How to conduct an HR audit

For many organisations, the ultimate goal is to achieve maximum efficiency in all areas of the business. And for the human resources department, the HR audit has become the preferred tool to assess performance and introduce improvement measures.

Keep reading to find out more about how audits work, what purpose they serve, and how to conduct an audit.

What is an HR audit?

The HR audit can be defined as a process to evaluate an HR department’s performance and operations. This method examines aspects such as policies, processes, systems, etc, relating to various functions:

These tasks are central to the HR department’s responsibilities in the organisation, making it vital to analyse them, measure their output and identify areas for improvement.

We also want to highlight the definition put forward by Eric Flamholtz, President of Management Systems Consulting Corporation, who says that the “Human Resource Audit is a systematic assessment of the strengths, limitations, and developmental needs of its existing human resources in the context of organizational performance.”

The main objectives of the HR audit

The human resource audit, therefore, works towards a set of objectives:

Identify the most important HR tasks for achieving the organisation’s objectives.
Measure department performance.
Ensure the company is compliant with current employment law.
Help HR to introduce improvements and make their internal processes more efficient.
Allocate adequate resources for the department’s needs.
Establish a basis on which to introduce improvements in the future.
Encourage change and creativity within the team.

The importance of conducting an HR audit

An audit helps us find out what goes on in a department, detect errors or problems, and develop specific solutions. It is a management tool that should be used throughout all areas of the company. The most immediate benefits include:

A full and detailed view of the department’s workings: gain that crucial understanding of how each part of the department works and how they integrate with the rest of the company. Plus, identify which processes work, and which do not.
Valuable information for the team: the audit will put together a set of extremely useful data and conclusions for the department, which will help them make better management decisions.
Positive change: develop, grow, innovate. A key mantra for all areas of a company. Audits drive positive change through practical measures.

Types of HR audits

As we said at the start, an external audit concentrates on different aspects of the HR department. As a result, there are different types of audits depending on the objective:

‘Right to work’ audit: this type of audit confirms companies have carried out the required checks to ensure all their employees have a ‘right to work’. This is important in case there is ever an investigation.
Policy: this type of audit searches for any changes that must be made to policies to make them coherent and lawful.
Legal compliance: the majority of the HR team carry out legal compliance audits to ensure they are up-to-date with all their obligations.
Hiring: this audit reviews the hiring process to ensure it is coherent, efficient and non-discriminatory.
Salary and working day: this audit aims to detect problems with the salary structure or workload.
Health and safety: HR consultants analyse the relevant obligations to ensure the health and wellbeing of office workers.

The 7 steps of the HR audit process

If you want to conduct an HR audit, either yourself or with the help of specialist consultancy services, you need to know what steps to take during the process.

1. Establish the scope of the audit

Firstly, the team should decide what the audit’s objectives are and which areas it will cover. If it is the first time the company has undergone an HR audit, you may wish to go for an across-the-board analysis.

2. Plan the questionnaire

Advisors usually respond to a series of key questions for the department or organisation. You will need to dedicate enough time to create this questionnaire as it will become our guide for the next steps.

3. Gather information

It’s time to get down to work and collate information for the audit. During this stage you will need to gather details about the organisation, processes, and practices, etc. HR consultants normally refer to the questionnaire to find out which information they need.

4. Compare the results

The evaluation involves comparing the results with those of similar-sized companies or previous results from the company itself if available. Putting the data into context will give us a better understanding of the organisation’s performance in the relevant area.

5. Write a report

The next step is to compile the results obtained and present them in a full report. This makes the results accessible for the HR team, and it may even land on the desks of the senior management. At this stage you will usually also propose specific improvement measures.

6. Create an action plan

Using the changes the HR consultant suggests based on the audit, the company should design an action plan encompassing all the measures to be undertaken. It is important to be specific and set precise goals and deadlines.

7. Continue improving

The HR audit is only a small part of the process. HR managers should introduce a culture of continuous improvement regarding the department’s policies and internal processes. In this way, the organisation will never stop improving and will maintain its competitive advantage.