HR Audits 101: Why Are They Important?

HR Audits 101: Why Are They Important?

by on 9 Feb, 2017

Many organizations have put forth much effort and expense to develop human resources policies, practices, and procedures that are both aligned with the organization’s corporate culture and compliant with the law. Still, with organizations and the legal landscape constantly changing, it is important to perform frequent reviews to ensure that everything is up-to-date. Performing regular human resources audits is a proactive way of ensuring that an organization stays up-to-date and out of hot water when it comes to legal issues.

The purpose for conducting HR audits goes beyond ensuring legal compliance, however. While these audits are key for recognizing HR deficiencies, they also aid in recognizing HR successes. Furthermore, they help HR professionals standardize processes, identify risk areas, and align HR practices with the overarching strategy and goals of the organization. An HR audit assesses the current activities and inputs available and then determines the future HR needs of the organization. When done properly, the audit will ultimately result in meaningful action items, including a suggested timeline and allocation of resources, that will improve the effectiveness and efficiency of the HR function. Beyond these reasons, the HR audits help to instill confidence in management and the HR function.

Before an HR audit can be conducted, employers must be knowledgeable about the typical areas of focus:

1. Internal Services: Employers should regularly audit the services that are provided to their employees, including payroll, benefits administration, and conflict resolution. The quality of these services directly affects employee satisfaction, which is key in employee retention. Employee satisfaction with these services typically leads to increased company morale and engagement. An audit of these services should seek to ensure that they are meeting the needs of employees.

2. Legal Compliance: Employers must adhere to employment and labor laws, which are constantly changing and evolving. Performing an HR audit is especially important because it mitigates the risk of being liable for what is deemed “unfair employment practices”. Legal issues and conflicts can be extremely costly, and HR audits are a proactive way to minimize the costs associated with such compliance issues. The audit should assess the recruitment and selection process for employees to ensure fairness. It should also assess the procedures for layoffs and terminations and the effectiveness of measures taken to maintain workplace safety.

3. Performance Management: HR audits usually involve reviewing employee files to ensure that supervisors and managers are continuously providing feedback and properly documenting it. An audit can help to pinpoint lapses in leadership and management and identify opportunities for training or performance management improvement.

These areas are common focuses in HR audits, but HR audits can be as broad or narrow as the company wants. While audits are a great tool to uncover deficiencies, organizations should be committed to acting on the recommended improvements. This can mean a number of things, from creating or updating policies and procedures, to performing a detailed review of your existing handbook, to communicating with employees to address some of the issues that are found.

Stay tuned for future blog posts about principal points in HR audits, detailed steps and outcomes of an HR audit, and more.

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