2/19/2016by arunal raja1 hr audit by arunal raja, asst. manager (per) personnel dept

05/04/23 BY ARUNAL RAJA 1

HR AUDIT

BY ARUNAL RAJA,ASST. MANAGER (PER)

PERSONNEL DEPT


WHAT IS AN AUDIT?

An audit is a review and verification of completed transactions to see whether they represent a true state of affairs of the business or not. Thus an audit is an examination and verification of accounts and records.

Types of Audits and Reviews:

1.Financial Audits or Reviews 2.Operational Audits 3.Department Reviews 4.Information Systems Audits 5.Investigative Audits or Reviews 6.Follow-up Audits


WHAT IS HR AUDIT? An HR audit is a process to review

implementation of institutions policies and procedures, ensure compliance with employment law, implement best practices and educate your managers. HR Audit refers to an examination and evaluation of policies , procedures and practices to determine the effectiveness of personnel management and HR AUDIT COVERS MEASUREMENT & EVALUATION OF PERSONNEL PROGRAMMES , POLICIES, & PRACTICES.


CONCEPTS OF HR AUDIT

The word “audit” comes from the Latin verb audire , which means, to listen. Listening implies an attempt to know the state of the affairs as they exist and as they are expected/ promised to exist. Auditing as a formal process is rooted in this feature of listening. Consequently, it is a diagnostic tool to gauge not only the current status of things but also the gaps between the current status and the desired status in the area that is being audited.

Auditing has been a routine exercise in the area of finance, especially because it is a statutory obligation. However, in case of Human Resource, there is no legal binding to adopt auditing.


Like any audit, the Human Resource Audit is also a systematic formal process, which is designed to examine the strategies, policies, procedures, documentation, structure, systems and practices with respect to the organization’s Human Resource Management. It systematically and scientifically assesses the strengths, limitations, and developmental needs of the existing Human resources from the larger point of view of enhancing organisational performance.

The Human resource audit is based on the premise that human resource processes are dynamic and must continually be redirected and revitalized to remain responsive to the ever changing needs. Human Resource Audits are not routine practices aimed at problem solving. Instead of directly solving problems, HR audits, like financial audits, help in providing insights into possible causes for current and future problems.


The findings of these audits aid decision making in the organisation and are usually internal documents that need not necessarily be shared with the public. Moreover, unlike Financial Audits that are routine, regulated and standardised, Human Resource Audits are non-routine and may be designed to cater to the unique needs of the organisation at a particular point in time. These are in fact, studies of an unusual nature. The manner in which the Audit is conducted could vary from self-directed surveys to interventions by outside consultants.


OBJECTIVE OF HR AUDIT To know how the various units are functioning

and how they have been able to meet the policies and guidelines which were agreed upon; and to assist the rest of the organisation by identifying the gap between objectives and results for the end-product of an evaluation should be to formulate plans for corrections or adjustments.


PURPOSE OF HR AUDIT Organizations undertake HR audits for many reasons: 1. To ensure effective utilization of human resources. 2. To review compliance with tons of laws and

regulations. 3. To instill a sense of confidence in the human resource

department that it is well-managed and prepared to meet potential challenges and opportunities.

4. To maintain or enhance the organization's reputation in a community.


WHY CONDUCT AN HR AUDIT? Human Resource practices and functions have a far reaching

impact on the employee’s morale and performance, which in turn, affects the overall performance of the organisation. The need for such assessment is even greater in today’s dynamic and at times, turbulent, environment, where human resource management needs continuous up-gradation and re-alignment. Moreover, with increased importance of the human contribution to organisations’ competitive advantage, especially in the knowledge driven economy, the human resource function itself is under transformation. It is gradually moving from the role of a service provider to that of a strategic business partner. In order to perform this emerging role effectively, the HR function has to be continually assess


Whether it is adding tangible value to the organisation through its strategies, policies, processes and practices. Whether it is doing so at a competitive cost and ,whether it is doing so in a manner that is satisfying to its people, acceptable to the society and the law, and from a long term perspective, sustainable. Answers to all these questions need regular HR Audit.

