If you have employees, you're never too small to evaluate HR practices
A human resources audit is an analysis of the state of your HR processes and procedures. Although it's easy to ignore the need for regular HR audits or treat audits as an afterthought, especially in small organizations, regular HR audits are a proactive and essential measure — regardless of the size of your organization.
What's the point of an HR audit?
For most organizations, the primary goal of an HR audit is to ensure compliance with applicable employment laws. Failure to audit may result in failure to comply with these laws, which, in turn, may have serious legal consequences — both for the organization and its senior leaders, who may be held personally liable.
But there are many additional benefits to performing regular HR audits.
For example, audits can help you anticipate personnel needs and avoid potential staffing crises — whether under- or over-staffing — and keep current employees on top of their professional development game. Additionally, regular assessments of the workplace culture can help prevent interpersonal conflicts and maintain a positive working environment. By providing an intense yet objective look at your organization's HR practices, audits also uncover opportunities for improvement.
Who should conduct the audit?
HR audits may be conducted in-house or outsourced to a nonprofit auditing firm.
If you'd prefer to conduct the audit in-house, the person or team assigned to the task will need to be familiar with any updates to applicable laws. You'll also need to agree on the assessment criteria that best reflect your optimal HR functions.
If you hire an auditing firm, you can count on the firm to be current on applicable labor and employment laws. The audit itself and the associated fee structure should match the size and scope of your nonprofit's work.
What should be included in the audit?
Key categories of an HR audit often include:
- Workforce planning. What are the organization's recruitment sources? Do recruiting procedures ensure fairness, consistency and quality hiring? Are they in line with employment laws, especially any recent equality legislation? Are references and background information checked before offering a position? Is this done in a fair and consistent manner?
- Job descriptions. Are job descriptions available for every role in the organization? Are existing descriptions accurate and up to date? Do they include minimum qualifications needed and, in the U.S., specify exempt or nonexempt status?
- Training and orientation. Is there a plan in place to acquaint new employees with their specific job requirements and expectations? Are employees immersed completely into the culture of the organization from the get-go and aware of how their roles interact with various other roles? What about ongoing training throughout the employee's tenure?
- Policies and procedures. Does your employee handbook cover relevant policies and procedures? Are policies and procedures in accordance with relevant laws? Do you ensure that every employee receives a copy of this handbook at the start of their employment, or is informed where a copy can be located? Is the handbook reviewed on a regular basis (annually, or more often if there are any major employment law changes during the year)?
- Performance evaluations. Are the rules and criteria for performance evaluations clear and open? Are they tailored to the demands of the position and the profession?
- Compliance with applicable laws. Are employees treated in accordance with laws governing compensation, workplace safety, benefits and leave?
- Working environment. Do supervisors and employees treat each other respectfully? Are lines of communication open and straightforward?
If you work with an auditing firm, the firm will likely propose their own criteria for the audit. If you opt to conduct the audit yourself, use these detailed HR audit checklists as a starting point:
- Strategic management
- Workforce planning and selection
- Employee development and training
- Total rewards
- Employee and labor relations
- Safety and security
- Diversity and equal employment opportunity
- HR information systems and metrics
- HR department
When should an HR audit be conducted?
Ideally, HR audits are conducted annually — with results communicated to the board. This not only keeps your organization running smoothly, it's also a direct way to maintain compliance with updated labor and employment laws.
Better yet, some self-auditing measures can be ongoing or spread out monthly or quarterly. For instance, one month, the person responsible for writing job descriptions might review personnel files to make sure all job descriptions are up to date. Another month might be dedicated to offering training on your employee benefits package.