Is your company experiencing rapid growth and your HR processes becoming more complex? Is your organization evolving: processes, payroll, acquisitions, and you want to ensure your employees remain engaged? Are you simply wondering whether your practices comply with legislation and labor law?
Whatever your situation and the size of your company (micro-business, SME, mid-cap, large corporation), conducting an HR audit, also known as an HR function audit, is essential to identify the strengths and areas for improvement in your organization.
But what exactly does an HR audit involve? What are the objectives of a social audit? What are the steps to follow for a successful HR audit?
HR Audit: Definition
An HR audit involves analyzing all of a company’s HR procedures in order to evaluate the practices in place and assess risks to improve the overall HR strategy and company performance.
An HR audit enables HR departments to take stock of the current situation in order to:
- step back and assess their operating methods;
- anticipate potential risks: legal compliance, payroll management, etc.;
- correct, where applicable, dysfunctions or risks.
The HR audit relies on three types of data:
- Quantitative: turnover rate, absenteeism, types of contracts.
- Qualitative: company culture, management practices, well-being.
- Legal: compliance with labor law, collective agreements.
After analyzing all collected data, the HR audit aims to establish an action plan to improve the company’s social and economic performance.
Two main types of HR audits can be distinguished:
- the legal audit, which evaluates administrative and legal aspects: safety, risk prevention, compliance, adherence to social obligations, evacuation procedures, etc.
- the organizational audit, which measures employee engagement, motivation, talent and skills management, etc.
Conducting an HR audit is strongly recommended, even though it is not mandatory, as regulations and the HR landscape are constantly evolving.
The duration of an HR audit varies depending on the size of the company. It can range from a few days to several months.
Why Conduct an HR Function Audit?
An HR audit can be conducted as a preventive or corrective measure.
As a preventive measure, the objective is to carry out an HR assessment, a comprehensive review of the company’s HR-related processes. It helps detect potential risks and areas of concern, while also highlighting positive aspects, thereby serving as a foundation for implementing a new HR strategy.
As a corrective measure, the objective is to determine the action plan to be implemented to correct a deteriorating situation, secure HR processes, and thus avoid any risk of disputes, litigation, or crises.
The Objectives of an HR Audit:
- Ensure that the HR policy complies with the current legal and regulatory framework: payroll verification, employment contracts, safety, etc.
- Evaluate the effectiveness and performance of HR practices and processes within the company;
- Identify potential risks;
- Identify the strengths of the HR department and areas where HR practices can be improved;
- Propose measures to secure HR processes;
- Implement and deploy an HR strategy aligned with the company’s values and culture;
- Optimize HR costs: payroll, HR tools;
- Improve the employee experience.
Who Should Conduct the HR Audit?
The HR audit can be entrusted to an internal team or a specialized external consultant (recommended).
The external HR consultant is an HR professional, typically with legal training and extensive experience in labor law and collective agreements. This makes them an immediately operational resource, well-suited to the audit assignment.
Using an external auditor to conduct the HR audit provides a fresh, unbiased perspective, unlike an internal team that may lack objectivity, in addition to lacking time.
The Responsibilities of an HR Consultant During the Audit
As part of the HR audit, the external consultant will be responsible for:
- Observing how the company operates;
- Comparing HR procedures with actual practices;
- Assessing HR risks and proposing effective corrective solutions;
- Conducting documentary and field analysis.
To carry out these assignments, the HR auditor follows a five-step methodology: familiarization, assessment, analysis, recommendations, and support. Each audit assignment is planned in advance, specifying the duration of each phase and the deadlines to be met.
The Stages of an HR Audit
Phase 1: Familiarization
The objective of this phase is to understand the company’s environment in order to better analyze it subsequently. To do this, the HR auditor takes the time to speak with the business owner or the audit sponsor to understand the need and define the audit objectives. Understanding the context and history of the company is key to proposing an appropriate action plan at the conclusion of the HR audit.
Phase 2: Assessment
After defining the scope of the HR audit, the auditor must collect all documents that shed light on the context and existing HR processes. Among these HR-related documents are, for example:
- company agreements, if any,
- internal charters,
- the latest HR service memos or internal HR communications,
- the internal regulations,
- the compensation policy,
- employment contracts (permanent contracts for managerial and non-managerial staff, fixed-term contracts, etc.),
- the employee welcome handbook,
- the disciplinary procedure,
- the contract termination procedure,
- the minutes of meetings with employee representatives,
- the training plan,
- mandatory workplace postings.
Based on this documentary foundation (non-exhaustive), the HR auditors can begin identifying risks and conducting an initial risk analysis that must be substantiated and confirmed through field evaluation.
This phase takes place within the audited company and aims to verify the reality of the HR risks identified theoretically during the preparation stage. The field phase deepens the analysis by, for example, conducting interviews with a representative panel of employees (by seniority, level of experience, employee representatives, etc.) or testing processes.
Based on the information gathered in the field, the HR auditors can analyze all qualitative, quantitative, and legal data and proceed to the reporting phase.
Phase 3: Analysis
The analysis is conducted by the auditor with regard to the company’s legal and regulatory framework and HR best practices. During this phase, the auditor evaluates the company’s good practices and identifies risks.
Phase 4: Recommendations
The conclusions of the HR audit are detailed in a written report, which may be in paper and/or digital format. The audit report is ideally presented to the client during an in-person meeting. It details the approach, methodology, and results: the company’s strengths to capitalize on and areas for optimization or even vigilance in cases of immediate risk.
The report includes recommendations and a short-, medium-, and long-term action plan.
Phase 5: Support
The HR audit typically leads to ongoing support to implement the recommendations outlined in the audit report. The auditor then takes on the role of consultant.
Key Takeaways
- Conducting an HR audit helps improve the company’s overall performance.
- The HR audit is a strategic management tool.
- Using a systematic HR audit framework ensures the rigor of the analysis.
- Relying on external HR auditors provides a broader perspective.
Conclusion
Whether you want to conduct a company audit or focus your review specifically on HR, the HR social audit is a powerful lever for aligning your practices with your business objectives. It also serves as an excellent foundation for implementing HRIS projects.
Do not underestimate the impact of a well-conducted HR audit!
