An HR compliance audit generally consists of two main parts:
The changing nature of HR management demands that HR professionals participate and contribute fully to their organizations as true strategic business partners.
An audit helps an organization understand whether its HR practices help, hinder or have little impact on its business goals. The audit also helps quantify the results of the department's initiatives and provides a road map for necessary changes. Audits can also help the organization achieve and maintain world-class HR practices.
The general process of conducting an audit includes seven key steps, each of which is discussed in greater detail below:
To uncover the needed information, the audit team must determine exactly which areas to target for review. If the organization has never audited its HR function, or if significant organizational or legal changes have recently occurred, the audit team may want to conduct a comprehensive review of all HR practice areas. On the other hand, if concerns are limited to the adequacy of a specific process or policy, the audit team can focus its review on that particular area.
Whether conducting a comprehensive audit or an audit of a specific practice, the audit team should invest sufficient time in developing a comprehensive document that elicits information on all the subjects of the inquiry. HR must develop a list of specific questions to ensure that the questionnaire is complete.
The next phase includes the actual process of reviewing specific areas to collect the data about the organization and its HR practices. Audit team members will use the audit questionnaire as a road map to review the specific areas identified within the scope of the audit.
To fully assess the audit findings, the team must compare them with HR benchmarks. This comparison will offer insight into how the audit results compare against other similarly sized firms, national standards or internal organizational data. Typical information that might be internally benchmarked includes the organization's ratio of total employees to HR professionals, ratio of dollars spent on HR function relative to total sales, general and administrative costs, and cost per new employee hired.
National standard benchmarking might include the number of days to fill a position, average cost of annual employee benefits and absenteeism rates.
At the conclusion of the audit process, the audit team must summarize the data and provide feedback to the organization's HR professionals and senior management team in the form of findings and recommendations. Findings are typically reduced to a written report with recommendations prioritized based on the risk level assigned to each item (e.g., high, medium and low). From this final analysis, the audit team can develop a timeline for action that will help determine the order in which to address the issues raised. In addition to a formal report, the audit team should discuss the results of the audit with employees in the HR department, as well as with the senior management team, so that everyone is aware of necessary changes and that approvals can be obtained quickly.
It is critical that the organization actually to do something with the information identified as a result of an audit. The organization must create action plans for implementing the changes suggested by the audit, with the findings separated by order of importance: high, medium and low. Conducting an audit and then failing to act on the results actually increases legal risk.
At the conclusion of the audit, HR leaders must engage in constant observation and continuous improvement of the organization's policies, procedures and practices so that the organization never ceases to keep improving. This will ensure that the company achieves and retains its competitive advantage. One way to do this is to continuously monitor HR systems to ensure that they are up-to-date and to have follow-up mechanisms built into every one of them.
One approach is to designate someone on staff (or an outside consultant) to monitor legal developments to ensure that HR policies and practices are kept current. Likewise, organizations should keep track of the audit findings and changes made, turnover, complaints filed, hotline issues, and employee survey results to identify trends in the organization's employment-related issues. Identifying problematic issues, growth areas or declining problem spots can help in the decision of where to allocate time, money and preventive training resources in the future.