Human Resource Valuation

and Accounting

HUMAN RESOURCE AUDIT , An HR Early
Warning System that works!
Your tool to assess the present. Your blueprint
for the future. Your commitment to excellence.
A human resource audit reviews an
organizations policies, procedures, and
practices. Its purpose is to examine the
technical and practical dimensions of the HR
function and to create a comprehensive system
that adds value to the organization.
An audit is a means by which an organization
can measure where it currently stands and
determine what it has to accomplish to
improve its human resources function. It
involves systematically reviewing all aspects of
human resources, usually in a checklist
fashion, ensuring that government regulations
and company policies are being adhered to.
The key to an audit is to remember it is a
learning or discovery tool, not a test. There will
always be room for improvement in every
organization.
Human Resource Audit is a systematic
assessment of the strengths, limitations, and
developmental needs of its existing human
resources in the context of organizational
performance (Flamholtz, 1987)
NEED FOR H.R. AUDIT:
Top Management saw solutions to their
problems, issues and challenges in HRD to face
business competition and to achieve
organizational goals.
PURPOSE OF H.R. AUDIT:
1. to examine and pinpoint strength and
weaknesses related to H.R. areas and Skills
and Competencies to enable an organization to
achieve its long-term and short-term goals.
2. To increase the effectiveness of the design
and implementation of human resource
policies, planning and programs.
3. To help human resource planners develop
and update employment and program plans.
4. To insure the effective utilization of an
organizations human resources.
5. To review compliance with a myriad of
administrative regulations.
6. To instill a sense of confidence in
management and the human resources
function that it is well managed and prepared
to meet potential challenges.
7. To maintain or enhance the organizations
and the departments reputation in the
community.
8. To perform a due diligence review for
shareholders or potential investors/owners.
SCOPE OF HUMAN RESOURCE AUDIT
Whenever the H.R. Audit it taken up, the scope
is decided. Audit need not be exhaustive, but
should be focused on particular function of
H.R.M. such as Training and Development,
Performance Appraisal, Compensation, etc..
However, the objective and approach of H.R.
Audit, more or less, remains the same,
regardless of scope.
What does a full HR Audit entail:
1)Legal compliance
2)Compensation/Salary Administration
3)Employment/Recruiting
4)Orientation
5)Terminations
6)Training and Development
7)Employee Relations
8)Communications
9)Files/Record Maintenance/Technology
10)Policies and procedures (including
employee handbook)
11)Communications
The following lists the core HR functional areas
and summarizes what will be reviewed during
an audit; it is not all-inclusive, and it may be
subject to change. The scope of work for the
audit may include a review of internal policies
and processes, a review of filing and tracking
systems, and surveys and questionnaires of
employees and managers on the effectiveness
of the human resources operation in the
department. The Audit Schedule outlines who
will be audited, when the audits will occur, and
the functional area to be audited.
HUMAN RESOURCES
ORGANIZATION/ADMINISTRATION.
Organization of HR office, including appropriate
class of professional positions; delegation of
authority to and within the department; quality
control to ensure consistency in authorities
delegated within the department;
documentation of processes, operating
standards, and internal controls;
administration of retention rights, including
notices, matrix, use of separation incentives,
and outplacement practices; how staff remain
current and up to date with the HR field and
the state personnel system; and techniques for
communicating with employees and appointing
authorities in department.
SELECTION. Recruitment methods, methods
used in workforce and succession planning,
and use of turnover data; access to and quality
of job announcements; quality of job analyses;
exam development, administration, and
scoring; length of eligible lists, including
merged lists and notice of appeal rights; and
referrals and interviewing practices.
JOB EVALUATION . Standards, processes,
and internal and quality control methods for
reviewing and updating PDQs including
essential functions, FLSA notification,
turnaround times, and repeat requests;
internships for new evaluators; allocation
process including quality of reports and
employee notification; process to address
concerns with non-appealable decisions;
communication process for official system
maintenance studies; and standards, internal
controls, and processes for reviewing and
exempting positions from the state personnel
system.
TOTAL COMPENSATION. Standards, and
processes used to develop and communicate
