HR Audits: What, Why, and How

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HR Audits What, Why, and How
Conducting the Human Resources Audit

• By Anna M. Loh
• Director, Human Resources
• Wharton School at the University of Pennsylvania

06/12/03
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What keeps you awake at night?
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What is an HR audit?
An HR audit is a process to review implementation
of your institutions policies and procedures,
ensure compliance with employment law, eliminate
liabilities, implement best practices and educate
your managers.
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The audit should be
Proactive Reactive Informative Developmental
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Why conduct an HR audit?

• Ensure compliance
• Improve HR practices
• Train your managers
• Prepare for potential government audit or
  litigation
• Gain an understanding of departments
  environment
• Show a good faith effort
• Correct errors

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Audit Tools

• Interview
• Document review
• Questionnaire
• Sampling

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What is the audit testing?

• Compliance with employment law
• Compliance with institution policies/procedures
• Training opportunities
• Department environment
• Potential liabilities
• Accuracy of records
• Managers understanding of law/policies/procedure
  s

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Before you begin the audit process

• 1. Determine who will conduct the audit.
• Internal vs. External
• 2. Secure senior management commitment.
• Are they ready to fix whats broken, even if it
  costs ?
• Do they agree with the methodology?
• Will they allow access to all departments/informat
  ion?
• Will they publicly support the process?

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Before you begin the audit process

• 3. Define the parameters.
• Who will be audited?
• What do you want to audit?
• What audit tools will you use?
• How will the process be rolled out?
• How will results get reported?
• Who will get the results?

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Before you begin the audit process
4. Introduce the audit process to your managers.
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How do you introduce the HR audit to your
managers?

• 1. Explain the reason for it.
• To protect them and the institution
• To help them understand policies, procedures, and
  laws
• To gain a better understanding of their
  department
• To help them set best practice procedures
• To avoid costly and time consuming litigation

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How do you introduce the HR audit to your
managers?
2. Give them a copy of the questions before the
interview. If you have an intranet, post the
questions on it.
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Departmental AuditsWhat should you be concerned
about?

• Record Keeping
• Sick and vacation tracking
• Overtime reporting
• FMLA application
• Temporary worker tracking
• Accessibility/safety/security of
• records
• Accuracy of records

• Employee Files
• What is and isnt in the
• employee file
• Access to the file
• Safety and security of the files

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Departmental AuditsWhat should you be concerned
about? (contd)

• Managers Understanding of Policies/Practices
• How to handle complaints of harassment
• How to calculate/report overtime
• Difference between exempt and non-exempt
• Giving employment references
• Affirmative Action requirements
• FMLA
• Consistency applying policies and procedures

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Reporting the Results

• Compile your findings in a draft letter
• Allow department head/manager to review
• your draft and make comments/corrections
• Compile final version
• Present report to senior management
• Copy department head/manager

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Remember.
Allowing a department head and or manager to
review your draft is not a license for him/her to
change your findings.
The findings are not negotiable!
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What should your memo contain?

• Recognition of departments cooperation (or lack
  of it)
• State the facts avoid opinions
• Document areas that need attention
• Document areas where department was proactive,
  compliant,
• practiced good judgment
• Suggestions on how to correct problem areas
• Time line for follow-up
• Offer Human Resources assistance

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Dont forget to conduct an audit in your own
(Human Resources) department!

• Benefits
• No phantom participants
• Compliant with HIPPA
• Paying correct rates

• Compensation/Payroll
• Correct use of exempts vs. non-
• exempt status
• Employees are correctly graded
• Job descriptions are available for all
• position or grade categories
• Limited access to systems/records
• Social Security numbers are secure
• and only used when necessary

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Review

• Employee Relations
• Correct documentation of
• investigations
• Warning/disciplinary letters
• Policies and procedures are
• readily available to staff
• Required posters are visible to
• staff
• Sick and vacation tracking is
• accurate

• Training and Development
• Programs are readily
• available to staff
• Tracking attendance

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Review

• Records
• Employee files are kept in
• safe and secure area
• Limited access to files
• Necessary paperwork is
• readily available (job
• description, application, I9,
• W4, emergency contact)
• Certain records are kept
• separate from employee file
• (references, medical records,
• investigatory documents)

• Employment/Recruitment
• Staffing and selection paperwork
• Affirmative Action forms
• Posting information

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Thank you!