HR Audit process and its importance

What is HR Audit and why is HR Audit so important?

To understand the importance of an HR Audit and answer the question What is HR Audit and why is HR Audit so important? So, let’s just first understand what HR Audit exactly is

What Is an HR Audit?

An HR audit is an objective scrutiny of your business’s HR policies, practices, and procedures. However, the goal is to look for trouble spots and/or identify ways you can improve. Although you can hire an outside company to perform the audit else you can instruct your HR department to perform an internal audit.

Are All HR Audits Created the Same?

No. There are several types of HR audits with differing goals. However, the two main types are risk mitigation and value creation. While you can conduct both types of audits concomitantly, they will focus on different aspects of your HR processes and policies. This risk mitigation will mainly cover the areas where you can get into legal trouble or are leaving yourself open to employment-related lawsuits. While on the other hand value creation will mainly look for areas where your processes and policies can be improved to maximize the value of your employees or attract better employees.

What Specific Areas Do HR Audits Examine?

When Hr audit is conducted you can look into one or more of the give following areas, depending on your concerns, budget and time frame:

Compliance

Any Human resource leadership team would want to know that they are compliant. While the main role of an Hr compliance audit is to focus on how well your business is actually complying with the current, local, state and federal employment laws and regulations. As this is a risk-mitigation audit. Therefore your goal is to ensure you’re not violating any laws or leaving yourself open to any sort of liability lawsuits.

Best Practices

The in main function of an HR best-practices audit is to compare your HR processes and policies with the accepted industry standards. This audit type can be greatly beneficial to a growing company because it can help ensure you’re on the right track. As you create handbooks, increase payroll, establish job descriptions, and set expectations for your very new employees.

Performance

An HR performance audit involves a review of personnel files with an aim of evaluating the quality of feedback the managers are giving to their staff. While a lack of quality feedback can inhibit the growth of employees. But before employee development suffers a performance audit can easily identify problems with your review and feedback process.

Competitiveness

So what kind of compensation packages your HR managers have put together? Did you calculate whether your wages, benefit and salary packages competitive enough? An HR audit looks into all areas of employee compensation and the benefits to assess the quality part i.e. whether your business is doing enough things to attract the best-qualified employees. Although, even if you can’t compete on the salaries or wages part. Still, a competitive audit can identify other areas such as- telecommunicating opportunities, and the most important flexible work schedule that can improve how attractive is your business to the applicants.

Function Specific

This function-specific audit is a kind of mini-audit- where you examine just one area of your HR processes or policies. Although you might choose to investigate an area such as- payroll management, employee review policies, record-keeping efficiency, etc.

Why Are HR Audits Important?

The answer to this question is pretty much clear- Since an HR audit is the only way you can fully assess whether your HR processes and policies are benefiting or harming your overall business. So, it’s very clear that if you’re in danger of a lawsuit or criminal suit, if your employees aren’t developing, if your HR systems are inefficient, or if you can’t attract the right employees, your business will suffer. Therefore to excel try improving those areas and you can improve your chances for success.

How Can You Learn More About HR Management?

While HR audits are essential, managing human resources requires a lot more than simply examining your processes and policies. So, if you want to know how to better manage your HR issues—or if you want to enter the HR field—one of the best choices you can make is to earn a degree or certificate, such as a master’s in leadership with a human resources concentration, Certified HR Audit Professional. So, with programs such as these, you can gain the knowledge you need to start or advance your career in HR. Also, thanks to the online learning, now you can earn your professional certificate without quitting your current job or moving to another city.

Classroom Training:

This age-old method is evergreen. You can get yourself enrolled in any good classroom training for HR Audit. There you’ll be able to interact with the training F2F. Since many people still find the offline Classroom training the best option. Therefore, these sessions give you the chance to focus properly with the study material provided you’ll be able to learn and grasp the required knowledge.

