Role of HR Auditor

HR audit is a functional audit. It consists of diagnosing, analyzing, evaluating and assessing future lines of action within the framework of HRM. HRD auditing is a basic tool for the management of a company. Its objective is not only the control and quantifying of results, but also the adoption of a wider perspective that will aid in designing future lines of action in the HRD field.

Thus, HR auditing must perform two basic functions, 1st; it must be a MIS, whose feedback provides information about the situation in order to facilitate the development of managing processes or the development of HRD. On the other hand, it must be a way of controlling and evaluating the policies that are being applied, as well the established process.

Types of Audits

An HR audit can be structured to be either comprehensive or specifically focused, within the constraints of time, budgets and staff. There are several types of audits, and each is designed to accomplish different objectives. Some of the more common types are:

• Best practices. Helps the organization maintain or improve a competitive advantage by comparing its practices with those of companies identified as having exceptional HR practices.
• Focuses on how well the organization is complying with current federal, state, and local laws and regulations.
• Function-specific. Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention).
• Focuses on strengths and weaknesses of systems and processes to determine whether they align with the HR department’s and the organization’s strategic plan.

However, organizations are particularly vulnerable in certain areas. Most lawsuits can be traced to issues related to hiring, performance management, discipline or termination. Some additional risk areas that employers should carefully review in an audit include:

• Misclassification of exempt and nonexempt jobs. Almost every organization has job positions that have been misclassified as exempt from overtime eligibility. The complexity of wage and hour laws and regulations makes it easy to err in classifying a job as exempt, thereby exposing the employer to liability for past overtime.
• Inadequate personnel files. A review of sample personnel files often reveals inadequate documentation of performance for example, informal, vague or inconsistent disciplinary warnings. Performance evaluations may be ambiguous, inaccurate or outdated. Personal health information is often found in personnel files, despite medical privacy laws requiring such data to be kept separate. Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims.
• Prohibited attendance policies. Controlling excessive absenteeism is a big concern for most employers. However, the complexity of family and medical leave laws, with sometimes conflicting state and federal protections, has made many formerly acceptable absence control policies unacceptable. Absences affect workers’ compensation, family and medical leave, disability accommodations, and pregnancy laws. Organizations often have attendance policies that do not comply with relevant laws and regulations or that grant employees more protections than required.
• Inaccurate time records. Employers typically require nonexempt employees to punch a time clock or complete time sheets reflecting their time worked each week. The records generated by these systems typically are the employer’s primary means of defense against wage and hour claims, so time-keeping policies and practices must be clearly communicated and consistently administered.

The HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organisation will have a very strong overview of the health of the HR function, at the conclusion of the audit. These phases include: Pre-Audit Information: This phase involves the acquiring and review of relevant HR manuals, handbooks, forms, reports and other information. A pre-audit information request is forwarded to the client who compiles the necessary information for review by auditors. Pre-Audit Self-Assessment: In order to maximise the time spent during subsequent portions of the audit, a pre-audit self-assessment form, if sent to the client can be of use.

The self-administered yes/no questionnaire asks a number of questions about current HR policies and practices. The completion of this self-administered questionnaire allows auditors to identify key areas for focus during the HR audit.

On-site Review: This phase involves an on-site visit at the client’s facility interviewing staff regarding HR policies and practices. A very in-depth HR audit checklist is completed.

Records Review: During the on-site visit, a separate review is conducted of HR records and postings. Employee personnel files are randomly examined as well as compensation, employee claims, disciplinary actions, grievances and other relevant HR related information are checked.

Audit Report: The information gathered is used to develop an HR audit report. The audit report categorises action needs into three separate areas. The areas that are urgent and important (UI), not urgent needs but important (NUI), not urgent but not important needs (NNI), and important opportunities needs (IO). As a result of this scheme of classification, managements can prioritize their steps.

The critical areas the, comprehensive HR audit covers all areas of HR management like recruitment practices, training and development, compensation and benefits, employee and union relations, health, safety and security, miscellaneous HR policies and practices-welfare, strategic HR issues, manpower planning/budgeting. Besides classifying needs in each of the above areas, the HR audit also cites relevant laws, cases and research to support the recommendations.

Preparation for an audit Auditor engagement: If external firm carrying out the audit, it is preferable to set terms in writing defining and agreeing on scope. If using internal resource it is better to appoint them formally with clarity on scope and select persons who are nonpolitical or those who are not high on hierarchy. Also, if internal persons are auditing there must be training in auditing.

Documents, manuals, handbooks, forms and reports auditor must have access to relevant information contained in employee files and other confidential documents of the organisation. Auditors must be given unrestricted access to records, once they sign agreement for confidentiality.

Data gathering: Completion of a self-assessment questionnaire significantly expedites the audit process and allows for better audit planning.

Audit of the HR policies and practices is the assessment and evaluation of the conventional HR practices being followed in an organization. These include:

• Staffing: Assessment of methods and procedures used in recruitment; recruitment costs; recruitment efficiency in filling vacant positions; efficiency of selection procedures.
• Workforce planning: Assessment of existing resources; future personnel requests; analysis of succession plan; and staff turnover analysis.
• Performance management: Analysis of methods used in the personnel assessment; assessment of results and effects of the personnel evaluation process.
• Compensation and benefits: Analysis of motivation forms; their relationship with personnel motivation; analysis of the level and structure of compensation.
• Training and development: Analysis of targets and forms of training; study of the training program; assessment of personnel after completing training; the efficiency and results of the training program; analysis of development system of personnel in the organization; job analysis; analysis of the plan for personnel development.