The Steps to Conducting an Effective HR Audit

Posted on: February 10, 2020 by iSure

The simplest audit can just be an organizational one. Is everything filled in the proper file? Often things get misfiled and as a result, an important piece of paperwork may go missing. Or something will be misfiled in a folder that is not as confidential as it should be. This kind of misfiling does not only occur on paper but electronically as well.

The second level of audit is a compliance audit. Here the policies, procedures, and practices are checked to ensure law compliance. Are employees properly classified? Are correct forms being used and filed correctly?  Rather than doing an entire compliance audit, sometimes a simple functional audit will do. Organizations may opt to look only at wage and hour classifications. Or focus on FMLA utilization. Benefits enrollment and proper participation levels may be an appropriate section to look for missing employees. Proper and up-to-date Occupational Safety and Health Act (OSHA) policies and recordkeeping may be appropriate. Are performance evaluations being done in a timely and effective manner?

The highest level of audit is a strategic audit. Is HR corresponding with the strategic direction of the organization? How does HR put into practice its part of the strategic plan? Are the goals appropriate? Third-party HR outsourcing is truly beneficial for audit assistance.

Determine the Scope

An effective HR audit consists of determining the scope of the audit. If an HR audit has never been conducted, a comprehensive review of all policies and procedures is recommended. Going forward, businesses may opt for audits focusing on specific HR functions, such as payroll or record keeping.

Develop a Plan

Next, the business must develop a plan for audit execution. Identify the goals of the audit, assemble the audit team and create a timeline for completing the audit.

Gather & Analyze Data

Once the audit begins, the audit team should gather all the applicable documents and forms under the scope of the audit. The audit team should also review current and potential legal actions.

An HR audit can review:

  • Personnel file set-up/maintenance
  • Employment process
  • Employee onboarding process
  • Employee handbook creation
  • Job description development
  • Benefits and salary administration
  • Performance reviews
  • Harassment avoidance
  • Produce a Report

We must then develop a report with all the audit findings. This should identify any strengths and weaknesses found during the audit, as well as offer recommendations to correct any instances of noncompliance. If the audit proves to have poor results, the business could benefit from third-party HR outsourcing.

Create an Action Plan

Once the audit is complete, company executives meet with the audit team to discuss the findings and formulate a plan to address each problem or area of concern identified in the report. Action items may include changes to policy, procedures and/or training practices. Organizations should also consider their available resources when setting a timeline for correcting noncompliance issues, and ensure any corrective actions are realistic and achievable. Take measures to ensure the audit information is kept confidential and protected from unintentional disclosure.

Evaluate the Progress

Organizations must continuously monitor and periodically review the new processes or procedures to ensure the organization stays compliant. Audits consist of many variables and sometimes takes a trained eye. Third-party HR outsourcing can be truly helpful for just about any business.

Posted in: Employee Benefits