What Are Human Resource Audits?

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July 07, 2005

A human resource (HR) audit is a comprehensive review of a company's systems and processes to determine if they meet current and projected HR needs, whether such systems are in compliance with current state, local and federal regulations, and whether the company's internal processes include practices that minimize legal liability. The HR audit allows a company to systematically measure where it currently stands and what actions need to be taken to improve its human resources function.

Failure to recognize potential causes of action for wrongful discharge or employment discrimination or failure to comply with the increasing number of federal and state employment regulations can produce disastrous results and large jury verdicts. As employers recognize these liabilities and obligations resulting from the enormous growth and expansion of employment litigation, the need for a review of policies and practices becomes not only prudent, but also a matter of financial stability.

Who Should Conduct the Audit? 
The team that is responsible for the audit should represent a cross-section of the organization's staff, including staff, middle and upper management and those responsible for HR functions. The audit process consists of a series of questions covering the eight primary components of the HR function:

- Roles, head count, and HR information systems (HRIS)
- Recruitment
- Documentation (electronic and paper)
- Training, development, and career management
- Compensation and benefits
- Performance measurement and evaluation
- Termination, transition, and security
- Legal issues and personnel policies

The focus is on how these activities and tasks are actually performed in the organization. The first step is to collect all the pertinent information. The process of obtaining accurate information, in and of itself, can be quite informative.

Why Do an Audit?

On a practical level, a properly conducted audit instills a sense of confidence in management, human resources, and the entire organization, that the company is well managed, prepared to meet challenges, and strives to provide its employees with a safe and professional work environment.

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