Why you should conduct HR audits – and how

Written by
RMI Team (F)

The importance of HR audit

“Inspiring” is not a word often associated with an audit. But taking a close look at your organisation’s processes and procedures can inspire change and ensure that your business is on track to meet its goals.

Shifts in culture, advances in technology, changes to employment law and more can influence the role of HR and the success of HR management.

In many places across Asia, employment regulations are tightening; there are more avenues now for employees to seek support when organisations do not follow appropriate procedures.

For instance, in Singapore, workplace discrimination or harassment complaints increased by 42 percent from April 2019 to March 2020, resulting in suspension of work pass privileges for many of the companies involved.

Failure to comply with employment laws and regulations can result in financial and legal consequences, and in reputational damage to your business’s image as an employer. The latter is particularly important given the ongoing talent war.

While HR audits are often carried out in response to a problem, such as legal trouble arising from employment disputes, regular auditing can optimise HR to help mitigate common business risks and uncover opportunities for improvement and added value.

Internal versus external HR auditor

HR audits can be conducted internally or externally. There are many benefits to hiring an external auditor, including specific expertise and an unbiased, objective perspective. However, external auditors can be expensive.

On the other hand, internal audits are much less costly. They can be effective as part of regular business operations, though this requires a suitably qualified member of the HR team to commit time and resources to conduct the audit.

What’s involved in an HR audit?

The first step is to determine the purpose and focus of the audit. This may involve prioritising areas that need to be addressed immediately, such as those identified when a problem arises. Some areas of focus include:

  • Compliance with new or existing legal requirements. This may be especially relevant today given regulatory changes and the rise of hybrid work increasing risk in certain areas.
  • Alignment with business strategy, including employee performance and recruitment-related issues such as fraud.
  • Function-specific areas – for example, payroll, record keeping, recruitment interviewing, job descriptions

Then, create a questionnaire or checklist that aligns with the goals and purpose of the audit, and collect relevant data. The latter may involve interviews, reports from HRM software and tools, or both.

The next step is to analyse the data and compare your organisation’s performance with industry standards and previous audits. This may also be a good time to look into new tools and processes that could improve the efficiency of HR activities and add value to your business.

Armed with these findings and recommendations, you as a HR leader can then make a business case for change, and develop action plans to implement the necessary initiatives and improvements.

Tips for a successful HR audit

Here are some pointers to maximise your chances of success:

  • Allocate enough time and resources. If resources are limited, you may need to narrow the scope of the audit.
  • Choose the right auditor. Whether the audit is conducted by an internal HR professional or an external party, current knowledge of local regulations is vital.
  • Take a holistic approach to auditing. This means not just identifying risk and problems, but also how to optimise HR to drive better business outcomes.
  • Conduct mini-audits regularly. Make reflection on processes and procedures part of regular practice to encourage continuous improvement in the business.
  • Keep honing the auditing process. Improvements to the audit process will help drive the pursuit of more effective and efficient operations.

Today’s fast-changing business landscape means uncertainty is the norm. HR leaders need to stay agile and flexible, and be ready to react to unforeseen circumstances and emerging business risks, to help future-proof the organisation for success.