UNIT 30

Human Resource Audit

By audit we mean verification of transactions to ensure whether they represent a true state of affairs of the business or not. This Chapter is devoted to discussing Human Resource Audit. Human Resource Audit Meaning Human Resource Audit (HR Audit) is concerned with the examination and evaluation of the policies, procedures and practices with references to the human resource of the organisation. it is a periodic review to measure the efficiency and effectiveness of human resource management. The main objective of HR audit is to determine whether the human resource policies and practices are consentient with the organisational objectives. It further reveals how effectively the human resource policies and programmes have been implemented. Objectives of HR Audit The important objectives of HR audit are given below: 1. To review the entire system of procuring, developing, allocation and utilizing the human resources in an organisation. 2. To seek explanation on any matter pertaining to the human resource of the organisation. 3. The evaluate the extent of implementation of the human resources policies and programmes. 4. To evaluate the performance of the staff looking after the HRM function.

Need for or Importance of HR Audit Although there is no legal obligation to conduct HR audit, it is considered important in view of the following reason: 1. The human resource of an organisation is considered as important as, if not, even important than, the other resources, namely, materials, machines and money. Therefore, every contemporary organisation is interested in HR audit. 2. The feedback labour information available from the HR audit is necessary to improve the performance of the human resource of the enterprise. 3. The rising labour cost is anther reason why HR audit is necessary.it guides the organisation to adopt certain measures to bring down the cost of labour. 4. HR audit helps to meet the challenges posed by the trade union. the information available from such an audit will answer certain queries raised by the union officials. 5. The HR audit information available with the organisation is also useful in case it has to face any enquiry in future.

Indicators for HR audit The following are some of the Qualitative Indicators for HR audit: Human Resources Management Function 1. Procurement Quality of HR planning, job specification, source of Recruitment, selection Procedure. 2. `Development` Type of Training, Management Development Programme, Performance Appraisal Methods, Promotion Criteria, Career Planning. 3. Compensation Method of job Evaluation, Methods of Wage Payment, type of Incentives, Fringe Benefits, Union Demands. 4. Integration Handling of Grievances and Conflicts, Measures taken to ensure Discipline and a high level of Morale, Employees participation in decisions. 5. Maintenance Steps taken to provide Job Satisfaction, Measures adopted to control labour turnover. Qualitative Indicators

The Quantitative Indicators have been mentioned below: Human Resource Management Function 1. Procurement Time taken to fill up vacancies, Ratio of Vacancies to Number of Posts, Number of Employees recruited during the year. 2. Development Duration of each Training Programmed, Number of Trainees in every Programme. Productivity Increase. 3. Compensation Pay differentials, Number of employees earning bonus and other incentives. 4. Integration Level if Morale, Grievances and Level of Job Satisfaction, Rate of Labour Turnover. Quantitative Indicators

HRM Areas requiring Examination/Verification under HR Audit The specific questions in HRM areas for the purpose of HR audit may be as given below: Personnel Policies and Procedure 1. Are there written statements of policies and procedures? 2. Are these policies and procedures relevant to the needs of the organisation?

3. Does everything take place in conformity with the policies and procedures? 4. Are the policies and procedures subject to periodic review? HR Planning 1. What is the period covered by the HR plan? 2. Is there an association between HR plan and the business plan? 3. Does the HR plan consider the demand and supply forces, career and succession plans and promotion? Recruitment, Selection and Placement 1. Has the recruitment policy of the organisation been adhered to? 2. Has the procedure for selection, established already by the organisation, been followed? 3. Is the placement of personnel proper? 4. Is there a violation of any legal provisions in the entire process of recruitment, selection and placement? Training 1. In case of In-Company training, does the organisation have all the training facilities? 2. In case of Off-the job training, are the trainees sent to the proper place of the training? 3. Is the duration of every training programme right? 4. Is it cost-effective? 5. Has the training actually helped to enhance the skills of employees?

Promotion and Transfer 1. Has the promotion and transfer policy of the organisation been adheref to in each case? 2. In case the organisation does not leave a specific written promotion policy, has the Seniority or Merit criterion been followed? 3. Has any employee been subject to vindictive transfer? 4. Do the employees have any grievance in the matter of promotion and transfer? Performance Appraisal 1. Is the method of appraising employers correct? 2. Is there any discrimination in the matter of employee appraisal? 3. Are the employees informed of the appraisal results? 4. What steps have been taken to motivate employees who have performed well? 5. What measures have been taken adopted to improve the performance of average or below average workers? Wage and Salary Administration 1. Is the fixation of pay proper? 2. In case of time wage, is efficiency recognised and rewarded? 3. In case of piece wage, is minimum daily wage assured? 4. Are unauthorised deductions made from salary? 5. Is there a violation of any legal provisions in the matter of pay fixation and salary disbursement?

Communication System 1. Have the employees understood the organisational policies and procedures? 2. Does the system of communication always insist on hierarchy? 3. Is the flow of communication from top to bottom as well as from botton to top? 4. Are circulars and notices used to inform employees whenever necessary? 5. Do key executives meet subordinates at regular intervals and share their thoughts? Motivation 1. Do the employees of the organisation feel motivated? 2. Does the organisation satisfy only the basic needs of the employees or does it also provide scope for the satisfaction of higher order needs? 3. Has negative motivational technique any relevance for the organisation? Job Satisfaction 1. What is the level of job satisfaction of the employees of the organisation? 2. What steps have been taken to promise job satisfaction among employees? 3. Do employees have complaints? Morale 1. What is the level of morale of the employees? 2. In case the level is high, how is to so?

3. In case it is low why is it so? 4. What are the measures adopted to improve morale? Stress Management 1. Does the employer recognise the stress conditions of his employees? 2. Is the scope for the stress greater in the organisation? 3. How do employees manage stress? 4. What does the employer do to help the employee to get rid of stress? Labour Turnover 1. Is the rate of labour turnover in the organisation high or low? 2. If it is high, why is it so? 3. What steps have been taken to tackle the problem of a high labour turnover? Benefits of HR Audit The merits of HR audit are as follows: 1. It ensures that the policies and procedures of the organisation, in respect of HR management, are sound. 2. It pinpoints deviations. If any, from established procedures and practices. 3. HR audit indicated whether the investment in human resource id adequate considering the size of the organisation and the scale of its operations. 4. HR audit reveals whether the organisation his made an optimum use of its human resource.
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It is possible to know whether the organisation has a contented and satisfied workforce.