What is a Human Resources audit?

A human resources audit is basically a review of how current HR operations are supporting a business’ growth.

The audit can cover a wide range of areas, such as hiring processes, employee training and development, compensation and benefits and performance management. In some circumstances, an HR audit may be more formal in terms of evaluating compliance. With our HR Audit Guide, we’re looking closely at how to maximise the potential of your workforce.

Through this process, we want to help HR managers feel confident in recommending improvements that can help businesses better manage their human capital.

Why should you conduct HR audits?

Businesses audit their finances regularly, so why shouldn’t something as important as human resources also be put under the microscope? Doing so can safeguard your business for the future, and make it more effective for today.

Finding the right team structure for your changing business

If you’re an SME, chances are your business looks quite different to how it did 12 months ago. You may have added new products and services, or be working with a different set of clients and customers. You might have decided to run at huge growth ambitions, or be more conservative moving forward.

Whatever it may be, you need the right team structure to suit your business. A regular HR audit can help you stay dynamic and agile for the next stage of operations.

Boosting performance and engagement

A big part of the HR audit process is evaluating performance and development within your team. Although performance reviews can be a little daunting for some, providing feedback generally has an overall positive effect on employee engagement. This is especially true if it leads to things like promotions or other development opportunities.

Checking in on compliance factors

One of the less exciting, but most important, aspects of a human resource audit is checking over visa requirements and certifications. Keeping track of visa requirements and employee certifications can safeguard your business against potential non-compliance, and help to ensure employee safety.

Who is responsible for HR audits?

Typically, an HR audit is conducted by internal HR professionals or HR managers who has a great understanding of a company’s HR policies, employee retention rates, employee benefits and employee records.

Sometimes, an external professional will conduct an HR audit, but for SMEs, it can be a good choice to keep the audit in-house with your HR department if someone on your team has the skills to complete it.

Why? Well, your internal HR team already has a great knowledge of the business, they have internal relationships and they are more familiar with your businesses weak points. If you’re using a human resource information system (like Employment Hero), they will also be able to source valuable people analytics from the platform.

However, there will be some circumstances where external expertise is required. Maybe you’re a new business and you haven’t built up your HR team yet? Or maybe you have a huge team with complex needs? Don’t be a hero – reach out for external support if you need it.

Are you a junior HR professional? Download our complete Intro to HR Management guide to take your skills to the next level.

What are the main components of an HR audit?

Our guide and HR checklist goes into the details of what makes a great audit.

Gathering people analytics

Like everything else these days, efficient and effective HR is supported by digital tools. People analytics – like retention rates, absentee rates, team KPIs and team OKRs – can hugely influence the actions of your audit.

Visa and certification checks

As mentioned above, visa and certification checks are an essential part of your audit. Keeping track of these things is important to make sure you’re operating in-line with employment laws in your country.

Performance evaluations

Are your team members hitting their KPIs? What are their ambitions with the company? Do they feel like they have a gap in their skills? A performance evaluation will help answer those questions, and inform the next part of your HR audit too.

Employee development, reassignment and restructuring

Performance reviews will give you a good basis to then make decisions about movement in your team. Maybe someone is due for a promotion, or their skills could be better used elsewhere in the business.

This is also the stage where you may have to make the tough decision to do some restructuring too. If it’s necessary, don’t forget to consult an employment lawyer before terminating or dismissing any team members.

At this point, you might also examine the national pay scale in your country, and think about salary reviews in-line with market rates.

Recruitment

A great audit will also highlight some workforce needs. By the end of the process you should know what areas of the business need more support, and have an idea of what new roles could make a difference.

How often should you conduct HR audits?

We recommend conducting an HR audit annually or biannually, depending on the size of your business.

Remember, an HR audit needs time to breathe so that your actions can take effect. Although they can have incredible impacts, running them too often could cause disruption to your business or render them ineffective.

How do you write an HR audit report?

Any great audit should leave a clear paper trail. After all, you’re making big suggestions (and potentially big decisions) around the way your business operates.

We recommend keeping a detailed record of all the data which you gathered as part of your HR audit, and all filing all of the related documents like your performance review worksheets in a confidential place.

The findings and recommendations of an HR audit should also be communicated to a business’ senior leadership. In this report you may wish to include;

• The key people analytics sourced, and how they informed your auditing process
• Any trends around performance evaluations
• A list of clear actions and recommendations, in order of importance or urgency

We also recommend presenting the findings of your report to help get your points across to the right decision-makes within your business.

Time for the HR department to shine!

We hope that you find this HR audit guide and checklist helpful in building your strategic plan for the future. It takes time, but an HR audit can be exactly what you need to revamp your team’s energy and prepare your business for the next stage of success. Go forth and be great!

From sourcing people analytics to storing employee feedback securely, HR software is your secret weapon in conducting an HR audit! Learn more about which software might be right for your business.

Otherwise, if you’re looking for what to read next to level up your HR game, check out these common HR mistakes to avoid or our total guide to HR hacks.

Download the guide now.