The word Audit is derived from a Latin verb Audire which means to listen in English. Listening is implied here as the attempt to understand the state of affairs as they are and as expected to exist. Auditing is a formal routine which is ingrained in this listening. The purpose of a HR audit is to assess the whole effectiveness of the Human Resource functions.
This systematic process is designed to examine the policies, procedures, the system and its structure considering the organization’s human resource management.The Human Resource is an asset to the organization so an HR Audit signifies the way you look at the people and the processes that are involved to make an effective HR system. The HR audit is done on the annual basis by providing all the information related to the workforce and the efficiency of the company as how they deal with its people from recruiting to the firing. This provides the company a general idea about where the company stands, need for improvement and prevent from problems in the future.
It is a systematic authentication of job analysis, job design, and recruitment and selection method, orientation, the training and development programs, performance appraisal and job evaluation, employee remuneration , motivation and morale of the workforce, the company ‘s culture ,the safety and health , industrial relation, trade unions and disputes and resolutions taken place within the company.
The people who are responsible for conducting the audit must hold the cross section of the organization ‘s staff that involves the line staff, middle and upper management that are overall responsible for carrying out the HR functions.
The HR audit starts with collecting data by assessing the mission, vision, strategy and the organizational culture of the company. The information about the turnover rate of the employees, the hiring statistics, the compensation offered by the company, the exit interview summaries, the overall HR budget and expenditure, employee complaints (discrimination, harassment issues etc) and the promotion and advancement policies are collected to carry out the audit process.
Often times, internal interviews are also conducted with the employees to find out how employees perceive the company’s goals ,the top management’s strengths and weaknesses, relationships with the peer groups and subordinates and which functions do not perform well.
Following are the approaches used in the HR Audit process such as:
• The Comparative Approach: Here the auditor identifies the competitor company model. The results are compared with the other company /industry.
• The Outside Authority Approach: this is used as a standard set by the outside consultant for the comparison of results.
• The Statistical Approach: the performance of the company is measured through the existing result.
• The Compliance Approach: The auditors take a review of the past results if they comply with the company’s legal policies and procedures.
The HR audit is important to provide direction and may recommend the course of action to enable compliance with the laws and regulations of the company and therefore reduces the certainty of risk and liability for the company.