People may think of audits as being mainly financial in nature, probing companies’ financial statements and accounting records to search for discrepancies, but any department in a business can be audited in some way. The human resources department is no exception to the rule, although human resources (HR) audits involve a good deal of qualitative analysis in addition to financial considerations. An introduction to human resource audits can familiarize you with the types of information analyzed in an HR audit.
Human resources audits are rarely conducted by government agencies, unless a company is involved in serious legal trouble over an HR issue. Small businesses can conduct their own HR audits, however, to ensure that the HR function runs efficiently and effectively, as well as ensuring that the company stays within legal guidelines to avoid the possibility of an external audit.
Hiring and Firing
Hiring and firing are two main contributions of the HR department to businesses. Human resources audits should always be concerned with the effectiveness, fairness and reliability of hiring and firing policies. Audits can check the reliability of interview processes, for example, by taking a look at the number of seemingly outstanding new hires who leave their jobs within one year. Audits can look into the fairness of job applicant screening policies, as another example, by comparing the ethnic make-up of all job applicants for a period of time against the ethnic make-up of new hires during the same period.
Human resources departments have to operate within strict federal regulations related to the fair treatment of job applicants and employees. Human resources audits should be primarily concerned with HR policies’ effectiveness at following employment laws and going beyond the letter of the law to gain distinct advantages. Audits can look into HR departments’ equal employment opportunity policies, for example, to ensure that the company has comprehensive guidelines in place to provide equal opportunity and equal access to all applicants and employees. Audits can review the results of any discrimination-related incidents the HR department was involved in, whether handled internally or through an outside agency. This part of an HR audit can be challenging, since gauging the effectiveness of conflict management outcomes can become a bit subjective. Tie your audit analysis into the relative frequency of issues arising between different periods to gain a bit of quantitative insight.
Employee training programs, performance appraisal policies, mentor ship programs and other employee development initiatives should be reviewed from time to time to ensure that they remain relevant to the company’s current situation. An HR audit provides an ideal opportunity to look into your employee development programs and update them as necessary to reflect new demands in the marketplace, new job roles in the company and other new opportunities.