Online or Virtual Certifications:

It’s good to take the classroom training but in this competitive world, some people find it a waste of time to sit in the classroom for hours. They prefer it online or virtual classes are the preferable method. There are plenty of options for you to learn online the concepts of HR Audit. There are professional certifications trending these days. Certification bodies like- Vskills- India’s Largest Certification Body, and Informa, etc.

Top Certification Bodies:

There are many top certification bodies as discussed above. So let’s take an intent look at the best.

Vskills- India’s Largest Certification Body:

Since we now already know a Human Resources Audit (or HR Audit) is a broad method for evaluation of human resources policies, procedures, documentation, and systems of organization. For recognition of improvement and enhancement of the HR function. So, Vskills is giving a chance to enhance your skills by taking the Certified HR Audit Professional.

As due to the increased focus of human resources in achieving tactical and strategic goals of the organization HR Audit has gained widespread acceptance.

Similar to an audit of a business’ finances, human resources policies and procedures also need continual auditing. While, HR Audit not only locates problem areas in HR policies but also helps in meeting statutory compliances.

So, earning a Vskills Certified HR Audit Professional helps the prospects in differentiating in today’s competitive job market. Also, by displaying their advanced skills, and result in higher earning potential broaden their employment opportunities.

Who will benefit from taking the certification?

All of those, job seekers, who are looking to find employment in the HR departments of various companies. As usual, students wanting to improve their skill set and make their CV stronger and existing employees looking for a better role can prove their employers the value of their skills through this certification.

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

Firstly the internal Services

Employers should regularly audit the services that are provided to their employees, including payroll, benefits administration, and conflict resolution. This is because the quality of these services directly affects employee satisfaction. This actually is the key to employee retention. Employee satisfaction with these services typically leads to increased company morale and engagement. Thus, an audit of these services should seek to ensure that they are meeting the needs of employees.

Secondly, 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 auditing is 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.

Subsequently 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 on 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.

Need and Purpose of Human Resource Auditing

Often understood in accordance with specific statutory regulations, audits are the established and regular accounting audits carried out. Nevertheless, in the case of human resource audits, there is no legal obligation, but enlightened management has voluntarily accepted its usefulness depending upon the circumstances.

Approaches to Human Resources Audit

The following approaches are adopted:

  • Comparative approach
  • Outside authority approach
  • Statistical approach
  • Compliance approach
  • Management by objectives (MBO) approach
  • Comparative approach

So in this, the auditors identify Competitor Company as the model. The results of their organization are compared with that Company or industry.

Outside authority approach

Here, the auditors use standards set by an outside consultant as a benchmark for comparison of own results.

Statistical approach

Here, the Statistical measures are performance is developed considering the company’s existing information.

Compliance approach

Here in this auditors review past actions to calculate whether those activities comply with legal requirements and industry policies and procedures.

Management by objectives (MBO) approach

And finally, this approach creates specific goals, against which performance can be calculated to arrive at the final decisions about the organization’s actual performance with the set objectives.

Top companies hiring HR Auditors:

Companies like- CapGemini, Optum, Standard Chartered Global.

The base purpose of an HR Audit is to recognize strengths. And identify any needs for the improvement in the human resources function. As a properly executed Audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems. Therefore, following are the reasons to conduct such a review:

  • Firstly ensuring the effective utilization of the organization’s human resources
  • Secondly reviewing compliance in relation to the administration of the organization
  • Thirdly instilling a sense of confidence in management and the human resources function
  • Then maintaining or enhancing the organization and the department’s reputation in the community
  • Next performing “due diligence” review for shareholders or potential investors/owners
  • Subsequently establishing a baseline for future improvement for the function

To sum up

The HR leaders must engage in constant observation and continuous improvement of the organization’s policies, procedures and practices. So that the organization never ceases upon the improvement side. As, this will ensure that the company achieves and retains its competitive advantage. However, the one way to do this is to continuously monitor HR systems to ensure that they are up-to-date and to have follow-up mechanisms built into every one of them.

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