To know how the various units are functioning & how they have been able to meet the policies & guidelines of organisation. Improve HR practices Train your managers understanding of department’s environment Show a “good faith effort” Correct errors


WHAT DOES A FULL HR AUDIT INVOLVE?

7)Employee Relations 8)Communications 9)Files/Record

Maintenance/Technology 10)Policies and procedures

1)Legal compliance 2)Compensation/Salary

Administration 3)Employment/Recruiting 4)Orientation 5)Terminations 6)Training and Development


1)Legal compliance: Who is responsible for legal or employment questions. What are the disputes can be resolved with in or out side of the organisation. What are the illegal violations, and punishments, suspensions pay etc.

2)Compensation/Salary Administration: Salary & wage components, paid leaves, job evaluations, fringe benefits, incentives, increments etc.

3)Employment/Recruiting: Manpower planning, Recruitment sources, screening, selection process, interview panel.

4)Orientation: Duration of Induction & orientation program, topics included, who is responsible for conducting these programs etc.


5)Terminations: Resizing, retrenchment procedures, causes or conditions of termination of employment exists? What procedures are used for Termination for Cause, Job Closure, Resignation? Responsible persons for communicating the termination to other employees, exit interviews.

6)Training and Development: Types of training methods for levels of employee, duration, trainers, Annual expenditures, Personality development, Leadership programs etc,

7)Employee Relations: Responsible persons to look after grievance redressal procedures, maintenance of works committees, Maintenance of grievance records, conducting programs to retain hormonal relations.


8)Communications: Communication procedures, tools , barriers, Responsible persons, methods of effective communication etc.

9)Files/Record Maintenance/Technology: Documentation of personnel files such as Compensation and Benefits, Transitions Paid Time Off, Training, Discipline, Work History, Work Assignments, Significant accomplishment, Emergency contact information, Performance evaluation and performance management, Termination, Current HRIS method etc.

10)Policies and procedures: What personnel policies are currently being used, When was the last time these policies were reviewed and updated, is there a disparity between policies and practices etc.


WHO WILL CONDUCT HR AUDIT

The team that is responsible for the audit should represent a cross-section of the organization’s staff, including line staff, middle and upper management, and those responsible for HR functions or may use an external consultant to assist.


AUDITING PROCESS: ESSENTIAL STEPS

The Auditing process is a function of the objectives and the scope of the Audit, the nature of the organisation and the level of involvement of the top management. Though this process may vary from organisation to organisation, it essentially follows the stages described below.

1) Briefing and orientation: This is a preparatory meeting of key staff members to:

i) discuss particular issues considered to be significant ii) chart out audit procedures, and iii) develop plans and programme of audit

2) Scanning material information: This involves scrutiny of all available records and documents pertaining to the personnel as well as personnel handbooks and manuals, guides, appraisal forms, material on recruitment, computer capabilities, and all such other information considered relevant. Human Resource Audit is the critical analysis of the existing human resource management within the organization. To be able to do that, the audit will have to be served with the data that is quantitative, authentic as well as comprehensive. In other words, the success of this stage of human resource planning solely rests upon the manner in which personnel records and other information are maintained. Hence, the quality of the HRIS becomes critical.


3) Surveying employees: Surveying employees involves interview with key managers, functional executives, top functionaries in the organizations, and even employees representatives, if necessary. The purpose is to identify and enumerate issues of concern, present strengths, anticipated needs and managerial philosophies on human resources.

4) Conducting interviews: The key issue here is to list the pertinent and probing questions. The decision on these questions depends on the scope and purpose of the Audit as well as on the culture of the organisation. The skill of the interviewer lies in getting relevant and correct information without threatening the interviewees.

5) Synthesising: The data thus gathered is synthesized to present the current situation, priorities staff pattern, and issues identified.


