What is the purpose of HR audit?

HR audits can assist your company in avoiding personnel issues and achieving greater performance.

What Is a Human Resources Audit?

HR audit is a thorough examination of your company’s human resources policies, practices, and procedures. The purpose, on the other hand, is to look for problems and/or ways to improve. You can either employ an outside organization to do the audit or order your HR department to conduct an internal audit.

What is the purpose of an HR audit?

The goal of an HR audit is to identify strengths and areas where the human resources department can be improved. A well-conducted audit will discover problem areas and offer comments and strategies for resolving them. The following are some of the reasons for doing such a review:

• Ensure that the organization’s human resources are used effectively.
• Examining conformity with regard to the organization’s administration.
• Creating a sense of trust in management and the human resources department.
• Maintaining or improving the reputation of the company and the department in the community.
• Conducting a “due diligence” investigation for shareholders or potential investors/owners.
• Creating a baseline for the function’s future improvement.

Is there a standard for HR audits?

No. HR audits come in many forms, each with its own set of objectives. Risk reduction and value generation are the two major types. While both types of audits can be conducted at the same time, they will examine distinct parts of your HR processes and policies. Risk minimization focuses on areas where you might get into legal difficulties or leave yourself vulnerable to employment-related claims. Value creation focuses on areas where your procedures and policies can be changed in order to increase the value of your employees or attract better ones.

What are the areas that HR audits look into?

Determine Indicators

Identifying the signs is the first stage in an HR audit. This is the first step in the auditing procedure. Specific challenges relating to the organization’s abilities, styles, processes, tactics, and structures are covered here. For the audit, necessary data is also collected; various indices, statistical ratios, and gross numbers are identified according to the requirements.

Function-Specific

A function-specific audit is a type of mini-audit that looks at a single aspect of your HR processes or regulations. You may look into payroll management, employee review policies, and record-keeping efficiency, for example.

Competitiveness

What kind of remuneration packages have your HR managers devised? Are your salaries, pay, and benefits competitive? An HR competitiveness audit examines all aspects of employee salary and benefits to see if your company is doing everything it can to recruit the best people. Even if you can’t compete on wages or compensation, a competitiveness audit can help you uncover other areas (such as telecommuting and flexible work hours) where you can attract more people.

Guidelines for Best Practices

Is your human resource management staff performing at its best? An HR best-practices audit compares your HR policies and processes to industry best practices. This type of audit may be extremely valuable to a growing business because it helps guarantee that you’re on the correct track as you expand payroll, produce handbooks, create job descriptions, and set expectations for new employees.

Compliance

Any HR management team would like to ensure that their employees are compliant. While the primary goal of an HR compliance audit is to determine how effectively your company is adhering to current employment laws and regulations at the local, state, and federal levels. This is a risk-mitigation audit, after all. As a result, your main priority is to make sure you’re not breaking any laws or putting yourself at risk of potential lawsuits.

It’s just as necessary to do an HR audit and determine a proper action plan as it is to conduct one in the first place. Improper audits can produce false results, leading to poor management decisions. As a result, you must have a firm grasp of these audits.

Most companies are familiar with the concept of an audit, especially when it comes to the financial aspects of the business. However, conducting an audit of your human resources policies and procedures could be just as valuable. Hiring experts for HR audit services will not only help you assess the important factors for creating a financially healthy future, but it can also provide insights into the qualitative aspects that impact your organization’s culture.

While contracting HR audit services isn’t mandatory, here are nine ways it can provide incredible value for your organization:

1. An HR audit helps ensure compliance with important HR regulations. Staying up to speed on the latest compliance and regulations updates is critical. Whether you’re trying to avoid ACA-related penalties or provide appropriate overtime compensation, HR audit services can help you ensure you’re avoiding any potential fines or penalties.
2. An HR audit helps eliminate the guesswork around benefits packages. Making sure your employee benefits package is legal and competitive is one of the most challenging aspects of human resources. An HR audit can help you answer all of your questions around which healthcare benefits package is right for your business and how you can simplify your annual renewal and enrollment process.
3. An HR audit helps you stay up-to-date with the latest employment laws and trends. The business world is changing rapidly, including the laws that govern human resources departments. Employing HR audit services can ensure that you’re not only adapting to the employment law trends that are shaping today’s workplace but that you’re also up-to-date on the general business trends that could impact your organization.
4. An HR audit helps ensure that your employees are being paid fairly. As an employer, you need to know what fair pay should be for your employees and how to communicate about fair pay and compensation. An HR audit can provide insights into both areas and help address inequities or inconsistencies. Starting in 2019, companies with more than 100 employees must provide the U.S. government with data about worker compensation, broken down by sex, race, and ethnicity. HR audit services can help you be prepared for these reports, while also helping the company avoid any unwanted surprises.
5. An HR audit will accurately classify your employees. As the popularity of freelance work and independent contractors has risen in recent years, so has the ambiguity on how to classify employees. An HR audit can help you determine how an employee should be classified or what type of hire you should make.
6. An HR audit can analyze and reduce employee turnover. The economy is booming, and the competition among employers to acquire and retain top talent has never been fiercer. Using HR audit services can help identify reasons why employees may be leaving and improve retention. Whether you’re looking to capture insights through an effective exit interview or ways to boost morale and improve your company culture, an HR audit can provide insights to help you reduce employee turnover.
7. An HR audit can improve organizational structure and update job descriptions. Whether you’re just starting your business or experiencing rapid growth, using HR audit services can help you evaluate and improve the people, processes, and procedures you use to run your business. An employee handbook is a foundational element for businesses just starting out. As your company grows and evolves, an HR audit can help you re-assess job descriptions in the same way you evaluate finances and budgets.
8. An HR audit will help you adapt to the evolving expectations of Millennials. As Millennials continue to make up the larger percentage of today’s workforce, employers must be ready. An HR audit can help you ensure you are prepared and equipped for the ways in which Millennials will impact your organization.
9. An HR audit can help address and prevent harassment. With the dialogue surrounding the #MeToo movement, workplace harassment has become a hot button issue at companies across the country. Using HR audit services helps companies identify potential harassment issues and ways to foster a safe working environment.

Enhance the Processes & Procedures Impacting Your People

Whatever specific challenges you’re facing, our HR audit services can help you enhance processes and procedures that are directly impacting your greatest asset—your people. Our team at LBMC Employment Partners understands the nuances of federal and state labor laws to help you understand and execute procedural tasks surrounding HR compliance. We can also help you address cultural issues that might be holding your business back.

Connect with our team to learn more about our HR audit process and human resources outsourcing services.