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[HR] Does My Company Need an HR Audit?

According to the Society for Human Resources Management (SHRM), an HR audit is defined as an organization devoting time and resources to taking an intensely objective look at the organization’s HR policies, practices, procedures and strategies to protect the organization, establish best practices and identify opportunities for improvement.

What is involved?

This objective review of the employer’s current state can help an organization HR evaluate whether specific practice areas are adequate, legal and effective. The results can provide decision-makers with the information necessary to decide which areas need improvement.

An HR compliance audit generally consists of two main parts:

  • An evaluation of the organization’s operational HR policies, practices and processes with a focus on key HR department delivery areas (e.g., recruiting—both internal and external, employee retention, compensation, employee benefits, performance management, employee relations, training and development).
  • A review of current organizational HR indicators (e.g., number of unfilled positions, the time it takes to fill a new position, turnover, employee satisfaction, internal grievances filed, number of legal complaints, absenteeism rates).

Why do I need to do an HR Audit?                                                          

Conducting an HR audit can also help an organization comply with the law as part of an effective overall risk management strategy. Such due diligence helps uncover any potential problems before a government inspector comes calling, or the organization is faced with a human-rights claim or wrongful dismissal suit. Audit findings can help to provide evidence of compliance. This is particularly valuable in the case of an inspection, a prosecution or a lawsuit. Where the organization is non-compliant, the action items arising out of the audit should be used to remedy the situation as soon as possible. Note that there is a possibility that a business can still be operating “above board” yet, be ignoring several key best practices it has itself established. An audit helps to identify issues related to people and human resources management.

So, after an audit is completed, what next?

An audit is typically conducted to discover if there is a problem. If a problem was discovered, correct it. Unless it’s a really big one, in which case it might be best to contact legal counsel. Often you can work through the issues internally or with the help of an external consultant. Sometimes you can take the findings and develop a list of things to get done. For example, redoing the methodology and content of personnel files or establishment of employment contract protocols, creation and communication to employees of documented company policies or implementation of a new compliance training required by law.

Should HR audits be conducted on a regular basis?

This is akin to asking if one should check on their health regularly! Yes, preferably on an annual basis or periodically as appropriate. It’s just good housekeeping and a best practice. Some items need to be audited more frequently – like checking for employment validity if you have employees with Work Permits, verification of employee addresses and emergency contact info for obvious reasons (payroll/tax time/emergencies), or completion of bi-annual criminal checks for sensitive work environments that may require this. Other changes might be required to keep pace and be compliant with changing laws and employment protocols in your jurisdiction.

The HR audit is a valuable tool that should be effectively utilized at-least every couple of years to ensure that the organization and its HR team are on track and in step with organizational strategic plans.

More help and guidance?

As a Beneplan client you can access the HR Audit Guide available to you under the “HR Toolkit” section of our member portal of our website, once you log in. If you’d like to discuss or get additional guidance on this process, or other HR matters, you can call the complimentary HR Advice helpline provided by Beneplan for its members.