A regular human resources audit can improve the services your HR department renders to both employees and applicants. It can also determine whether your organization is in compliance with labor and employment laws. Auditing all of your HR practices and functions can take time and resources. Small businesses without enough staff to devote their full-time attention to an audit should consider hiring an external consultant to evaluate their HR systems. Whether you use in-house resources or an external consultant to conduct your HR audit, follow an outline to keep your audit focused.
Personnel Files
The starting point for an HR audit is up to the department lead; however, it’s reasonable to begin with an audit of your company’s personnel files. Review the department’s system for handling file materials, whether copies of employment actions are immediately filed in the appropriate folders and if the files containing health and medical-related information are secured in a separate location. Policies concerning personnel files, storage and HR staff with access to files should be part of audit.
Payroll
An audit of payroll practices is separate from analyzing compensation practices. Payroll involves processing employee wages, withholding appropriate taxes and remitting accurate employer taxes. An audit should include an assessment of the payroll clerk’s knowledge concerning changes and updates to tax laws, as well as familiarity with technology used to process payroll.
Compensation
Auditing compensation practices is an extensive part of an HR audit. Compensation practices include equal pay for comparable work, job analyses, evaluating how starting wages are determined, and establishing midpoint and maximum wages for employees. The company’s policy on salary raises, wage increases and incentives should be part of the audit process.
Recruitment
Examine recruiting processes, starting with how your recruiters source candidates. To achieve workplace diversity, a number of sources are valuable in attracting qualified applicants. Assess the effectiveness of your recruiting sources — online job postings, job and career fairs, college recruiting and social and professional networking sites. Conventional advertising methods, such as newspaper and television ads, also are effective, particularly when your diversity goals include developing a multigenerational workforce.
Employee Selection
HR audits examine hiring processes. Typical selection processes start with a preliminary telephone interview and at least one face-to-face interview with a recruiter or hiring manager. High-level positions may require third-round interviews or panel interviews. An HR audit can help you determine if you need to streamline your process for more efficient use of recruiters’ expertise and time.
Termination
How terminations, resignations, retirements and job abandonment are handled is an essential part of any audit, especially because wrongful termination suits can be costly to defend and even more expensive if your HR policies aren’t consistently applied to every termination. Exit interviews are another factor in your HR audit that should be reviewed; determine whether the results of your exit interviews are simply filed away or if they are actually considered in analyzing reasons for your company’s turnover.
Turnover
Monthly turnover statistics are helpful to understanding current employee count; however, a broad analysis of turnover and the impact it has on your organization generally requires more data. Assemble turnover data as part of your HR audit. Compare turnover statistics to organizational changes and supervisors’ performance records to understand job satisfaction. Analyzing departing employees’ exit interview responses and turnover statistics together is essential for evaluating job satisfaction.
Legal
Compliance with labor and employment laws is a critical element in your HR audit. Laws enforced by the U.S. Equal Employment Opportunity Commission begin with the Equal Pay Act of 1963 up to the Genetic Information Nondiscrimination Act of 2008. The U.S. Department of Labor enforces such laws as the Fair Labor Standards Act and the Family and Medical Leave Act. Determine whether your company meets the statutory requirements for these, as well as jurisdictional standards for the National Labor Relations Act.
