INTRODUCTION

An HR audit is a process to
review implementation of your
institutions policies and
procedures, ensure compliance
with employment law,
eliminate liabilities, implement
best practices and educate
your managers.

MEANING:

HR Audit means the systematic verification of job

analysis and design, recruitment and selection,
orientation and placement, training and
development, performance appraisal and job
evaluation, employee and executive remuneration,
motivation and morale, participative management,
communication, welfare and social security, safety
and health, industrial relations, trade unionism,
and disputes and their resolution.

HR audit is very much useful to achieve the

organizational goal and also is a vital tool
which helps to assess the effectiveness of HR
functions of an organization.

Scope of Audit:

Generally, no one can measure the attitude of human

being and also their problems are not confined to the HR
department alone. So it is very much broad in nature. It
covers the following HR areas:
 • Audit of all the HR function.
• Audit of managerial compliance of personnel
policies, procedures and legal provisions.
• Audit of corporate strategy regarding HR
planning, staffing, IRs, remuneration and other
HR activities.
• Audit of the HR climate on employee
motivation, morale and job satisfaction.

Benefits of HR Audit:

It provides the various benefits to the organization.

These are:
• It helps to find out the proper contribution of
the HR department towards the organization.
• Development of the professional image of the
HR department of the organization.
• Reduce the HR cost.
• Motivation of the HR personnel.
• Find out the problems and solve them
smoothly.
• Provides timely legal requirement.
• Sound Performance Appraisal Systems.
• Systematic job analysis.
• Smooth adoption of the changing mindset.

AUDIT TOOLS

• INTERVIEW

• DOCUMENT REVIEW

• QUESTIONNAIRE

• SAMPLING
 THE AUDIT SHOULD BE

• PROACTIVE
• REACTIVE
• INFORMATIVE
• DEVELOPMENTAL
Nature of Human Resource Audit

An HR audit is a tool for evaluating the

personnel activities of an organisation. The
audit may include one division or an entire
company. It gives feedback about the HR
functions to operating managers and HR
specialists. It also provides feedback about
how well managers are meeting their HR
duties. In short, the audit is an overall quality
control check on HR activities in a division or
company and an evaluation of how these
activities support the organisation’s strategy
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Recruitment
• How did the work force get to be the current size?
• What are some of your organization’s future needs for
personnel?
• What are the procedures for hiring in your organization?
• What recruitment sources are used? (e.g., advertisements,
referrals from other agencies, personal contacts)
• Are current employees given appropriate consideration for
promotion or lateral position changes?
• Who does the preliminary screening of candidates?
• Who selects candidates for interviews?
• Is training provided for those who conduct interviews?
• How is the recruitment, screening, and selection process
documented?
• What is the interview process that is used (e.g., individual,
sequential, panel)?
• Who holds final authority to hire?
• Who checks references?
• How are the reference checks documented?
• Who makes the offer of employment?
• Where is the hiring paperwork generated?
• Who negotiates compensation packages?
HR AUDIT

Documentation
• Where and with whom are the personnel files
currently held?
• What documents are held in personnel files?
• How are the following documented by your
organization?
○ Hiring: Application, Interviewing, and Reference
Checks
○ Compensation and Benefits
○ Transitions
○ Paid Time Off
○ Training
○ Discipline
○ Work History
○ Work Assignments
○ Significant accomplishments
○ Emergency contact information
○ Performance evaluation and performance
management
○ Termination
• How long are files held and where are they stored
after employees leave?
 • What is the interface between HR and Finance?
• Is a payroll service used, and if so, which one?
• Does the payroll service provide all governmental
employment filings?

Training, Development and Career

Management
• Who is responsible for new employee orientation?
• What are the elements of the new employee
orientation program?
• Where and to whom do new employees go when
they have questions about your organization or their
jobs?
• Is there a formal training program for employees and
managers? If so, please describe it.
• What training and development initiatives have
occurred in your organization?
• How are managers and supervisors trained and
prepared for their roles?
• What is the average length of time an employee
stays with your organization? Does this vary by
position type?
 • How much does your organization spend annually (in
total and per employee) on employee training and
development? Does this vary by position type?

Health and Welfare Benefits

• Describe the health insurance program
provided by your organization.
• Are dependents covered, and if so, in part or in
full?
• Are domestic partners covered?
• What are the eligibility requirements for health
insurance and other benefits?
• Which of the following health and wellness
benefits are offered, and what are the limits
and requirements for coverage?
○ Dental
○ Vision
○ Disability
○ Employee Assistance Program
 ○ Life Insurance
○ Other wellness benefits
○ Flex benefit plan
○ Other benefits

Performance Management And Evaluation

• Describe the past and current
performance appraisal system in your
organization.
• If a performance appraisal instrument is
used, please attach a copy. (If the
instrument differs by position, please
attach all instruments.)
• What type of process is used (360o–
supervisor only–peer evaluation–
outcome)?
• What type of training is used in
relationship to performance evaluation?
 • What is the role of the
supervisor/manager in performance
appraisal?
• What is the focus of performance
management in your organization?
• How often and consistently is the process
used?

