside of the organization. The company conducting the audit is one that is specialized in conducting and analyzing a human resources audit. 
• Statistical Approach Audit: In this type, substantial weight is put on the collection and analysis of data within the company to access overall performance. Examples of data that may be beneficial to an audit of your HR are absenteeism or high turnover rates. 
• Management by Objectives Audit: This type of audit is based on the comparison of results market by the department vs. the actual results achieved. 

Steps to perform an HR Audit

If you are thinking about conducting an audit of your company, it’s likely you may be feeling a bit stressed. Are you wondering where to start, which steps to take, and who will be the one performing the audit? There’s no need to sweat! 

Our recommendation is that you start by defining which HR function or processes you would like to evaluate under the audit. For example, the human resources programs you use, the policies of the HR department, or performance evaluations. You can also decide to evaluate the environment or other processes that are of interest. If there is an area in your company where you feel requires improvement and enhancement, you should consider adding it in the audit as well. 

As soon as you have identified all of the above, you can continue with the next HR audit process steps:

1. Decide whether the audit will be conducted internally or externally.
2. Define the audit type you want to carry out. 
3. Establish clear and defined objectives to result from the audit. 
4. Create a plan of action to arrive at your objectives.
5. Collect the information and form your conclusions.
6. Prepare a report with the results of the audit. 

If you want more information on how to conduct an HR audit, continue reading below, or visit the quick read on and effective HR audit checklist.

Conducting an HR Audit – Benefits

The truth is that there are many advantages to carrying out a company audit. Without a doubt, the most valued is that it provides you with a broad vision of the inner workings of your company. The audit often reveals how the human resources department fulfills its daily functions.

An audit is a comprehensive tool used to analyze multiple aspects of a company. Conducting an audit is essential to a company’s growth and improvement.   

Knowing the inner workings of your organization, allows your company to detect potential complications and/or areas of improvement. Also, as a result of conducting an audit, you can expose the positive aspects of the company. On the other hand, areas that could benefit from extra reinforcement are highlighted.

Main advantages of performing an HR audit:

• Provides a detailed vision of the human resources department

Understanding how each area of the department works, and how they integrate into the company, is essential to moving forward with the company’s objectives.

• Encourages compliance

  It is in a company’s best interest to ensure compliance with ever-changing rules that are present within the industry. For example, a human resources audit helps to encourage compliance with the labor standards act, among others. 

• Promotes positive change

Evolving is crucial and identifying a company’s weaknesses/possible pain points, enables them to better form a plan of action and implement it to improve.  

• Provides valuable data

• If you are a regular reader of the blog, you know that we love speaking about the collection of reliable data. Why? This data allows a company to quantify aspects of their HR department that may have previously been neglected. With an audit, you can retrieve valuable data that, after proper analysis, will help guide you to make the correct decisions later on. 

Use an HR Audit Checklist to Ensure Compliance

It’s important to keep in mind, that an audit is a great opportunity to learn and continue creating. It is in no way a negative assessment of the work that your HR department has performed. Using a checklist for HR audit processes ensures you don’t miss anything.

Still not sure about the key factors to successfully conduct an audit? 

An audit is a key moment for the department and the company as a whole, so they can learn and keep moving forward as an HR professional. If you continue to see an audit as an opportunity instead of understanding it as a threat, you will surely be able to carry out the process successfully.