A human resource audit is a procedure to measure the degree of compliance an organization has with the existing legal obligations and labor laws. It also suggests corrective actions which may be necessary.

The Human resource audit ensures that the organization is aware of the existing laws and rules and whether it is implementing them effectively. This creates an atmosphere of transparency and goes a long way in avoiding legal confrontation later. The audit also helps build trust in the minds of the employees who are confident that things pertaining to their wellbeing are being taken care of. It also makes the HR employees familiar with the current laws. Besides, the audit adds credibility to the company in the eyes of the investors, who may look favorably.

Should the organization opt for an Employment Practices Liability Insurance, the insurance will scrutinize the report of the HR audit to check for compliance and the presence of appropriate employment procedures.

To conduct an HR audit, we need to have an elementary knowledge of the laws involved. Some of the critical areas are those involved in hiring, termination, discrimination etc. Knowledge about laws pertaining to these areas would be ideal. It would be ideal to engage service providers and other professionals while conducting an audit. It is however, vital to protect the confidentiality of the audit, as knowledge about non-compliance can be used as evidence against the organization. Hence, it would be wise to involve the organization’s employment lawyer.

The employment practices and the related policies should be examined if they are in conformity with the existing laws. Laws such as those pertaining to discrimination, sexual harassment, overtime etc should be particularly looked into. Even seemingly minor things such as the employment application should be studied if it solicits inappropriate information.

The next step is extremely critical. Now that the audit has been carried out and the report is available. The organization can either implement the recommendations in the report or do nothing. Ideally, the recommendations should be implemented and the deficiencies and shortcoming should be corrected for the audit to be a productive. If the findings are not taken seriously, the report can be used as extremely damaging evidence in a future lawsuit against the company.

The possible actions that are taken upon receiving the report of the Human resources audit are modifications in the employee handbook, changes in the policy statement or training the HR personnel in the interview and recruitment procedures.

A Human resource audit can be beneficial not only in terms of the recommendations that come out of it but also in terms of the added credibility it gives. Employees may be motivated that the company is genuinely interested in the employees’ welfare. It brings awareness of the existing legislation to everybody associated with the organization. The audit ensures that the organization is on the right side of the law and prevents damaging lawsuits and legal action.