EXPLANATION OF HR AUIT:

An HR audit is dreaded by many a human resources

department head, but for the skilled HR
representative, it is a valuable tool that points to
areas in need of employee development. In some
cases an HR audit may even help a company find
areas where savings could be realized with the help
of job cuts and the funds may then be allocated to
different departments in an effort to either streamline
productivity or launch a new program or product line
by either moving personnel there or hiring additional
staff. Learning how to define an HR audit is not hard,
and when you follow these simple steps, you are
well on your way to drafting a hard hitting audit that
provides an abundance of facts with respect to
educational standards being met as well as
indicators where training improvement is needed the
most.
•

Prevalence of HR Audit
Audit of Managerial Compliance

This involves audit of managerial compliance

of personnel
policies, procedures and legal provisions. How
well are these complied with should be
uncovered by the audit so that corrective
action can be taken. Compliance with the
legal provisions is particularly important as
any violation makes the management guilty of
an offence

Audit of the Human Resource Climate

The HRM climate has an impact on employee

motivation,
morale and job satisfaction. The quality of this
climate can be measured by examining
employee turnover, absenteeism, safety
records and attitude surveys. Employee
Turnover Employee turnover refers to the
process of employees leaving an organization
and requiring to be replaced.
High turnover involves increased costs on
recruitment, selection and training. In
addition, high labour turnover may lead to
disruption of production, problems in quality
control, and difficulty in building teamwork
and morale.
Certain percentage of labour turnover is
unavoidable. Resignation, retirement, death
and transfers do take place causing
displacement in workforce. Similarly, business
expansion necessitates hiring of

Approaches to Human Resource Audit

Auditors may adopt any of the five

approaches for the purpose of evaluation:
• Comparative approach
• Outside authority approach
 • Statistical approach
• Compliance approach
• Management by objective

approach.

In the comparative approach the auditors

identify another company as the model.
The results of their organisation are
compared with those of the model
company.
Often, the auditors use standards set by
an outside consultant as benchmark for
comparison of own results. This approach
is called the outside authority approach.
The third approach is the statistical
approach. Here, statistical measures of
performance are developed based on the
company’s existing information.

compliance approach, auditors review

past actions to determine if those
activities comply with legal requirements
and company policies and procedures. A
final approach is for specialists and
operating managers to set objectives in
their areas of responsibility.

The MBO approach creates specific goals

against which performance can be
measured. Then the audit team
researches

Conclusion:
The auditors always prepare and submit an audit
report to authority of the organization, which may
be clean or qualified. The clean report indicates the
appreciative of the department's function, but the
latter one represents the gaps in performance and
therefore contains remarks and remedial
measures. HR Audit is very much helpful to face
the challenges and to increase the potentiality of
the HR personnel in the organization.

Compensation and Benefits

Basic Compensation Questions
Is there a formal compensation program?
How are wages set?
Are formal salary ranges set?
If formal salary ranges are set, are they made public to
employees?
How are jobs rated?
How frequently are jobs re-evaluated or updated?
Are any salary surveys used? If so, which ones?
Are pay ranges revised as a result of these surveys? How
frequently?
Who in your organization (what position) administers the
compensation program?
Are COLA’s given, and if so what is the basis for the COLA?
Are merit increases given, and if so, are they integrated with
performance evaluation?
Is there a bonus system, and if so how is it structured?
How is the compensation program and total compensation
package communicated to employees?
What are the “cultural issues” or beliefs related to
compensation in your organization?
How is employee communication regarding compensation
and benefits delivered in your
organization

How should it be conducted?

The audit process consists of a series of
questions covering the eight primary
components of the HR
function:
Roles, head count, and HR information
systems (HRIS)
Recruitment
Documentation
Training, development, and career
management
Compensation and benefits
Performance measurement and evaluation
Termination and transition
Legal issues and personnel policies

Roles, Head Count, & Human Resource Information

Systems (HRIS)
How many employees are currently on staff?
How many employees are:
− Regular
− Probationary
− Temporary
− Full Time
− Part Time
− Exempt
− Non-Exempt
What is the definition of a part-time employee? (i.e.,
What is the maximum number of hours an
employee can work to be considered part-time?)
What is the minimum number of hours an employee
has to work to be considered full-time?
How long is the probationary period?
Are employees aware of their status?
How long can an employee be temporary?
How many employees have supervisory responsibility?
Are there currently up-to-date job descriptions for all
employees? If not, which ones don’t have
descriptions?
Are independent contractors used? If so, how many are
being used? And, for what functions
Performance Management And Evaluation
Describe the past and current performance appraisal system in
your organization.
If a performance appraisal instrument is used, please attach a
copy. (If the instrument differs by
position, please attach all instruments.)
What type of process is used (360o–supervisor only–peer
evaluation–outcome)?
What type of training is used in relationship to performance
evaluation?
What is the role of the supervisor/manager in performance
appraisal?
What is the focus of performance management in your
organization?
How often and consistently is the process used?

Legal Issues / Personnel Policies

To your knowledge, are all employees appropriately classified?
What personnel policies are currently being used? (Please attach a
copy)
When was the last time these policies were reviewed and updated?
Is there a disparity between policies and practices?
Who has organizational responsibility for legal or employment
questions?
Is harassment training regularly provided?
How are employee grievances dealt with?

Termination And Transition

Is your organization an “at-will” employer?

What other causes or conditions of termination of
employment exists?
What procedures are used for
− Termination for Cause
− Job Closure
− Resignation
What level of approval is needed before a termination
can occur?
Is there any formal checklist or legal review prior to
termination?
Are exit interviews performed for all employees who
leave?
What documentation is required for all employee
transitions?
How are references handled in your organization?
Who is responsible for internal communications
regarding difficult terminations? (i.e.,
communicating the termination to other employees.)