7 Reasons to Conduct an HR Audit

No matter how efficiently your HR department operates, there is always room for improvement. Since the way your HR team works directly affects the company’s bottom line, streamlining its performance is always on the agenda. 

To understand how your HR team can reach its full potential, it’s imperative to run regular audits. The primary function of an HR audit is to uncover deficiencies and recognize HR success. 

But that is just the tip of the iceberg.

Why Conduct an HR Audit? 

An HR audit checks your HR policies, practices, procedures, systems, and documentation. By revealing the strengths and weaknesses of your HR system, it helps you make fast adjustments and avoid adverse consequences.

1. Legal Compliance

Legal compliance is one of the most critical aspects of human resources. Even the most minor error can turn into significant penalties. By running an HR audit, you can determine if your team is staying up to date with the current legal requirements.

• Fair Labor Standards Act (FLSA) compliance – check for overtime regulations, employee classification, and record-keeping.

• Occupational Safety and Health Administration (OSHA) compliance – ensure that proper employee safety procedures and preventive measures are in place. 

• Health Insurance Portability and Accountability Act (HIPAA) compliance – make sure that proper privacy and safety measures are implemented to handle private employee medical records. 

Since legislation tends to change over time, you may need an HR audit to check how well you follow the latest developments. 

2. Standardize Processes

If different employees take different approaches to HR procedures out of personal preferences or habits, it can slow the entire department down. You may never notice this is happening unless you run an HR audit.

During the audit, you can uncover inconsistencies and help your team standardize processes to ensure all employees are on the same page. This can speed up the department’s work and unveil automation opportunities. 

3. Identify Risk Areas

Even if your HR department is functioning perfectly today, it may be at risk for some mistakes tomorrow. An HR audit can help you uncover potential risks and problems so that you can address them promptly.

For example, you could learn that employees lack safety training, which puts them at risk of sustaining injuries in the workplace. Or you may find out that your managers aren’t sufficiently trained in preventing situations that could lead to employee lawsuits.

An HR audit can help your team identify potential harassment issues and find new ways to reduce risks in the workplace. 

4. Align HR with Business Goals

An HR department is only efficient if it helps the company achieve its business goals. What may have worked for your company a year ago could be redundant today.

If your company’s goal is to cut costs, you may want to invest more effort in retention instead of hiring new talent. In case the objective is to improve productivity, you could spend more time on onboarding and training.

During an HR audit, you can take a closer look at how well the department is working toward achieving core business objectives. This could provide valuable insight into the direction its work should be taking.   

5. Improve HR’s Efficiency

An HR audit doesn’t just unveil the system’s strengths and weaknesses. It can help use these strengths to improve the department’s efficiency. By auditing existing resources and plotting them against future HR needs, it’s possible to streamline your HR functions and adjust to the latest industry trends.

You can also use the HR audit to identify strategic human resources opportunities with the company’s goals in mind. 

6. Instill Confidence in Management

The results of an HR audit are an excellent reflection of how your department functions. It shows management if there are problem areas, the main issues, and how to correct them. With a clear plan for improving HR efficiency, management can have higher confidence in the team’s productivity.

Eventually, an HR audit can become a criterion against which the management can measure HR success. 

7. Increase Employee Satisfaction

HR audits assess current internal practices to help the team see where it lacks in terms of employee needs, engagement, communications, and retention. Meanwhile, auditing salaries and benefits for competitiveness could result in better options for the team.

Each HR audit allows the company to take a step toward improving the workplace environment, onboarding practices, training opportunities, benefits options, and much more. All the above works toward increasing employee satisfaction.

Audits can also help you adapt to the evolving expectations of the top talent, allowing you to streamline recruitment practices. 

Independent Audits are Ideal 

While internal HR audits are possible, they aren’t optimal. Your HR team may not be straightforward about problems uncovered during this audit to avoid looking bad or disappointing the management. Such a conflict of interest could interfere with the goals of the audit and make it less efficient.

By outsourcing your HR audit to the experts, you avoid the above issue and make sure all aspects of HR functions are fully covered. With an independent audit, you can get a fresh look at your HR system and receive proactive advice based on the audit’s results.