9 Reasons to Conduct an Human Resources Audit

Most companies are familiar with the concept of an audit, especially when it comes to the financial aspects of the business. However, conducting an audit of your human resources policies and procedures could be just as valuable.

Companies and their processes change over time as new people come in and new technology emerges. During this natural progression, things can get lost in the shuffle. HR Departments need specific programs, documents, and processes for everything from managing employees to cataloging data. HR audits ensure that all these procedures are in place and that they use the most up-to-date methodology and technology.

Hiring experts for HR audit services will not only help you assess the important factors for creating a financially healthy future, but it can also provide insights into the qualitative aspects that impact your organization’s culture.

Nine Reasons to Conduct an HR Audit

While contracting HR audit services isn’t mandatory, here are nine ways it can provide incredible value for your organization:

1. An HR audit helps ensure compliance with important HR regulations.

Staying up to speed on the latest compliance and regulations updates is critical. Whether you’re trying to avoid ACA-related penalties or provide appropriate overtime compensation, HR audit services can help you ensure you’re avoiding any potential fines or penalties.

2. An HR audit helps eliminate the guesswork around benefits packages.

Making sure your employee benefits package is legal and competitive is one of the most challenging aspects of human resources. An HR audit can help you answer all of your questions around which healthcare benefits package is right for your business and how you can simplify your annual renewal and enrollment process.

3. An HR audit helps you stay up-to-date with the latest employment laws and trends.

By using HR audit services, you can make sure that your company is keeping up with both the general business trends that may have an impact on it and the employment legislation developments that are reshaping today’s workplace.

4. An HR audit helps ensure that your employees are being paid fairly.

It is imperative for employers to understand the appropriate compensation scale for their workforce and how to effectively communicate it to them. An HR audit can assist address disparities or inconsistencies and offer insights into both areas. Data on worker compensation, broken down by sex, color, and ethnicity, must be provided to the U.S. government by businesses with more than 100 employees as of 2019. HR audit services can assist the business in avoiding any unpleasant shocks and help you get ready for these reports.

5. An HR audit will accurately classify your employees.

As the popularity of freelance work and independent contractors has risen in recent years, so has the ambiguity on how to classify employees. An HR audit can help you determine how an employee should be classified or what type of hire you should make.

6. An HR audit can analyze and reduce employee turnover.

Using HR audit services can help identify reasons why employees may be leaving and improve retention. Whether you’re looking to capture insights through an effective exit interview or ways to boost morale and improve your company culture, an HR audit can provide insights to help you reduce employee turnover.

7. An HR audit can improve organizational structure and update job descriptions.

Whether you’re just starting your business or experiencing rapid growth, using HR audit services can help you evaluate and improve the people, processes, and procedures you use to run your business. An employee handbook is a foundational element for businesses just starting out. As your company grows and evolves, an HR audit can help you re-assess job descriptions in the same way you evaluate finances and budgets.

8. An HR audit will help you adapt to the evolving expectations of Millennials.

As Millennials continue to make up the larger percentage of today’s workforce, employers must be ready. An HR audit can help you ensure you are prepared and equipped for the ways in which Millennials will impact your organization.

9. An HR audit can help address and prevent harassment.

With the dialogue surrounding the #MeToo movement, workplace harassment has become a hot button issue at companies across the country. Using HR audit services helps companies identify potential harassment issues and ways to foster a safe working environment.

Types of HR Audits

Most companies should perform small internal audits of specific elements of the HR department at different points every year. This lets HR professionals note what has changed and what needs improvement on a continuous basis. But, beyond these small check-ups, businesses should also consider other types of regular audits to improve performance. Here are some examples:

1. Expert

This type of audit involves hiring an outside firm to vet your Human Resources department. Experts can often find problems or suggest improvements that those within your organization are too close to see. Using an expert HR firm from outside your company is the best way to ensure that your HR department meets the best practices in HR standards.

2. Comparative

This type of audit compares one company’s HR department with another, model company. This type of audit is the easiest way to bring a new or ailing HR department up to an appropriate standard. This type of audit can be performed internally but is best conducted by an expert firm.

3. Management by Objectives

This type of audit compares each HR process with its objective to make sure that the department is meeting its goals. This type of audit is best conducted by an expert firm after a company has overgone a major overhaul.

After choosing a type of audit and a firm to perform it, the department should decide the purpose and scope of the audit. Will this audit look at one specific element of the HR process or vet the entire department? What goals or benchmarks is the audit meant to achieve? Once these decisions are made, the auditor must collect all relevant information on the HR process being examined and perform the analysis. The audit concludes with a final report that analyzes the effectiveness of the HR process and makes suggestions for improvement.

How to Perform a Human Resources Audit

Many HR auditors use a checklist during the audit to help collect all relevant information and identify any gaps in the department’s procedures. Expert HR firms have complex checklists tailored to each company’s goals and the type of audit, but all HR departments should have their own checklists for performing their annual internal check-ups on each of their processes.

There are three types of questions that every checklist should include:

1. Does the company have a process or policy?

This should be the first question on any HR checklist. It establishes whether a necessary process or policy exists and what it is.

2. Does the process follow this best practice?

All policies and procedures should be designed to follow the general best practices. This ensures that the policies in your HR department are inclusive and don’t have any unintended consequences.

3. Does the process or policy achieve this specific goal?

All procedures should have a purpose. This type of question helps determine if the department is meeting its goals and moving forward.

Need Some Assistance with Your HR Audit?

LBMC Employment Partners can help you perform a successful HR audit and improve your company. From payroll to PEO services, we’re equipped with a comprehensive suite of HR services to grow and scale with your company along the way!

Improve the Procedures & Processes Affecting Your People

Our HR audit services can assist you in improving policies and practices that have a direct bearing on your most valuable resource—your people. With our in-depth knowledge of both federal and state labor laws, our team at LBMC Employment Partners can assist you in comprehending and carrying out the necessary procedural activities related to HR compliance. We can also assist you in resolving any cultural problems that may be impeding the growth of your company.

Connect with our team to learn more about our HR audit process and human resources outsourcing services.