A human resources audit is a critical process and comprehensive method adopted by a company on an annual basis or during critical changes being experienced by a company, such as mergers and acquisitions, operational restructuring, due diligence processes, in preparation for the annual department of labour or other regulatory inspections etc. The purpose is to review current human resource policies, procedures, documentation and systems, identifying the need for improvement and/or enhancement against compliance requirements and evolving best practices.

An HR audit conducted by a professional HR consultant looks at all aspects of HR management focusing on a checklist that directs the auditing process in accordance with the employee life cycle:

• Hiring and onboarding
• Benefits, compensation, reward and payroll processes
• Job descriptions and job benchmarking
• Performance evaluation processes
• Absenteeism, sick leave and ergonomic factors
• Training and development plans
• Organisational structure and reporting lines
• Labour relations and inherent risks
• Employee files, employee manuals and policies
• Termination process and exit interviews
• All legislated and other compliance-related matters
• Organisational culture, values and employee satisfaction

The purpose of an HR audit is to recognise the strengths and identify any needs for improvement in the way staff are managed by the HR function and/or line managers. A properly executed HR audit will reveal problem areas and provide recommendations and solutions to remedy these problems. Some of the reasons to conduct an HR audit during the annual company auditing process are:

1. to ensure the effective and efficient utilisation of the organisation’s human capital;
2. to perform a “due diligence” review for shareholders or potential investors/owners; and
3. to establish a baseline for future improvement from within the HR function and the company as a whole.

Due to the multitude of employment laws that affect each stage of the employment process, an employer needs to conduct regular analysis and audits of both the HR function and the company’s adherence to policies and practices. Completing an annual HR audit helps to identify regulatory compliance issues and risks that may exist and which if attended to correctly supports the company in avoiding costly fines and/or lawsuits.

Whilst ensuring that companies minimise their risk, potential penalties help define the risk of non-compliance and highlight the importance of having an experienced and professional HR advisor/ consultant conduct periodic HR audits. An audit can also ensure that the employee value proposition is underpinned by employee policies and procedures are fair and applied consistently across the organisation which ultimately leads to strengthening employee engagement and improves staff satisfaction. Leaders that recognise the importance and value of having a strong HR platform understand the return on investment they get from a satisfied and productive workforce.

Committing to an annual HR audit reduces the expense associated with costly staff turnover or other negative symptoms inherent of a dissatisfied workforce. Calculate the cost of losing one employee which is estimated to cost a company between 50 – 150% of the lost employee’s salary in time and money spent to replace that employee and one will soon realise that an HR audit is a proactive step that companies need to adopt.

Contact Crowe DNA to assist your firm and your clients in taking the necessary steps to carry out a world-class HR audit that delivers a complimentary service that brings the best HR solutions that add lasting value.

Email/contact:
Dale Holloway, Managing Director, +27 834615933 / dale.holloway@crowe.za.com
Nicole Badenhorst, Director, +27 0829294744 / Nicole.badenhorst@crowe.za.com or mail infodna@crowe.za.com and one of our professional consultants will contact you directly.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)