HR Audit - Everything You Need to Know

Is your company performing regular HR audits? Inefficacious HR processes, systems, and policies can harm your business. An internal audit undertaken by your HR team could be exactly what you need to help your company gauge its performance and detect its strengths and weaknesses, so you can tackle any major issues in advance of being faced with an audit from another agency. An HR audit provides companies with the opportunity to identify potentially complicated policies that may not be in compliance with laws and regulations in an effort to reduce the risk of costly lawsuits or fines. In this article, let us see why an HR audit is an important practice for your organisation and how to conduct one.

What is an HR audit?

An HR audit is a systematic review of a company’s policies and procedures to identify areas that may require improvement and what areas are doing well. HR audits help to minimise lawsuits or regulatory violations as well as to accomplish and maintain excellent competitiveness in key HR practice areas. A human resources audit is like an internal process audit that helps the HR department know how effective it is. Most importantly, an HR audit is an opportunity to stiffen up the processes so that things like recruitment and termination procedures, onboarding, retention, training, remuneration and compensation, payroll, and performance management all get the attention they require.

The Significance Of Performing An HR Audit

HR audits safeguard organisations from risk and help them avoid legal liabilities connected with human resource issues. An HR audit provides companies with the opportunity to protect themselves from legal risks and alleviate issues before they become unmanageable. This is particularly helpful with regard to the incomprehensible laws and regulations related to employment, tax, insurance, and recruitment. HR audits allow organisations to measure their strategies and practices. An audit will disclose how your organization’s present policies and practices are helping or obstructing the accomplishment of strategic goals; it will also help you identify what steps may be required to change current practices.

HR audits help set up businesses in the event of an external audit. An internal HR audit is potentially the perfect method to prevent the tension of an unexpected external audit from another body. Implementing your own HR audit gives you confidence in where your company stands with regard to compliance, policies, business practices, etc.

Goals for HR Audits

An HR audit can be integrated differently based on a company’s goals. Generally, there are four types of audits; each type is aimed at achieving something different.

1. Compliance Audit
A compliance audit evaluates how well an organisation complies with regulatory guidelines. Audit reports assess the strength and comprehensiveness of compliance preparations, security policies, user access controls, and risk management proceedings during the course of a compliance audit.

2. Best Practices Audit
A best practice audit compares an organization’s current practices with those of the industry for the purpose of preserving or gaining a competitive advantage. The scope of this kind of HR audit is to understand how an organisation performs compared to its competitors. Although it is not legally based or compliance-related, this kind of audit gives businesses an understanding of whether or not they are executing and following through with actions that can help enhance competitiveness.

3. Strategic Audit
A strategic audit is an objective survey and evaluation of a strategic plan that focuses on the strengths and weaknesses of systems and processes to assess whether they align with the organization’s strategic plan. The audit assures that strategic plans are pinpointed, remain valid, and continue to create value for the organization.

4. Function-specific Audit
A function-specific audit emphasises specific HR function areas like payroll, performance management, etc. The purpose of this audit is to address one specific area of the operation and ensure that the structure, policies, and best practices within that specific department align with the strategy of the entire organization.

Steps To Perform An HR Audit:

1. Find out the type and scope of the HR audit to be executed. An HR audit can be structured to be either extensive or primarily targeted within the constraints of time, budgets, and staff. It is the best method to analyse your strategic plan as a whole.

2. Make a plan for your audit. Prepare questions or draft goals for the audit, and then figure out how they will be implemented. The below questions should be answered at this step: What is the perfect method to accomplish the audit? Who will take part in it?

3. Collection of data. Using the above plan, complete your audit and then do a thorough examination of the data collected.

4. Evaluate your findings. If possible, compare your results to those of your competitors; furthermore, ensure that what your company is calling "best practices" are still best practices for your enterprise.

5. Give feedback on your findings. After the audit, it is essential to report findings to help talk through and analyze next-level recommendations.

6. Set up action plans. Give suggestions for what should change, and then find out the next steps for making improvements on the basis of the audit.

7. Nurture continuous improvement. This means attributing to an attitude of unceasing assessment and improvement. Organizations may find it helpful to appoint one person to stay up to date on legal and regulatory problems that may affect the company, as well as to stay informed of internal processes to quickly identify problems.


The above-mentioned process is an outline of the HR audit process. Although an HR audit should incorporate these steps, your organisation should also make an effort to bring them in line with your own strategic goals, compliance requirements, and more.