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Assignment
on
HUMAN RESOURCE
AUDIT
Under the subject of
Submitted to Submitted by
The concept of HR audit has emerged from the practice of yearly finance and
accounting audit, which is mandatory for every company, to be done by external
statutory auditors.
This audit serves as an examination on a sample basis of practices and systems for
identifying problems and ensuring that sound accounting principles are followed.
Similarly, an HR audit serves as a means through which an organization can measure
the health of its human resource function.
5. To clarify desired practices of HR work and roles within the organization (HR
Department, Line Managers).
An audit is a systematic process, which examines the important aspects of the function
and its management, and is a means to identify strengths, weaknesses and areas
where rectification may be warranted. An audit is done on sampling basis. And in
sampling, not every instance or situation can be examined.
An HR audit can be used by an organization for multiple purposes. Some of the more
common reasons are:
How an audit is conducted is very often determined by its intended use. For instance,
the type of audit used to ascertain HR practices may be significantly different from the
type of audit used to support an initial public offering. Although the areas examined may
be similar, the process used and the depth of inquiry will vary from the intended
outcome.
The HR audit process is conducted in different phases. Each phase is designed to build
upon the preceding phase so that the organization will have a very strong overview of
the health of the HR function, at the conclusion of the audit. These phases include:
Pre-Audit Information: This phase involves the acquiring and review of relevant HR
manuals, handbooks, forms, reports and other information. A pre-audit information
request is forwarded to the client who compiles the necessary information for review by
auditors.
On-site Review: This phase involves an on-site visit at the client's facility interviewing
staff regarding HR policies and practices. A very in-depth HR audit checklist is
completed.
Audit Report: The information gathered is used to develop an HR audit report. The
audit report categorizes action needs into three separate areas. The areas that are
urgent and important (UI), not urgent needs but important (NUI), not urgent but not
important needs (NNI)), and important opportunities needs (IO). As a result of this
scheme of classification, managements can prioritize their steps.
Audit of HR Climate
HRM Climate has impact on Motivation, Morale and Job Satisfaction. Quality of Climate
can be measured by examining: 1.Employee Turnover, 2.Absenteeism, 3.Safety
Records 4. Attitude Surveys
Employee Turnover:
ETO Implies the process of Employee Leaving & Joining - deaths, transfers,
retirements, resignations. High ET incurs increased costs – Recruitment, Selection,
Training, Disruption of Production, QC-Problems, and Team & Morale Building. Certain
% turnover is Unavoidable. Avoidable ETO causes Concern to HRM, gives excellent
measure of HR Climate, as it can be reduced. Specific Actions can Minimize ETO -
Better Hiring Practices, Orientation Training, Working Conditions, Remuneration &
Benefits, and Advancement Opportunities. Quality ETO Better than Quantity ETO
Absenteeism
Organizations keep records. Accidents cost money and also reflect prevailing
Organizational climate. Managements must have Safety Plan, implement, and evaluate
its Effectiveness.
Attitude Surveys
The Program comes to end with preparation of Report. Report may be Clean or
Qualified. It is Qualified if HR Performance contains Gaps for which remedies
suggested. Report is clean where Performance is fairly Satisfactory.
1. Introduction
2. Executive summary
4. Organization chart.
8. Findings highlights
An example
HR Audit Process
Company______________________________________________Phone_____________
Address_________________________________________________________________
Contact Person_________________________ Total Number of Employees _________
Other Locations Within 75 miles? _________ Number of Employees _______
Federal Contractor?_________ Amount of Government Contracts? $______________
Union Facility? __________ If yes, which union(s)______________________________
What does the company do? (Is it a contractor or does it hire migrant labor?)
_________________________
Performance Evaluations
____ ____ Formal job-evaluation process in place?
____ ____ If yes, are any subjective areas of the process clearly defined?
____ ____ If not, are there any documented reasons for pay differentials (especially if there are
gender
differences?)
____ ____ Copies of evaluations in personnel file
Independent Contractors
____ ____ Do you use any independent contractors?
____ ____ If yes, do records clearly distinguish between core employees and
contract/contingent workers?
Other Records
____ ____ Employee Benefit Plans (1 year after termination of the benefit plan)
____ ____ I-9’s (On file for 3 years or 1 year after termination whichever is longer; preferably
not with Personnel file)
____ ____ Payroll or other records that include name, address, date of birth, occupation, rate of
pay and pay each week for all employees (3 years)
____ ____ If more than 100 employees, is Form EEO-1 at each unit or company headquarters?
____ ____ IRS info—All info on remuneration for labor including tips and sick pay and taxes
withheld for each employee with Soc. Security number kept at least 4 years.
(Keeping records indefinitely is safest)
Occupational Safety and Health Act—Recordkeeping applies, if 10 or more employees
during past year**. Other areas apply to all employers (except agriculture, self-employed, most
mining & nuclear, & state employees)
____ ____ Are records of work-related injury or illness kept within 7 days of notice? **
____ ____ Records of all legally required medical examinations kept? **
____ ____ Records of employee exposure to potentially toxic materials or harmful physical
agents?