internal compensation policy and plans;
internal controls to ensure accuracy and
consistency of pay and leave; policies on pay
adjustments; pay differentials and incentive
awards; overtime pay; premium pay awards
including hazardous duty pay, housing
premium pay, documentation on approval of
requests to pay shift and on-call premiums to
individuals in classes not designated by the
state personnel director. Leave management
standards, internal controls, and practices;
confidentiality policies and agreements with
those handling health-related information;
leave tracking systems; FLMA compliance
including designation and notification; leave
sharing plans; and maintenance of annual SES
performance contracts, including filing with
state personnel director. Standards and
processes for enrollment for new employees in
benefit plans; communication methods for
open enrollment; workers compensation
reporting; process for reporting employment
claims; and compliance with COBRA and STD
benefits requirements.
PERFORMANCE MANAGEMENT. Most current
Performance Pay Program is approved and on
file with the state personnel director, including
methods of communication to new and current
staff and plan for mandatory supervisory
training; completion rate of plans and ratings
including quality control and review for
consistency of ratings; methods used to
determine distribution of awards; efficiency
and communication of the internal dispute
resolution process; and compliance with
requirements for sanctions.
WORKFORCE DEVELOPMENT. Orientation
program for new employees and supervisors;
training programs and delivery methods
including courses, training staff, and cost;
workforce development policies including drug-
free workplace, workforce violence and sexual
harassment prevention, diversity, FMLA and
FLSA responsibilities.
EMPLOYEE RELATIONS. Number, type, and
outcome of appeals, grievances, and directors
reviews; internal grievance processes; other
forms of alternative dispute resolution used;
communication methods and forms; number,
type, and outcome of corrective and
disciplinary actions; any methods used to
address work environment issues.
[b]RECORDS MANAGEMENT. Content of
employee, payroll, medical, and position files;
internal controls to ensure accuracy and
control access; compliance with IRCA (I-9);
process for purging records; FLSA
designations; a review of employee
timesheets; posting of required notices; and
methods to ensure timely and accurate
reporting of information to the state personnel
director.
HR AUDIT FORM
EMPLOYEE RELATIONS
Are the Employer/Employee Guidelines for
Wrongful Termination followed?
Is there a formal Performance Improvement
Program policy?
Are terminations handled in a manner that
complies with applicable laws and association
policy?
Is written performance documentation
maintained?
Are performance reviews done on a regular
basis?
Do employees clearly know upon what their
appraisals will be based?
Do you have an open door policy for
employee complaints?
Is the sexual harassment policy clearly
communicated to all employees?
Are employees provided with a comfortable
work environment?
Are personnel files retained in compliance
with applicable laws?
Are I-9 forms complete for all employees?
Have all employees received a copy of the
employee handbook? Have they signed a
statement that they have received, read and
understand its contents?
Does the handbook have the appropriate
Employment At Will disclaimer?
RECRUITING
Is a standard application form used?
Do job descriptions exist for open positions?
Does the job description drive the writing of
the employment ad?
Does the job description drive the selection
of behavioral interview questions?
Are all qualified candidates interviewed?
Is the selection decision made in compliance
with the applicable employment laws?
Have candidates given written permission to
contact references?
Are references checked before offers are
made?
LEGAL
Are all employee decisions based on Bona
Fide Occupational Qualifications?
Are required employment law posters
displayed in an appropriate place?
Are you making employment decisions based
on applicable employment laws and compliance
thresholds?
TRAINING
Is an orientation conducted for all new hires?
Do all new hires receive job-specific training?
Are current employees allowed to take skills-
based training as needed?
COMPENSATION
Are employees appropriately classified
(exempt vs. nonexempt, employee vs.
independent contractor)?
Is there compliance with the Fair Labor
Standards Act in terms of minimum wage,
overtime pay and record keeping?
Is there compliance with other applicable
employment laws?
Are employees paid a competitive rate?
Is there internal equity among current
employees?
Is compensation tied to performance?
BENEFITS
Are the benefits offered sufficient to attract
the desired level of talent?
Are the benefits offered in compliance with
the appropriate laws?

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