How to conduct a human resources audit: objectives, stages, results

When is it necessary to conduct a human resources audit in an organization

The law does not prescribe the frequency of such audits for enterprises; they are conducted based solely on the internal needs of companies. Typically, it is large and medium-sized businesses that conduct the procedure. These companies have hundreds of employees, which can result in challenges with efficient human resource utilization and document management. Another issue HR departments encounter is the periodic changes in labor legislation, necessitating updates to documentation.

There are several reasons to carry out an audit of human resources management:

• There has been a change in the company's leadership, and the new head wants to fully understand the state of the company.
• Two or more companies have merged, or an acquisition has taken place.
• The company faces the risk of inspection by labor inspectors.
• The management has decided to streamline the workforce and needs to identify which employees to lay off.
• The enterprise's economic efficiency has declined recently, necessitating the identification of staff positions that need reinforcement.
• The company has seen an increase in labor disputes and complaints related to labor laws.
• The head of the HR department or a key specialist responsible for documentation has changed.

What is the purpose of a human resources audit?

We have already highlighted the main goals of the audit – more efficient use of human resources and ensuring documentation complies with labor laws.

Additionally, such audits inform management about the potential for labor disputes within the enterprise. If there is a risk, it is necessary to mitigate it. Disputes within the team, arising from labor law issues, may prompt an inspection by labor authorities.

Often, company leaders are unable to independently evaluate the effectiveness of the HR department. The tasks of a human resources audit also include optimizing the HR service itself.

Types of HR audits

Internal and external HR audits differ in whether they are conducted by company employees or independent organizations.

Internal audits are commonly used by small enterprises with several dozen employees. Managers tend to prefer analyzing the situation with their own resources. However, such an analysis is not always objective since the expert looks at the situation from within the company. Moreover, the assessment will not be independent, as there can be some influence exerted on the expert by other employees.

An external HR audit provides the most objective and effective results. An independent expert can evaluate the situation impartially, free from any company employee influence. The audit does not distract employees from their main work, and the procedure itself is completed swiftly.

What is included in the procedure?

It is worth noting that auditors have a comprehensive and diverse task ahead:

• They need to conduct an analytical audit of HR documents to ensure compliance with legislative requirements.
• Financial reports are examined to assess the efficiency of departments, units, and individual employees.
• Information regarding salaries and additional payouts is analyzed.
• The staff schedule, employees' duties, instructions, orders, and timesheets are reviewed.
• The psychological motivation of employees is evaluated using surveys, interviews, and observation methods.
• The company’s labor efficiency metrics are compared with industry standards.

Stages of a human resources audit

Analyzing HR documentation

All mandatory HR documentation must be present in the company; auditors first verify this. Missing documents need to be restored.

Auditors also check the documents for legal compliance and the correct execution of timesheets, staff schedules, labor contracts, and other paperwork.

Analyzing the workforce

Conducting a human resources audit involves evaluating the current qualifications of staff, certifications, and professional development. The process for candidate selection for positions is scrutinized. The specifics of new employees' adaptation and the team's psychological climate are considered.

Assessing HR management effectiveness

The audit concludes with a holistic analysis of the HR policy. The number and localization of vacancies within the company's various activities are assessed. Staff turnover, personnel redundancy, or the opposite, staff shortages, are examined.

Results of the human resources audit

The data collected enable management to identify weak points in HR policy and obtain complete information about where to strengthen or possibly reduce staff. Auditors determine if employees' qualifications align with the company's stated tasks.

Streamlining documentation can prevent fines from regulatory bodies. Minimizing the risk of labor conflicts can lead to more harmonious relations between staff and management. This can enhance the enterprise’s operational efficiency.

Should this procedure be performed with own resources?

Many companies contemplate how to conduct a human resources audit using their own resources. But as mentioned above, there are associated risks:

• potential for bias;
• lack of independence;
• the inability to evaluate the company from an external perspective;
• the auditors’ lack of expertise.

It is often more effective to entrust the audit to an outsourcing company. Unistaff Global Services employs specialized experts well-versed in the subtleties of HR documentation. Turning to us, you will receive comprehensive advice on optimizing your company’s HR record-keeping.