HR Audit

The aim of any audit is to assess what an organization is doing right while also coming to know the areas of improvement- How can activities be done differently, more effectively or at a lower cost? It is about identifying issues and finding solutions before they become unmanageable. An audit involves examination or inspection of various books of accounts by an auditor including physical verification of inventory to ensure that the departments are following documented system of recording transactions. In respect of HR, there are many legal compliances that are required to be done in a timely manner. The HR audit helps to ensure that everything is going well and that appropriate corrective steps are taken wherever necessary.

An HR audit is an objective examination of the company's HR policies, practices, and procedures. The broad focus would be on the consistency of the department in its dealings with employees, its compliance with law and the completeness of the work it performs. The audit may cover not only the functional aspects but also the culture, strategy, compliance and policies framed by the company.

Auditing can be done of the entire gamut of the function like recruitment, payroll, retention, training, onboarding, salary, compensation & performance management or any one aspect or concern area, depending on the scope determined for the audit. If an HR audit has never been conducted in the organization, a comprehensive review of all policies and procedures is recommended. The auditing can be done by hiring an outside expert or more frequent internal audits can be done by employees of the company; the aim being to look out for trouble spots and ways for improvement.

In Hyundai Motor India Ltd, we had problems related to the contract labour management and compliance. In accordance with the Contract Labour (Regulation & Abolition) Act 1970, PF, ESI remittances and other compliances were to be done by the contractor. But as per the said law, failure of the contractor to do so puts the onus and liability on the principal employer. As the number of contractors were large and monitoring their compliance became a problem, the company outsourced the job of monthy auditing of the contractor's records to experts. As a result, the compliance issues were solved instantaneously.

An HR audit checklist can be prepared by the department to ensure that all aspects are covered in an audit. It also helps in highlighting the noncompliance fields to be addressed. Thus any threat that may be faced by the company in the future is reduced. After an audit is completed, the audit report is furnished to the HR department to make corrections and comply. It is very important to have a follow up review after six months to confirm whether or not the corrective actions were implemented.

In conclusion, it is to be reiterated that HR audit is most essential for the health of the organization. It could be the difference between its success or failure!   

This post is a part of #BlogchatterA2Z 2023