What is an HR audit and why is it important?

What is an HR audit and why is it important?

When it comes to risks in the management of human resources, employers and HR professionals should not simply wait for an inspection by the Department of Labour, the Social Insurance Services, the Income Tax office or another government bureau to knock on their door.  Regular audits are the best way to defend an organisation against potential employment claims, adverse government department findings or fines.

Most people are familiar with annual financial audits (the legal requirement for organisations to provide reasonable assurance that their financial statements are complete and accurate) but not many have heard of HR Audits.  The performance of people (human resources) is one of the most difficult aspects of organizational performance to measure. HR audits can provide valuable help in this direction as they are a powerful tool measuring the effectiveness of HR management practices.

HR audits can help an employer safeguard legal conformity and to monitor their recordkeeping policies.  But they don’t have to be limited to legal compliance. HR audits may accomplish a variety of additional objectives, such as aiding the maintenance or improvement of competitive advantage; creating efficient documentation and technology practices; and, detecting strengths and weaknesses in recruitment, performance management, reward, communications, learning and development and other employment practices.

A systematic formal process like any other audit, the HR audit is designed to objectively review and evaluate the strategies, policies, processes and procedures, structure, systems and documents of the organisation’s human resource management in view of enhancing organisational performance.  It does so by:

  • Ensuring that legal compliance and governance requirements are being met
  • Confirming that business and talent management objectives are achieved
  • Identifying, assessing and managing human resources management risks
  • Warranting the organization’s human resources add value

The HR audit is based on the principle that HR processes are dynamic and have to be re-addressed and refreshed constantly if they are to keep on being quick to respond to needs that are changing all the time. 

It’s important to note, that this is not a routine practice intended to solve problems.  Similar to financial audits, HR audits act as a health check-up, allowing organisations to get an overall view of where they stand, looking at their processes and paperwork to see if everything is in order. 

By offering insights into the likely cause of problems they are facing or by identifying potential future issues, this health-check acts as an “early warning system”.  The audit can help the organisation plan ahead and prevent issues from arising, thus saving trouble and money.

HR audits provide the following benefits to organisations:

  • They explore the effective use of human resources
  • They ensure alignment of human resource management with the overall business
  • They can identify ways to streamline work processes
  • They offer measuring of continuous improvement
  • They can instil a sense of confidence in the HRhhrHR department
  • They can maintain or enhance the organisation’s reputation in the community

By carrying regular HR audits, it can be ensured that the organisation’s human resource practices are healthy and carried out at its best; reducing general organizational liability and increasing performance effectiveness.

As human resources are becoming the most important factor in an organisation, being the source of innovation and a driver for productivity, profitability, business success and sustainability, it is evident why HR audits are such an important tool.  The results of an HR audit professionally carried-out by experienced, external consultants, help determine the actions that need to be taken, how the changes will affect the business bottom line and how to prioritise problem areas in order of importance.

Kiki Kallis
HR Consultant