HR Audits

HR audit

There are many different types of A Human Resources Audit (or HR Audit). Audits can be broad, incorporating how a business operates and reviewing efficiencies, or they can identify potential problems and lead to timely corrective measures. Whatever the need, we’ll streamline the process for you.

The HR Audit is the process of evaluating the performance of Human Resource Department and its activities undertaken, and the policies followed towards the accomplishment of organizational goals.

The HR Audit is conducted to identify the lapses, shortcomings, gaps in the implementation of HR functions and suggesting the remedial actions, if any.

A HR Audit is a comprehensive method (or means) to review current human resources policies, procedures, documentation, systems, admin, employee details, handbook, performance management, training programmes, termination procedures to identify needs for improvement and enhancement of the HR function as well as to assess compliance with ever-changing rules and regulations. An Audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion.


Human resource audits involve an organization’s strategic actions to take an intensely objective look at its HR policies, procedures and practices. This type of comprehensive review of the company’s current state can help identify whether specific practice areas or processes are adequate, legal and effective. The results obtained from this review can help identify gaps in HR practices, and HR can then prioritize these gaps in an effort to minimize lawsuits and regulatory violations, as well as to achieve and maintain world-class competitiveness in key HR practice areas.

Sections of review include:

  • Hiring and Onboarding
  • Benefits
  • Compensation
  • Performance evaluation process
  • Termination process and exit interviews
  • Job descriptions
  • Form review
  • Personnel file review

The purpose of an HR Audit is to recognize strengths and identify any needs for improvement in the human resources function. A properly executed Audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems. Some of the reasons to conduct such a review include:

  • Ensuring the effective utilization of the organization’s human resources
  • Reviewing compliance in relation to administration of the organization
  • Instilling a sense of confidence in management and the human resources function
  • Maintaining or enhancing the organization and the department’s reputation in the community
  • Performing “due diligence” review for shareholders or potential investors/owners
  • Establishing a baseline for future improvement for the function

Approaches to HR Audit

Following are the approaches that can be adopted by an auditor to evaluate the performance of the HR department:


In this approach, the auditor identifies any company usually the competitor’s company as a model. Then the results of the organization are compared with that of the model company.

Outside Authority:

The auditor uses the standard set as a benchmark by the outside consultant and then compares the organization’s performance with that.


Under this approach, the auditor develops the statistical measures of performance for the existing organization’s information, such as turnover rates, absenteeism.


Here the auditor checks the past actions of the company to ensure that those activities comply with the legal requirements and is in line with the company’s policy and procedures.

Management by Objective:

under this approach, the auditors check the performance of HR personnel against the goals set by the top management.

It is recommended to have an HR audit once in a year so that, the performance of the HR department in terms of its recruitment and selection process, compensation plan, grading system, layoff schemes and other HR functions can be checked. By doing so, it can be ensured that Human resource practices are carried out at its best and is reducing the organization’s liability as a whole.

Because of the multitude of laws affecting each stage of the employment process, it is extremely important for an employer to regularly conduct an HR analysis of their policies and practices. This helps to identify regulatory compliance issues if they exist and avoids potentially costly fines and/or lawsuits, if otherwise ignored. While penalties such as these help define the risk of non-compliance and signify the importance of conducting periodic HR Audits, an Audit can also ensure that policies and procedures are fair and consistent across the organization and strengthen employee satisfaction. By maintaining a satisfied and productive workforce, an employer lessens the expense associated with costly turnover of staff. Losing one employee is estimated to cost a company 50 – 150% of the lost employee’s salary in time and money spent to replace that employee.