Similarly, future needs are identified and appropriate criteria developed for spotlighting the human resource priorities and specific recommendations made.

6) Reporting: Like planning meetings for briefing and orientation, the results of the audit are discussed within several rounds with the managers and staff specialists. In the process, the issues get further crystallized. Based on the findings and the discussion during the meetings, then a final report is prepared and presented formally to the Management. This report should include, the “state of the organisation” report, the assessment of effectiveness and efficiency of various areas covered by the Audit, a legal compliance/ areas of concern report, and critical recommendations for improvement.


COMMON RESEARCH APPROACHES TO THE HR

AUDIT

A.Comparative Approach

B.Outside Authority Approach

C.Statistical Approach

D. Compliance Approach

E. MBO Approach


COMPARITIVE APPROACH In this approach, another division or company that has

better practices or results is chosen as the model. The audit team audits and compares the audited firm’s

results with the best practices of the model organization.

This approach is commonly used to compare the results of specific activities or programs.

This ‘best practices’ approach is often used with turnover, absence, salary data and staffing levels.

It helps detect areas where improvement is needed. It also makes sense to compare where a procedure is being used for the first time.


OUTSIDE AUTHORITY APPROACH

In this approach, standards set by a consultant or taken from published research findings serve as the benchmark for the audit team.

The consultant or research findings may help diagnose the cause of problems.


STATISTICAL APPROACH This approach relies on performance measures drawn

from the company’s existing information system. From existing records, the audit team generates

statistical standards against which activities and programs are evaluated. With the mathematical standards as a base, the team may uncover errors while they are still minor.

Often this approach is supplemented with comparative data from external sources such as other firms, or industry association surveys.

The information is usually expressed in ratios or formulas that are easy to compute and use.


COMPLIANCE APPROACH This approach reviews past practices, to determine if

actions taken followed legal requirements and company policies and procedures.

The audit team here often examines a sample of employment, compensation, discipline and employee appraisal forms.

The purpose of the review is to ensure that the field offices and the operating managers have complied with internal rules and legal regulations, such as minimum wages and equal employment opportunity laws.

By sampling elements of the human resources information system, the audit team looks for deviations from laws and company policies and procedures.

The team can then determine the degree of compliance achieved.


MBO APPROACH In this ‘management by objectives’ approach,

managers and specialists set objectives in their area of responsibility.

Then they create specific goals against which this performance can be measured.

The audit team researches actual performance and compares it with the previously set objectives.

They can then evaluate the trends in this area.


BENEFITS OF HR AUDIT It helps to find out the proper contribution of the HR

department towards the organization. Development of the professional image of the HR

department of the organization. Reduce the HR cost. Motivation of the HR personnel. Find out the problems and solve them smoothly. Provides timely legal requirement. Sound Performance Appraisal Systems. Systematic job analysis. Smooth adoption of the changing mindset.

BENEFIT OF HR AUDIT IN DIOM, NMDC

Error free personnel records Better effectiveness of various HR Policies Better Compliance of Labour Laws Implementation of better facilities &

provisions For recruiting right person at right time &

at place For high morale & satisfaction of

employees


CONCLUSION

The main functions of human resources audit are to take specific actions that will help minimize employee turnover orientation training, working conditions, remuneration and benefits and opportunities for advancement. Therefore, quality of turnover is more important than the quantity of people leaving and joining the industry. Human resources management should create a work environment to make employee realize that it makes a sense to work in the factory rather than staying at home and waste their time. The auditors always prepare and submit an audit report to authority of the organization, which may be clean or qualified. The clean report indicates the appreciative of the department's function, but the latter one represents the gaps in performance and therefore contains remarks and remedial measures. HR Audit is very much helpful to face the challenges and to increase the potentiality of the HR personnel in the organisation.

2/19/2016by arunal raja1 hr audit by arunal raja, asst. manager (per) personnel dept

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