Human Resource Audits

What is an HR audit?
An HR audit is a process to review
implementation of organization’s policies and
procedures, ensure compliance with
employment law, eliminate liabilities,
implement best practices and educate your
managers.
 Human Resource Audit?
A human resource audit evaluates the personnel
activities used in an organization. The audit
may include one division or entire company.
It gives feedback about :
1. The function of operating manager
2. The human resource specialists.
3. How well managers are meeting their human
resource duties.
In short, the audit is an overall quality control
check on human resource activities in a
division or company and how those activities
support the organization’s strategy
 Personnel/Human Resource Audit
Involves:
 Measurement and evaluation of personnel
programmes, policies and practices
 Identification of gap between objectives
and results
 Determination of what should or should
not be done in future.
 Benefits of A Human Resource
Audit
 Identifies the contribution of the personnel
departments to the organization
 Improves professional image of the personnel
department
 Encourages greater responsibility and
professionalism among members of the
personnel department
 Clarifies the personnel department’s duties
and responsibilities
 Finds critical personnel problems
The audit should be:
Proactive
Reactive
Informative
Developmental
 Why conduct an HR audit?
• Ensure compliance

• Improve HR practices
• Train your managers
• Prepare for potential government audit or litigation
• Gain an understanding of department’s environment
• Show a “good faith effort”
• Correct errors
 The Scope of Human Resource
Audits
 Audit of Corporate Strategy
Corporate Strategy concerns how the organization is going to gain competitive
advantage.
 Audit of the Human Resource Function
Audit touches on Human Resource Information System, Staffing and Development,
and Organization Control and Evaluation.
 Audit of Managerial Compliance
Reviews how well managers comply with human resource policies and
procedures.
 Audit of Employee Satisfaction
To learn how well employee needs are met.
 Audit of Corporate Strategy
 Human resource professionals do not set
corporate strategy, but they strongly determine
its success.
 By assessing the firm’s internal strengths and
weaknesses and its external opportunities and
threats, senior management devises ways of
gaining an advantage, such as :
 stresses superior marketing channels,
 low-cost production, etc.
 Understanding the strategy has strong
implications for human resource planning,
staffing, compensation, employee relations, and
other human resource activities
Audit of the Human Resource
Function
1. Human Resource Information
System
- Human Resource Plans : Supply and demand
estimates; skill inventories; replacement charts
and summaries
- Job Analysis Information : Job standards, Job
descriptions, Job specifications
- Compensation Management : Wage, salary, and
incentive levels; Fringe benefit package;
Employer-provided services
 2. Staffing and Development
 Recruiting : sources of recruits, availability of
recruits, employment applications
 Selection : selection ratios, selection

procedures, equal opportunity.

 Training and development : orientation

program, training objectives and procedures,

learning rates
 Career development : internal placement,

career planning program, human resource

development efforts
 3. Organization Control and
Evaluation
 Performance appraisals : standards and
measures of performance, performance
appraisal techniques, evaluation interview.

 Labor-Management Relations : Legal

compliance, management rights, dispute
resolution problems.

 Human Resource Controls : employee

communications, discipline procedures, change
and development procedures,
 Tasks of Auditors
 Identify who is responsible for each activity.
 Determine the objectives sought by each
activity.
 Review the policies and procedures used to
achieve these activities.
 Prepare a report commending proper
objectives, policies, and procedures.
 Develop an action plan to correct errors in
each activity.
 Follow up the action plan to see if it solved
the problems found through the audit.
 Audit of Managerial
Compliance
 Compliance with laws is especially
important. When safety, compensation,
or labor laws are violated, the
government holds the company
responsible.
 If managers ignore policies or violate
employee relations laws, the audit
should uncover these errors so that
corrective action can be started.
Audit of Employee Satisfaction
 Employee satisfaction refers to an employee’s
general attitude toward his or her job.
 When employee needs are unmet, turnover,

absenteeism, and union activity are more

likely. To learn how well employee needs are
met, the audit team gathers data from
workers.
 The team collects information about wages,

benefits, supervisory practices, career planning

assistance, and other dimensions of job
 Before you begin the audit process…
1. Determine who will conduct the audit.
Internal vs. External
2. Secure senior management commitment.
a. Are they ready to fix what’s broken, even if it costs
highly?
b. Do they agree with the methodology?
c. Will they allow access to all departments/information?
d. Will they publicly support the process?
 Before you begin the audit process…

