Human Resource Audit and Best HR Practices.pptx

Human Resource Audit is a chapter under HR Best Practices.
To ensure that there are no leakages in payment of wages and salary Audit is a must.
It ensures that there no frauds in he number of employees, the compensation paid and the utilization of human resources.
Human resources are treated as human assets and human capital. HR audit should be conducted by the qualified professionals who are generally outsiders.
Human assets have brains and they can use the brain for favorable or unfavorable things. They are tempted to commit frauds for personal enrichment. HR Audit requires special skills.

1. Unit 3. HR Audit Table of Contents Topic No Title of the topic 3.1 Introduction to HR Audit 3.2 Meaning of HR Audit 3.3 Nature of HR Audit 3.4 Objectives of HR Audit 3.5 Importance of HR Audit 3.6 Models of HR Audit 3.7 Prospects of HR Audit Prof.Shantilal Hajeri

2. Unit 3. HR Audit Table of Contents Topic No Title of the topic 3.8 Scope of HRA 3.9 Record for HR Audit 3.10 Checklist for HR Audit 3.11 Advantages of HR Audit 3.12 Prerequisites of HR Audit 3.13 Role of an HR Auditor Prof.Shantilal Hajeri

3. 3.1 Introduction An HR audit is a process that checks the effectiveness of your HR department. The motive of an HR audit is an analysis to identify the scope of improvement in HRM to benefit the business. HR audit checklist can be helpful for HR to conduct the internal audit. Prof.Shantilal Hajeri

4. 3.2 Meaning of HR Audit An HR audit is a process of accessing the effectiveness of the human resource department. It includes an evaluation of the human resource policies, processes, compliance and more. It is good to hire a third-party entity for the human resource audit. Prof.Shantilal Hajeri

5. 3.3 Nature of HR Audit It is not compulsory under law. It is for internal purpose It is a recent phenomenon. It is in the growing stage Accountants have always given more importance to the physical resources and ignored the human resources. It is subjective because it is difficult to quantify the worth of an employee. There are no set standards regarding Human assets. Hence, the audit becomes difficult Prof.Shantilal Hajeri

6. 3.4 Objectives of HR Audit 1. To review the whole organizational system of human resource practices, i.e.,acquiring, developing, allocating and utilizing human resources in the organization. 2. To analyze the factors involved in HRD and develop a statement of findings with recommendations for correcting deviations, if any, on the following issues: a. The extent of deviation from HRD policies b. To what extent objectives are spelt out c. To what extent performance standards have been established Prof.Shantilal Hajeri

7. 3.4 Objectives of HR Audit 3. To seek explanations and information and answers to all such above questions as: What happened? Why did it happen? 4. To evaluate the effectiveness of various personnel policies and practices. 5. To evaluate the extent of implementation of policies by line managers and the operational problems faced by them in implementing HRD policies. Prof.Shantilal Hajeri

8. 3.4 Objectives of HR Audit 6. Evaluating the personnel staff and employees. 7. Knowing how the various units are functioning and how they have been able to meet the policies and guidelines, which were agreed upon. 8. To study the current manpower inventory and identify shortfall or excess, if any. Prof.Shantilal Hajeri

9. 3.4 Objectives of HR Audit 9. To modify the existing human resource practices to meet the challenges of personnel/human resource management. 10. To assist the rest of the organization by identifying the gap between objectives and results. 11. To formulate plans for correcting deviations if any. Prof.Shantilal Hajeri

10. 3.4 Objectives of HR Audit To Evaluate the Effectiveness of HR processes To Optimize Resources Utilisation To Improve Employee Engagement To Support Organizational Goals To Identify Areas for Improvement To Ensure Statutory Compliance To identify the training needs to comply with the the Changes in labour rules, tax laws and cyber laws etc. Prof.Shantilal Hajeri

11. 3.4 Objectives of HR Audit To Support the new ownership, new management or Changes in Organisational Structure. To Improve Employer Branding To ensure that the HR department is working effectively To ensure that the HR function is able to support Changes in Business Processes To ensure that the Labour cost is calculated correctly, that the correct compensation is paid to the employees Prof.Shantilal Hajeri

12. 3.5 Importance of HR Audit Prof.Shantilal Hajeri Technological changes are calling for renewal of knowledge and skills of existing manpower. Training function has assumed importance. Periodic HRD audit can help to identify the changing training needs and development of new training modules for effective utilization of manpower.

13. 3.5 Importance of HR Audit Prof.Shantilal Hajeri To keep pace with the environmental changes, management philosophy and practices at the organizational level also need to be changed, like participative management (through quality circles and value engineering team), employee empowerment, total employee, involvement, etc. Need for all these can be understood only when we periodically undertake HRD audit.

