This document provides an overview of conducting a human resources audit. It begins with defining an HR audit as examining an organization's HR policies, procedures, documentation, and practices. The purposes of an audit are then outlined, such as identifying strengths/weaknesses and ensuring legal compliance. Approaches to auditing include comparative, outside authority, compliance, and management by objectives. The auditing process is then detailed in seven steps: develop a plan, checklist, collect data, analyze data, findings, implementation plan, and closing comments. Various topics that could be covered in an audit are also listed, such as hiring, personnel files, compensation, and employee handbook.
2. PRISCILLA NUNN
Priscilla Nunn, President of Cox Cox
Consulting Group, is a results-oriented
organizational development
professional with over 25 years of
progressive experience. She is
recognized as a strategic business
partner with a proven track record for
delivering solutions and strategies
aligned with business goals and
objectives.
4. DEFINITION
The Human Resources (HR) Audit is a process of
examining policies, procedures, documentation,
systems, and practices with respect to an
organization’s HR functions.
5. To identify HR management
strengths and weaknesses.
To ensure legal and policy
compliance in response to a
discrimination charge or
employment related lawsuit.
To purchase Employment Practices
Liability Insurance.
To collect data and develop
measurement standards to
benchmark best practices.
As a part of regular internal audit
procedures.
As a part of Merger &Acquisition
activities.
6. Comparative approach: Audit results are compared to
other organizations in the industry.
Outside authority approach: Organization use standards
set by an outside consultant as benchmark for comparison
of own results.
Compliance approach: Organization determines whether
the audit results comply with legal requirements.
Management by objectives (MBO) approach: Organization
uses audits to determine if goals and objectives are met.
8. Develop An Audit Plan
• Scope
• Key areas and Issues
• Organization’s Facilities
• Resources needed
• Timeline
• Governance
– Team
– Guidelines
– Process
9. Key Areas and Issues
Roles, head count, and HR information systems (HRIS)
Staffing (Recruitment & Selection) process.
Personnel records documentation
Training, development, and career management
Compensation, rewards and benefits.
Performance measurement and evaluation
Termination / demotions and transition / turnovers.
Legal actions / issues and personnel policies
10. Organization’s Facilities
• Corporate
• Individual plants, stores, and offices
• Departments, product lines, profit centers, and cost
centers
• Subsidiaries and divisions
• Acquisitions
• Suppliers, vendors, and third parties
11. Cost related to conducting the
audit, analyzing the audit
findings, reporting the audit
findings, and implementing
corrective action:
• Staff salaries and expenses
• Legal and HR consulting
expertise and expenses
• Equipment (computers,
copiers, etc.)
• Space
• Time
12. Audit Governance
• Who conducts the audit?
– Internal team
• Managers, supervisors and employees from across the
organization
– External Auditor
• An attorney or consultant, or an outsider may work as part
of the audit team.
– Individual HR team member
• How often will the team meet?
• Will the the team issue interim reports?
• How will audit data and information be collected and stored?
• Who will have access to this data and information?
• Who will receive interim and final reports?
14. Audit Checklist Example: Hiring Process
KEY LEGAL CONCERNS
• A claim of discrimination based on the
way applicants are attracted or treated.
• Incomplete or inaccurate
documentation which might be
needed later; for example, to defend a
discrimination claim or in a
government audit focused on the
hiring process.
• Incomplete or incorrect documentation
collected after the hire, such as lack of
I-9 documentation or child/spousal
support documentation.
• Violation of drug testing statutes.
DOCUMENTS TO COLLECT AND REVIEW
Job advertisement - Job application -Job descriptions -Affirmative Action Plan (if any)
Drug testing policy - Internal job posting policy –Internal policies and procedures regarding
interviewing and hiring –Reference/background check policy and forms -Rejection letter
• Does the recruiting process comply
with the employer’s Affirmative Action
Plan (“AAP”), (if any)?
• Does the recruiting process comply
with federal and state discrimination
laws, including making reasonable
accommodation for applicants who
request it as part of the hiring process
• Has the employer completed the I-9
correctly within the required time
frame after the commencement of
employment?
• Are all state drug-testing requirements
met in the hiring process?
HIRING PROCESS QUESTIONS
16. Current Organization
• Total Headcount?
• Full-time / Part-time / Temporary?
