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What is an HR Audit and what does it typically include?
Why do businesses perform HR audits?
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6 Answers
Hello Caty:
The HR auditing process is an independent, objective, and systematic evaluation that provides assurance that: 1) compliance and governance requirements are being met; 2) business and talent management objectives are being achieved; 3) human resource management risks are fully identified, assessed, and managed; and 4) the organization’s human capital adds value. Under this definition, HR audits are more than an audit activity that solely collects and presents evidence of compliance. HR audits are increasingly expected to look behind and beyond the organization’s assertions of sound and proper HR management practices and to assess the assumptions being made, to benchmark the organization’s processes and practices, and to provide the necessary consultative services that help the organization achieve its business goals and objectives.
As the importance of human capital has increased and as the related risks have exploded, HR audits have evolved from an assessment performed by HR to one performed of HR. Factors affecting this evolution include: 1) Greater C-suite and board of directors oversight; 2) increasing interest in a strategic perspective; 3) Greater concern about the impact of the organization’s culture on compliance; 4) the increasing use of non-HR auditors; 5) increasing benchmarking activities to external standards; and 6) the development of HR audit scorecard.
If you are interest in learning more about HR audits, you may want to join the HR Audit group on LinkedIn. Let me know if you have any questions. Ron Adler
The organization wants to see if the are in compliance with Fair Labor Standards Act, Department of Homeland Security, Fair Employment and Housing, OSHA, Equal Pay Act, ERISA. Non- Compliance can cost employers large sums of money. If they fix on their own they can save money. The agencies tactics to find employers out of compliance have changed and they are conducting more audits. In addition, 30% of lawsuits are employment related claims. Most employers can not afford to not be in compliance.
Hi Caty,
An HR audit is a systematic, objective tool to assess regulatory & policy compliance in the workplace. Not unlike a financial audit, an HR audit must be comprehensive in nature in order to be effective. Audits prevent lawsuits, fines, and penalties and possibly prevent federal/State agencies from getting involved in the companies operations. Some examples of the categories of questions that may be found in an audit include:
Management
Hiring
New Employees
Wage and Hour
Benefits
Employee Relations
Safety and Security
Discrimination and Employee Rights
Workers' Compensation
Employee Separation
Recordkeeping and other Documentation
It should be noted that not all of the above categories will be found in all organizations. An audit is focused and customized to the organization's needs.
Following an audit, an Action Plan is developed to address areas in need of attention. In my experience, many of the audit items are interrelated so addressing one will probably effect others. For example, bringing your Hiring function into compliance may also effect Recordkeeping or Discrimination and Employee Rights. Or, changes in Management may require changes in Employee Separation processes.
If I can be of any further assistance, please don't hesitate to contact me.
Michael
kmjanas@gmail.com
Caty,
A good HR audit in my opinion includes all of the elements that my esteemed colleagues mention in terms of compliance, but in my opinion should go a few steps further,
Beyond compiance are our talent management systems delivering and retaining the critical talent we need to drive the organization? Do they reinforce alignment with organizational objectives? Are our employees "engaged"? Is HR a value added thought partner or a compliance/administrative organization? Do we have a management team that is skilled and capable of setting expectations, giving constructive feedback, taking appropriate corrective action, and driving the performance we need?
We are at a place today where "engagement" and trust in leadership are at all time lows. Stopping your audit at compliance is like letting Accounting run the business- you are playing not to lose rather than playing to win....
Let me throw another factor into the discussion. I agree with everything that has been said so far however there is another use for the HR Audit. The audit can also expose some obstacles in your HR processes which through the use of continuous process efforts such as six sigma can improve the efficiency and effectiveness of the overall organization.
Hi Caty,
I found your question as I was researching and preparing for mr webinar romorrow on how to conduct HR Auduts via UIS continuing education program. I can't say that I can add anything more about what they are than what has already been contributed. What I can say after conducting them over the last twenty years is that there are many small business that truly need this service but have no idea that they do. That old saying "you don't know what you don't know" is so very true. Small business that have grown up focusing on their product or service have not had time to figure out what is best business practice, compliant with local and federal regulations, as well as many other details.
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