Human resources are the people in an organization, so a human resources audit is a look at those people and the processes that put them in place to make sure the system is working efficiently. An HR audit also goes beyond looking at the hiring process into areas like employee retention, budgeting, training, employee compensation, management/employee relations and virtually any process or practice within the company that affects its people. Concept of Human Resource Audit
The word “audit” comes from the Latin verb audire , which means, to listen. Listening implies an attempt to know the state of the affairs as they exist and as they are expected/ promised to exist. Auditing as a formal process is rooted in this feature of listening. Consequently, it is a diagnostic tool to gauge not only the current status of things but also the gaps between the current status and the desired status in the area that is being audited.
Auditing has been a routine exercise in the area of finance, especially because it is a statutory obligation. However, in case of Human Resource, there is no legal binding to adopt auditing. Some of the companies nevertheless prefer to have Human Resource audits.
Like any audit, the Human Resource Audit is also a systematic formal process, which is designed to examine the strategies, policies, procedures, documentation, structure, systems and practices with respect to the organization’s human resource management. It systematically and scientifically assesses the strengths, limitations, and developmental needs of the existing human resources from the larger point of view of enhancing organisational performance.
The human resource audit is based on the premise that human resource processes are dynamic and must continually be redirected and revitalized to remain responsive to the ever changing needs. Human Resource Audits are not routine practices aimed at problem solving. Instead of directly solving problems, HR audits, like financial audits, help in providing insights into possible causes for current and future problems.
The findings of these audits aid decision making in the organisation and are usually internal documents that need not necessarily be shared with the public. Moreover, unlike Financial Audits that are routine, regulated and standardised, Human Resource Audits are non-routine and may be designed to cater to the unique needs of the organisation at a particular point in time. These are in fact, studies of an unusual nature. The manner in which the Audit is conducted could vary from self-directed surveys to interventions by outside consultants.
An HR Audit is like an annual health check-up, it plays a vital role in instilling a sense of confidence in the Management and the HR functions of an organisation.
HUMAN RESOURCE (HR) AUDIT
A periodic Human Resource audit can qualify its effectiveness within an organization. Human Resource audits may accomplish a variety of objectives, such as ensuring legal compliance; helping maintain or improve a competitive advantage; establishing efficient documentation and technology practices; and identifying strengths and weaknesses in training, communications and other employment practices.
Human Resource auditing is something that many companies do annually, just as they audit their financial information. This gives them an accounting of their workforce and the efficiency with which the organization as an entity deals with its people, from recruiting to firing. Human Resource auditing can be likened to a person going to the doctor for a general check-up to stay well. The process allows a company to get a general idea of where it stands so it can better correct any potential problems and plan for the future.
When it comes to physical health, prevention of problems is far better than waiting until a problem arises and trying to cure it. The same holds true for human resources auditing. Preventing problems is much easier than trying to fix them after the fact. Good Human Resource planning and auditing can help prevent those problems, and save companies money and difficulties.
Human Resource Accounting benefits the company ascertain how much Investment it has made on its Employees and how much return it can expect from this Investment.
Human Resource Audit means the systematic verification of job analysis and design, recruitment and selection, orientation and placement, training and development, performance appraisal and job evaluation, employee and executive remuneration, motivation and morale, participative management, communication, welfare and social security, safety and health, industrial relations, trade unionism, and disputes and their resolution. HR audit is very much useful to achieve the organizational goal and also is a vital tool which helps to assess the effectiveness of HR functions of an organization.
A complete Human Resources Checkup, including administration, employee files, compliance, handbook, orientation, training, performance management, and termination procedures. The intended outcomes include minimizing your liability exposure and introduction or enhancement of human resource best practices.
What is Human Resource Auditing?
The American Accounting Association’s Committee on Human Resource Accounting (1973) has defined Human Resource Accounting as
“the process of identifying and measuring data about human resources and communicating this information to interested parties”.
HRA, thus, not only involves measurement of all the costs/ investments associated with the recruitment, placement, training and develop ent of employees, but also the quantification of the economic value of the people in an organisation.
Flamholtz (1971) too has offered a similar definition for HRA. They define HRA as “the measurement and reporting of the cost and value of people in organizational resources”.
Who should conduct the audit?
The team that is responsible for the audit should represent a cross-section of the organization’s staff, including line staff, middle and upper management, and those responsible for HR functions.
Need and Purpose of Human Resource Auditing
The commonly understood audits are the established and regular accounting audits carried out in accordance with specific statutory regulations. However, in the case of human resource audits, there is no legal obligation, but enlightened managements have voluntarily accepted its usefulness depending upon the circumstances. The following circumstances may be cited as examples:
It is necessary to take a look at these and other questions. Human Resource audit is highly useful for the purpose
The following approaches are adopted for purpose of evaluation:
In this, the auditors identify Competitor Company as the model. The results of their organization are compared with that Company/ industry.
Outside authority approach
In this, the auditors use standards set by an outside consultant as benchmark for comparison of own results.
In this, Statistical measures are performance is developed considering the company’s existing information.
In this, auditors review past actions to calculate whether those activities comply with legal requirements and industry policies and procedures.
Management by objectives (MBO) approach
This approach creates specific goals, against which performance can be measured, to arrive at final decision about organization’s actual performance with the set objectives.
Sample Human Resource Audit question
Organization and Structure
HR Department Organization
Functions of the Human Resource Department
1. For what functions is the HR Department responsible?
2. Should the HR Department be responsible for all of the functions listed above?
3. Should the HR Department be responsible for functions that are not listed above?