• With benefits? Without benefits?
• Average years of service
• On Probation?
• On Family/Medical Leave?
• On Vacation/Sabbatical?
• By Division / Location / Department?
17. Positions
• Are there Job Descriptions for
each position?
• Are there Job Classifications?
• Are Jobs consistently located
within the job classification
system?
• Do the Job Descriptions specify
the minimum requirements,
knowledge/skills/abilities, job
duties?
• Is there an Organizational Chart?
• Is the Organizational Chart made
public? Where is it distributed?
18. Recruitment
• How are candidates sourced?
• How are candidates selected?
• Are legal requirements met?
• Are the same processes used
for all jobs, all locations?
• Are processes followed
consistently?
19. Job Description
• Written in simple language that is
clear to understand?
• Includes a Title, Description, and
Requirements?
• Physical Requirements specified?
• Working conditions specified? Any
hazards?
• Includes statements or work /
duties?
20. Personnel Files
• Where are the personnel files currently located?
• What documents are in the personnel files?
• How long are the files kept after the employee leaves the
company?
• What information is removed from the personnel files and at
what time after the employee leaves the company?
• What controls are in place for access to the personnel files?
• Can employees request to review their files?
• What checks are in place to ensure accurate information?
• How much of this information is stored on-line?
21. Employee Handbook
• Is there an employee handbook?
• Is it distributed to new hires?
• Do the employees have to sign a form stating they
read and understand the handbook?
• When was the handbook last updated?
24. Types of Documentation
AAP/EEO Related
Affirmative Action Plan
EEO-1 Reports
Equal Employment Opportunity Form
Veteran/Disabled Self-Identification Form
Recruiting/Staffing
Job Postings/Advertisements
Employment Agency/Search Firm Contract
Resume/Candidate Tracking System
(sample report)
Employment Application
Interview questions
Pre-Employment Tests –physicals, drug
screens,
FCRA Documents -Consent for Background
Offer Letter Form
Rejection Letter/Rescission of Offer Letter
Adverse Action Letters -FCRA, Criminal,
or Drug Screen
Hire Orientation
On-boarding/Orientation Checklist
Invitation to Self-Identify
I-9 Form
W-4, 1099 Form
Employee Handbook & Acknowledgement
Workplace Harassment Policy &
Complaint Response Process
ADA Policy & Accommodation Request
Process
Equipment Agreement
Summary Plan Document
Personal information Form
Direct Deposit Form
Non-compete Agreements
Federal and State Poster Requirements
www.dol.gov; State Department of Labor
25. Types of Documentation
Ongoing Employment
Job Descriptions
Compensation Analysis
Time Sheets/hours Tracking
Leave Documentation
Performance Management/Discipline
Performance Review/Evaluation Form
Performance Improvement
Plans/Disciplinary Action Forms
Termination of Employment
WARN Act Notification
Termination//Separation Letter
Severance Agreements
Unemployment Insurance
Workers Compensation Information
Non-compete Agreements,
Confidentiality Agreements
COBRA Notifications
Compensation
Compensation Philosophy/Policy
Salary Administration policy
Bonus Policy
Executive Compensation Plan/Policy
Incentive Compensation Plan/Policy
Garnishment/Attachment Policy and
Procedure
Loans and Payroll Advances Policies
and Procedures Direct Deposit Form
Payroll Action Form
Bonus Plan Document
Merit Increase Form
Loan Repayment Agreements
Employment Agreements
28. Findings
Provide Feedback
Prepare a a written report with finding and
recommendations prioritized.
Meet with HR and Sr. Management
Summarize the data and provide feedback
to the company’s HR professionals and
senior management team in the form of
findings and recommendations.
Prioritization Recommendation
• Compliance Violation
• Policy Non-Compliance
• Practice Inconsistency
• Goal and Objective Misses
• Outsourcing Opportunity
• Transactional
• Benchmarking Opportunity
29. Develop an Implementation Plan
– Finding
– Recommendation-Action
(Legal advice may be needed to
understand issues and design
action steps)
– Responsible Person
– Timeline
30. To Note
Findings of your HR audit
• Will be discoverable
• Will become common knowledge
• Will raise employees’ expectations that you will
address the issues identified
It increases legal risk to conduct an audit and then fail
to act on the results.
