We would probably all agree that having regular ‘check ups’ is essential for ensuring smooth running of any machine, organism or an organisation. We go to see our doctor to check our state of health, we take our car for a regular MOT and we definitely ensure that our business finances receive a thorough annual audit but more often than not – we stop there.
Each business is made up of a number of function that all play vital roles in ensuring a smooth operation. Finance just happens to be the one that receives biggest scrutiny for operational efficiency and accuracy and the statutory requirements mean that this area can’t be ignored. But what about everything else? And what about HR in particular? Your business changes frequently and employment law changes frequently so how do you make sure that your HR function keeps up-to-date?
People – Your Main Operation
Unless your business is fully automated, your biggest investment/asset will be your employees. Managing them effectively and within the parameters of employment law is vital to your business success and you do need to conduct regular reviews to ensure that you are getting the maximum return on investment from your team.
We suggest that every business should conduct an annual HR audit. Ideally you would be taking on an external party to complete this (just like with financial audits) but you can also complete an HR audit yourself. We regularly complete HR audits for our clients (click here for details on this service) and wanted to give you a few tips to help you with this challenging task:
What should an HR Audit cover?
A standard HR audit will look at the operational efficiencies either of the HR department or the HR functions as they are delegated and shared amongst team members. This will include:
- reviewing your business plan/strategy and identifying the HR implications of what you are looking to achieve,
- reviewing your recruitment practices,
- looking at employment administration (contracts, new starter processes, benefits administration, etc.),
- assessing your training and development and people capabilities,
- reviewing your performance management processes and approaches,
- looking at your absence management and compliance with statutory leave procedures, and
- identifying any cultural challenges that need to be addressed.
The audit will give you a clear understanding of areas of risk for the business and also any gaps in compliance with employment law.
What activities are involved in an HR Audit?
To perform an HR Audit, you will need to:
- Speak with the people who are in charge of the different functions to understand the internal processes and the actual practices.
- Review the documentation available both the policies and procedures that are defined and also review records to identify if these are always followed correctly.
- Interview a selection of individuals in the business (those who are responsible for carrying out the processes and those who are experiencing the processes as users).
- Compare your findings with established good practice standards and also the standards that you are aspiring to achieve.
The HR Audit is done – what’s next?
Once you have completed the annual audit you will now need to identify areas that need improvements/changes and assign appropriate actions to these. Your audit will give you great insight into what areas you should be addressing in the business and now you will need to identify solutions and ‘fixes’ for all of these areas.
Lastly, having defined the actions that will need to be taken, you will now need to ‘do it’. There is not much use in having insight and understanding of things that might not be going well and then not doing anything about it. So, you need to have strong commitment to actually fixing the problems that the audit will highlight to you.
As you have probably gathered an annual HR audit is not all ‘fun and games’ but just like most things in business – we shouldn’t expect it to be. The success of your company lies in effective management of all operations and this requires regular reviews to identify risks and inefficiencies. An HR Audit should be a ‘must do’ for businesses as it deals with the area that most impacts on the overall success of all of your operations.
We hope this blog has given you some insight, but we understand that this is a rather complicated area. So, if you need any help with your next (or first!) HR audit, we have extensive experience of supporting clients with regular audits and can help by either providing you with information and guidance or doing it all for you as external auditors. Just give us a call on 0203 319 1649 and speak to one of our consultants to find out how we could support you with this.