3. Define the parameters.

a. Who will be audited?

b. What do you want to audit?
c. What audit tools will you use?
d. How will the process be rolled out?
e. How will results get reported?
f. Who will get the results?
 Before you begin the audit process…

4. Introduce the audit process to your managers.

 Departmental Audits
What should you be concerned about?

Record Keeping Employee Files

•Sick and vacation tracking •What is and isn’t in the
•Overtime reporting
employee file
•Temporary worker tracking •Access to the file
•Accessibility/safety/security of•
Safety and security of the files
records
•Accuracy of records
 Audit Tools:

• Interview

•Questionnaire
•Historical analysis
•External Information
Research approaches to audits
1. Interviews with employees and
managers are one source of information
about human resource activity.
Employees and managers comments help
the audit team find that need
improvement.
 Another useful source of information is

the exit interview. Exit interview are

conducted with departing employees to
learn their views of the organization.
 2. Questionnaires/surveys

Because interviews are time-consuming, costly,

and often to only few people, many human
resource departments use questionnaires.
Through questionnaire surveys, a more
comprehensive picture of employee treatment
can be developed. Questionnaire may also lead to
more candid answers than face-to-face
interviews.
- employee attitude about supervisors
- Employee attitude about their jobs
- Perceived effectiveness of human resource
department
 3. Historical analysis

Not all the issues of interest to human resource audit

are revealed through interviews or questionnaires.
Sometimes insight can be obtained by an analysis of
historical records, such as:
- Safety and health records
- Grievances records
- Compensation studies
- Scrap rates
- Turnover and absenteeism records
- Selection records
- Affirmative action plan records
- Training program records
 4. External information
Outside comparisons give the audit team a
perspective against which their firm’s activities
can be judged.
Through Department of Labor, industry association,
professional association numerous statistics and
report are compiled.
These organizations regularly publishes information
about future employment opportunities, employee
turnover rates, work force projection, area wage
and salary survey, work force demography,
accident rates, and other data that can serve as
benchmark for comparing internal information.
 How do you introduce the HR audit to
your managers?
1. Explain the reason for it.

a. To protect them and the institution

b. To help them understand policies, procedures, and
laws
c. To gain a better understanding of their department
d. To help them set best practice procedures
e. To avoid costly and time consuming litigation
 The audit report
Findings of research are used to developed a
picture of the organization’s resource activities.
For this information to be useful, it is compiled
into audit report.
The audit report is a comprehensive description
of human resource activities that includes both
commendations for effective practices and
recommendations for improving practices that are
less effective.
Audit report often contain several sections. One
part is for line managers, another is for manager
of specific human resource function, and the final
part is for the human resource manager.
 Reporting the Results
• Compile your findings in a draft letter

• Allow department head/manager to review

your draft and make comments/corrections
• Compile final version
• Present report to senior management
• Copy department head/manager
 Report for line managers
 How line managers handle their duties
such as:
 Interviewing applicants
 Training employees

 Evaluating performance

 Motivating workers

 Satisfying employee needs

The report also identifies people

problems. Violations of policies and
employee relations law are highlighted
 Report for the HR Specialist
 The specialists who handle employment
training, compensation, and other activities
also need feedback. Such feedbacks are :
1. Unqualified workers that need for training
2. Qualified workers that need for development
3. What others company are doing
4. Attitude operating managers toward
personnel policies
5. Workers pay dissatisfaction
 Report for HR Manager
 It is contains all the information given to both
operating managers and staff specialists. In
addition, HR Mangers gets feedback about :
 Attitude operating managers and employees
about services given by HRD
 A review of HRD plans
 Human resource problems and their
implication
 Recommendations for needed changes and
priorities for their implementation