Sample Question - HR Audit

QUESTION
I am working as a Human Resource Manager with a Telecom company in India. We need to begin HR Audit for our circles of operation. Since the concept is new to me I would like to understand the methodology and the relevant text/literature on the subject matter. If a few links are available please suggest the same.
ANSWER
We have pulled together a number of resources to assist you in understanding HR Audits. Before referencing those attachments, we wanted to provide you with some of the basics to be sure you had a clear understanding of an HR Audit.
What is an HR Audit?
An audit is a means by which an organization can measure where it currently stands and determine what it has to accomplish to improve its human resources function. It involves systematically reviewing all aspects of human resources, usually in a checklist fashion, ensuring that government regulations and company policies are being adhered to. The key to an audit is to remember it is a learning or discovery tool, not a test. There will always be room for improvement in every organization.
Why Do An Audit

1) To insure the effective utilization of an organization’s human resources.

2) To review compliance with a myriad of administrative regulations.

3) To instill a sense of confidence in management and the human resources function that it is well managed and prepared to meet potential challenges.

4) To maintain or enhance the organization’s and the department’s reputation in the community.

5) To perform a "due diligence" review for shareholders or potential investors/owners.

What does a full HR Audit entail":

1) Legal compliance

2) Compensation/Salary Administration

3) Employment/Recruiting

4) Orientation

5) Terminations

6) Training and Development

7) Employee Relations

8) Communications

9) Files/Record Maintenance/Technology

10) Policies and procedures (including employee handbook)

11) Communications

 A MERC Human Resources (HR) Audit collects and evaluates information about the state of an organisation's HR practices and policies to determine the overall effectiveness of people management in the organisation. The HR Audit demonstrates to what extent the HR function contributes to organisational effectiveness as a whole, as well as productivity and morale.
The HR Audit helps by:

• providing feedback on the value of the contribution of the HR function to the organisation's strategic business objectives
• assessing the quality of HR practices, policies and delivery
• reporting on extent of statutory HR compliance and remedial action required
• assessing HR and line management relationships and ways these can be improved
• setting guidelines for establishing HR performance standards and
• identifying areas for change and improvement with specific recommendations

MERC HR consultants are experienced HR professionals who objectively analyse the performance of the HR function and its impact on the organisation's performance.
HR Audit

1. Organizations Business Objectives
2. People Management
1. determine people management priorities
2. develop HR strategies and
3. day-to-day HR operations
3. Identify and implement change(s)
4. Evaluate impact of changes from HR audit

Elements of our HR Audit

The HR Audit focuses on the following elements of People Management:

• Organizational Data
• Strategic HRM overview
• Staff Communication and Change Management
• HRM Operational Delivery
• Staff Performance and Morale and
• HR Performance Measures

HUMAN RESOURCE AUDIT

Basically in Hr. Audit it’s including all the things as mention below:
1.full & final settlement data
a. Exit interview form
b. No dues
c. Resigned hard copy

2.Attendance
3.Training Data.
4. Joining Detail.

HR Audit is a comprehensive evaluation of the entire gamut of HR activities: -

HR Cost
HRD activities
Health, Env. & Safety
Legal Compliance
Quality
Compensation & Benefits

HRD Audit is evaluation of only few activities :-

Strategies,
Structure,
Systems,
Styles
Skills & Competencies
Culture

This evaluation helps the organisation have a clear understanding of the lacunae and better align the HR processes with business goals.

HR Audit is done for the following reasons.
To make the HR function business-driven.
Change of leadership.
To take stock of things & to improve HRD for expanding, diversifying, & entering into a fast growth phase.
For growth & diversification.
For promoting professionalism among employees & to switch over to professional Management.
To find out the reasons for low productivity & improve HRD strategies.
Dissatisfaction with a particular component.
To become employer of choice.

HR Audit can be done in any size of the organization provided the company has reached some level of maturity & people have accepted the HR within the organization. It also helps to find out gaps/ discrepancies within the HR role.

HUMAN RESOURCE AUDIT

An HR Early Warning System’s that works!
Your tool to assess the present. Your blueprint for the future. Your commitment to excellence.