14. 3.5 Importance of HR Audit Changing role of trade unions (which are now more Pro-active), Government (which is now more liberal), emergence of new working class (who are more enlightened), emergence of international quality system requirements (which call for scientific documentation of different corporate functions and infuse attitudinal changes), changing expectations of customers (which call for more customer orientation), new statutory requirements (pollution control), etc., are now influencing HRD functions at the corporate level, the effectiveness of which can only be understood by conducting periodic HR audit. Prof.Shantilal Hajeri

15. 3.6 Models of HR Audit Prof.Shantilal Hajeri

16. Types of HR Audit Internal Audits External Audits Compliance Audit Strategic Audit Best Practices Audit Job Specific Audit Prof.Shantilal Hajeri

17. HR Audit Process T.V. Rao and Udai Pareek (1996), to measure the effectiveness of people management, developed a set of questions mostly to suggest linking of HRD to the corporate objectives, goals and strategies, effectiveness of free flow of HRD information down the ranks, application of knowledge of behavioural science and industrial psychology for HRD, etc Prof.Shantilal Hajeri

18. HR Audit Process (i) Identifying indices, indicators, statistical ratios and gross numbers in some cases. (ii) Examining the variations in a time frame in comparison with a similar previous corresponding period. (iii) Comparing the variations of different departments during different time periods. (iv) Examining the variations of different periods and then comparing them with the similar units working in the region. (v) Drawing trends, ascertaining frequency distribution and correlations between them. (vi) Preparing a report and send it to the top management for information and action. Prof.Shantilal Hajeri

19. Steps for an Effective HR Audit Process 1. Define the Scope and Objectives 2. Collect Data 3. Analyze the Data 4. Identify Areas for Improvement 5. Develop an Action Plan 6. Implement the Action Plan 7. Monitor and Evaluate Prof.Shantilal Hajeri

20. 3.7 Prospects of HR Audit 1. The need for effective workers' participation for enhancing productivity. 2. The need for adopting employment policy in congruence with the national economic and social development policy. 3. The need for education and training of workers and building economically valuable stock of technicians, scientists, technologists and management specialists by increasing access to education, making it equitable and affordable. Prof.Shantilal Hajeri

21. 3.7 Prospects of HR Audit 4. Need for vocational guidance and counselling. 5. Need for promotion of self-employment. 6. Need for striking a balance between labour protection through state intervention and market flexibility. Prof.Shantilal Hajeri

22. 3.7 Prospects of HR Audit 7. Need for eliminating gender discrimination and enhanced participation of women in all economic activities. 8. Need for elimination of child labour. 9. Need for safeguarding the interest of international migrant workers. 10. Need for establishing internal labour standards Prof.Shantilal Hajeri

23. 3.8 Scope of HRA recruitment, selection, job analysis, training and development management development, promotions and transfers, labour relations, morale development, employee benefits, wage and salary administration, Prof.Shantilal Hajeri

24. 3.8 Scope of HRA collective bargaining, industrial relations and communication. leadership, grievances redressal performance appraisal employee mobility integration of corporate mission, goals, policies and objectives, manpower planning, career planning and development, transfer policies Prof.Shantilal Hajeri

25. 3.9 Record for HR Audit (a) Time study records and time standards, (b) Cost records, (c) Records on scores obtained in tests and other examinations, (d) Medical and accident reports, (e) Attitudinal survey-reports, (f) Grievances and redressal reports, Prof.Shantilal Hajeri

26. 3.9 Record for HR Audit (g) Labour Turnover reports, (h) Data on work stoppages, Strikes, Lock outs (i) Performance reports, (j) Pay roll data, (k) Labour costs data, etc. (l) Data regarding Disciplinary cases and the punishment awarded (m) Data regarding Industrial Relations, Meetings with Trade Unions. Prof.Shantilal Hajeri

27. 3.10 Checklist for HR Audit According to VSP Rao, the following questions can be asked to evaluate personnel policies, procedures and practices: (i) What are they? (i. e, policies/procedures/practices). (ii) How are they established? (iii) How are they communicated to various managers and employers concerned? (iv) How are they understood by individual employers, supervisors and managers at different levels? Prof.Shantilal Hajeri

28. 3.10 Checklist for HR Audit (v) Are they consistent with the management's organizational philosophy and human resource management philosophy? (vi) Are they consistent with the existing trends towards human resource management and research? (vii) What are the controls that exist for ensuring their effective and uniform application? (viii) What measures exist to modify them to meet the organizational requirements? Prof.Shantilal Hajeri

29. 3.11 Advantages of HR Audit Strengthens the Compliance Increases Profits Helps to optimize the human resources in the company. Improves Data Security Retains the Best Talent Helps to acieve organisational goals Prof.Shantilal Hajeri

30. 3.13 Role of an HR Auditor 1. To get the current facts. 2. To study the effectiveness of the present system by answering the following issues: a. Why was the practice introduced? b. What would be the result, if the practice is discontinued? c. What needs were intended to be fulfilled and have those been fulfilled or not? d. What could be the best possible alternative for fulfilling such needs? e. What changes can improve effectiveness of the existing practice? f. Are such intended changes economically and operationally viable? g. Are such changes sustainable from the union's point of view? h. What should be the time-frame for introducing the change? Prof.Shantilal Hajeri