____ ____ Totals for the calendar year on OSHA form # 300-A posted in the workplace for
3 months?**
____ ____ OSHA 300 injury/illness log, privacy case list, annual summary and OSUA 301
Incident Report forms kept for 5 years?**
____ ____ Old OSHA 200 and 101 forms retained for 5 years following the year to which
they relate? **
____ ____ Procedure to insure reporting to OSHA any workplace incident resulting in a
fatality or hospitalization of three or more employees (OSHA form # 300) within 8 hours ?
____ ____ Records of any medical exam required by OSHA retained 30 yrs after
termination?
____ ____ Appropriate personal protective equipment supplied to employees?
____ ____ MSDS (Material Safety Data Sheets) maintained for each location and used for
training?
COBRA—Insurance Continuation
____ ____ If more than 20 employees, is COBRA continuation offered?
Employee Retirement Income Security Act (ERIA)
____ ____ Records supporting data in Summary Plan Descriptions (SPFs) and related welfare
and pension reports (Retain 6 years. Exception: Records needed to determine eligibility benefits must
be retained as long as relevant.)
Employee Polygraph Protection Act
____ ____ Ever used Polygraphs? If yes, have the following items been retained for 3 yrs?
____ ____ Copy of statement provided employees telling specific incident being investigated?
____ ____ Basis for testing
____ ____ Records identifying loss
____ ____ Nature of employee’s access to person/property being investigated
____ ____ Notice given examiner identifying person(s) to be examined
____ ____ Reports, questions, lists, all records relating to testing
Compensation
____ ____ Is the turnover rate higher than expectation for any position?
____ ____ Job Analysis available for each position?
____ ____ Positions correctly categorized as exempt or non-exempt?
____ ____ Job Descriptions are up to date?
____ ____ Positions are categorized appropriately by job grades to insure internal equity
____ ____ Evaluation of local market done annually to insure external equity?
Employee Handbook
____ ____ Contains employment-at-will statement?
____ ____ Have a statement signed by each employee saying they have read and understand
the handbook?
____ ____ All key policies are covered including areas such as harassment, violence,
progressive discipline policy, federal regulations, leave, etc.
____ ____ Consistency between policies and practice in organization?
____ ____ Handbook is easily updated and there is a process in place for regular, periodic
review
Selection and Employment Processes
____ ____ The positions and organizational structure required for success has been identified.
This is reviewed before any position is replaced to see if changes are needed
____ ____ All questions on employment application are legal or defensible
____ ____ Job analysis has been done to identify the qualities, skills, abilities, and knowledge
needed for the position
____ ____ Job descriptions that include the major duties and responsibilities available for all
positions
____ ____ Interviewers are able to develop and ask questions that are legal and elicit
information which is behaviorally-based
____ ____ A clear process is in place for notification of candidates
____ ____ Adequate testing and/or background checking is done before extending an offer to
insure the person has the appropriate skills, knowledge, style, etc to be successful in the
position and has given accurate information
____ ____ Employment offer is contingent on passing a drug test
____ ____ Appropriate forms (I-9, W4, etc.) are completed before the person begins work
Americans with Disabilities Act—4 employees or more (Ohio); 15 or more Federal
Standard
____ ____ Policy in place
____ ____ Essential functions identified
____ ____ Job accommodations made, as appropriate
____ ____ Medical records kept separate from other personnel files; access is limited
Family Medical Leave Act--Private employers with 50 or more employees for each working day
during each of 20 or more weeks in the current or preceding year. All public employers.
____ ____ Basic payroll information and identifying employee data, including compensation
paid the employee and the manner in which it was determined, including all
additions and reductions in pay. (Even employers with no FMLA covered
employees must keep these records.)
____ ____ Record of dates FMLA leave is taken by FMLA eligible employees (time records,
requests for leave, etc.). Leave must be designated in records as FMLA leave.
However, leave so designated may not include leave required under state law or
an employer plan that is not also covered by FMLA.
____ ____ The hours of FMLA leave taken if in increments of less than one full day.
____ ____ Copies of all notices given to employees, as well as any received by the employer
requesting FMLA leave. Copies may be maintained in employee personnel files.
____ ____ Information stored in any form (paper or electronic) that explains employer policies
and employee benefits and the payment for benefits.
____ ____ Records of any dispute between the employer and an eligible employee regarding
the designation of leave as FMLA leave, including any written statement from the
employer or employee of the reasons for the designation and for the
disagreement.
____ ____ Records showing that exempt employees worked fewer than 1,250 hours in a 12-
month period, if leave is denied.
____ ____ FMLA-related medical records and documents pertaining to medical certifications,
recertification, or medical histories of employees or employees' family members, created for
FMLA purposes.