An audit is a means by which an organization can measure where it currently stands and determine where it has to accomplish to improve its human resource function.

The HR Audit is a process of examining policies, procedures, documentation, systems and practices with respect to an organization’s HR functions. The purpose of the audit is to reveal the strengths and weaknesses in the non profit’s human resource system, and any issues needing resolution.

The audit itself is a diagnostic tool, not a prescriptive instrument. It helps in identifying what is missing and needs to be improved, but it can’t tell what one needs to do to address those issues. It is most useful when an organization is ready to act on the findings.



ROLE OF HR AUDIT IN BUSINESS DEVELOPMENT
An HR Audit is like an annual health check, says EJ Sharma. It plays a vital role in instilling confidence in the management and the HR functions of an organization.

A healthy HR practice in an organization is as important as the physical and mental well being body.

The following are some of the favorable consequences of HR Audit that have been observed:

HR Audit helps to get a clue about the overall status of the organization and also to find out whether certain systems put in yielding any results.
It helps companies to figure out any gaps or lapses.
It compares the plans and implementations.
Improvements in HR systems.
Increased focus on human resource and human competencies.

Better recruitment policies and more professional staff.
More planning and more cost-effective training.
Streamlining of other management practices.
TQM interventions.

METHODOLOGY OF HR AUDIT:

HRM requires the use of a number of methods for HR Audit. The methodology of HR audit depends upon the level of HR Audit. The HR Audit may be conducted to understand the system and procedure or may be conducted to understand the compliance of system and procedure. The Bank of Baroda conducts HR Audit to evaluate the compliance of system and procedure.


The methodology used in HRD audit by and large has the following steps:-

Individual Interviews
Group Interviews
Workshop
Questionnaire Method
Observation
Analysis of Secondary Data
Analysis of Reports, Records, Manuals, and other Published Literature


WHY DO MOST COMPANIES WANT HR AUDIT

The concept of HR Audit has emerged from the practice of yearly finance and accounting audit, mandatory for every company, to be done by the external auditors. This audit serves as an examination on a sample basis of practices and systems for identifying and ensuring that sound accounting principles are followed. Similarly, an HR audit serves as a means by which an organization can measure the health of its human resource function.

There are various reasons why companies want to undertake HR audit, some of which have been stated below:

To make the HR function business driven.
To review compliance with tons of laws and regulations.
To instill a sense of confidence in the human resource department that it is well-managed and meets potential challenges and opportunities.
For promoting professionalism among employees and to switch over to professional management.
To help in achieving organizational maturity in terms of Human Resource Administration.
To maintain or enhance the organization’s reputation in a community.
To identify areas of innovative Human Resource practices being followed in any pocket.

LIMITATIONS OF HR AUDIT

The audit itself is rarely a failure. Most HR failures are due to failure of implementation.

Sometimes HR audit can also be used against the HRD department. It can be used to get rid of some staff in the department. Such a decision can have an adverse effect on the overall HRD of the company subsequently.

HR audit does not give evaluations of individuals but focuses on units and systems.

For audit presentation

There is one additional error on this slide also. It limits the use of P-CMM to the software industry. That limitattion is an urban myth. That was the industry that first saw the need for P-CMM, because of its work with CMM, but P-CMM is not limited (in use or by design) to software. It is widely used in BPO, and even Club Mahindra has used it.

Besides the links provided by my colleagues. Also would recommend you to read the book HR audit by Dr T V Rao.

Methodologies involved are: -
* Interviews with CEO, Top Managers & section of others in a structured questionnaire.
* Observation - Any Scientists/Top Notch performer would tell you that observation is the key to identifying problems & providing solutions.
*Review of forms, formats, reports & manual.
*HRD Audit questionnaire spanning all HR processes.

Let me share my two cent's thoughts on the HR Audit:-

HR audit is no different from other audits like Accounts & Finance which is a internal statutory mandated. Audit's purpose is to check the shortcoming of the processes & suggest the ways to plug the loopholes.

Lot of times. It’s just common sense. To align the same to Business Processes. After all it is the job of HR Manager to be in constant touch with the employees and be aware of HR systems, tools & interventions that can keep their motivation and commitment levels high.