An HR audit assesses all HR practices, policies, and procedures to see if they align with your business objectives and comply with legal requirements. When conducting an HR audit, you’re examining internal HR functions and external compliance with federal, state and local labor regulations.
Regular HR audits can help you identify strengths and weaknesses in your HR processes that may be supporting or hindering your organizational goals. The findings can help you optimize human resource management and improve organizational efficiencies.
Understanding HR Audit Findings
Analyzing the findings of an HR audit can help you understand what you’re doing right, spot where you’re going wrong and use the information for organizational improvement.
There are different types of audits for different areas of human resource management. Here are five main audits that every HR department should conduct:
1. Compliance audit
Employment laws can change, so it’s important to ensure your organization remains compliant. Federal laws include the Fair Labor Standards Act, the Americans with Disabilities Act (ADA) and Occupational Health and Safety Act (OHSA). Each state and local government may also have its own laws, such as minimum wage laws.
2. Policies audit
This type of audit reviews existing HR policies and procedures to ensure they are current, relevant, and effectively communicated to employees. Policies such as recruitment procedures, employee handbooks, performance management policies, and diversity, equity and inclusion (DEI) policies all come under scrutiny.
3. Best practices audit
In this audit, you compare your HR practices against the best practices of other public sector employers. It helps your organization remain a competitive workplace that attracts and retains talented employees.
4. Function-specific audit
These audits examine the effectiveness of specific HR functions in supporting your organization’s goals, such as recruitment, compensation, training and employee well-being. This is where you may discover shortcomings in your HR processes or workplace culture that could be contributing to low employee morale and high staff turnover rates.
5. Strategic audit
This audit assesses HR strategy against the broader organizational strategic objectives to determine whether the existing HR policies support long-term organizational goals.
Analyzing and Interpreting Audit Results
The first step in conducting an audit is gathering data; the second step is analyzing that data. There are various techniques for analyzing HR audit data. These include:
Trend analysis
In HR, trend analysis involves identifying patterns in employee behavior. These could include common skills gaps, changing demographics, employee turnover rates or employee sentiment.
By spotting trends, you can better predict future employee needs and make more strategic hiring, training and employee development decisions.
Benchmarking
Benchmarking is a process that uses qualitative data to make comparisons between different organizations or areas of an organization. HR benchmarking measures the effectiveness of your HR policies, practices, and metrics against those of other organizations.
Root cause analysis
Root cause analysis is a method auditors use to identify the underlying causes of issues. For example, if employee absenteeism is high, it could be due to a toxic workplace culture. When you understand where the root of a problem lies, you are in a better position to find effective solutions to fix them.
There are HR audit tools that make it easy to collect and analyze data. However, It’s also important to involve key stakeholders across the organization in the analysis process to gain diverse perspectives.
You can also outsource your audit to an HR consultancy. The benefit of using an external auditor is that they are impartial and will assess your HR practices objectively. They may bring fresh insights that an internal audit may overlook.
Implementing Changes Based on Audit Findings
Once you’ve identified gaps and weaknesses, you can develop an actionable plan to address the deficiencies. Ideally, you should prioritize the most pressing HR issues based on the impact they are having on your organization.
Set clear objectives and milestones, assign responsibilities to relevant individuals and establish timelines for each priority area.
Change is often unsettling for many people. It’s important to develop effective communication strategies to inform employees about changes, gain their support and keep them continuously updated as you roll out new practices and solutions.
Monitor the implementation of changes by measuring improvements in key HR metrics. This should be an ongoing process to determine the effectiveness of the changes over time.
Continuous Improvement and Future Audits
By regularly tracking the progress of each implementation step, you can ensure that actions are being executed and make timely adjustments to keep the plan on track.
Check in with employees and stakeholders to see if the changes implemented are having the desired effect. You can do this by requesting regular status updates from project managers and conducting employee surveys.
Regular HR audits can foster a culture of ongoing organizational improvement. Keep a record of audit findings and progress reports on implementation plans. This serves as a valuable reference for future audits, enabling a continuous improvement cycle.
Key Takeaways
An HR audit is not just a compliance exercise; it’s a strategic tool that can help HR departments implement policies and practices that contribute positively to the organization’s success. HR audits also help tighten compliance practices, which avoids legal discrepancies that can cause reputational harm.