Auditing refers to a comprehensive method of objective and systematic evaluation of current practices, documentation and policies &procedures prevalent in the HR system of the company.
An effective HR audit helps in recognizing the need for improvement and enhancement of the HR function. It also guides the company in maintaining compliance with ever-changing rules and regulations.
HR audit thus helps in analyzing the gap between ‘what is the present HR function’ and ‘what should be or could be the best possible HR function’ in a company.
Though HR auditing is not mandatory like financial auditing, companies these days are opting for regular HR audits in order to verify the existing HR system in line with the company policies, strategies, goals &objectives and legal needs.
The entire process of HR auditing is broadly segmented into the following phases −
- Pre-audit information − The pre-audit information phase engages a review of the company’s policies, HR manuals, employee handbooks, reports, etc., which act as the basis of working in the company.
- On-site review − The next phase of on-site review engages questionnaires, interviews, observations, informal discussions, surveys, or a combination of such methods to get the necessary inputs from the members of the company.
- Records review − The records review phase needs detailed scanning of present HR records, employees’ files, employee absenteeism and turnover statistics, notices, compensation claims, performance assessments, etc.
- Audit Report − On the basis of this analysis, the final audit report is compiled with appropriate conclusions, summary and recommendations, highlighting the strengths and weaknesses of the HR function along with the necessary developments as needed.
The first three phases include an extensive collection of quantitative as well as qualitative information. The method for collection of information is based upon the size of the target audience, availability of time and type of data to be collected.
The HR audit thus contributes towards the best possible application of internal resources and maximizing the effectiveness of human capital in the company. At the same time, it is useful in streamlining the HR processes and exercises with the company best practices and standards.