Business owners accept that their financial statements must be audited every year and yet few think of auditing another essential part of their business – their Human Resource department.
Granted, most micro and small enterprises do not have an established HR department per se, but every business has HR practices. No matter how underdeveloped, if you have employees, you have HR practices. As the number of employees grows, it becomes useful to conduct a review of those practices.
Hence the term HR audit.
An HR audit is an objective review of your existing HR processes, including recruitment, performance management and terminations, usually followed by a report on what the strengths and weaknesses within your HR department are. It essentially has two basic functions: risk mitigation and improvement. It is a preventative measure to help your business avoid unnecessary labour disputes.
Here are the top 4 reasons why it is worth conducting an HR audit:
1. Compliance
If you hire a professional to conduct an HR audit, they can inform you whether your business is complying with current law. There are still businesses out there, with multiple employees, but no employment contracts. Should such businesses be faced with a CCMA case, the commissioner will not look kindly on the employer who failed to give its employees a contract. If an employer dismisses an employee for poor performance, but no job description has been issued to that employee, the employer will have a hard time proving fair labour practices.
2. Performance Management
As part of an HR audit, the performance management process will be reviewed to see what is in place and what value is it adding to both the employer and employees. Does the current system provide for sufficient feedback and growth opportunities to the employee while simultaneously ensuring that staff performs optimally to the benefit of the employer?
3. Strategy Alignment
The HR audit is an excellent opportunity to check whether the human resource strategy aligns with business strategy and vision. Do you have the right employees, sufficiently trained, and the correct number of personnel to take your business to the next level?
4. Monitoring
An HR audit can show whether the personnel practices within your business are being executed fairly and consistently. Are all staff treated equally during appraisals, salary reviews and leave management? An audit is also a great way of identifying policies or practices which are no longer relevant to your business or to identify the need for new policies or amendments to your company handbook.
Most labour disputes can be traced back to one of four stages in the employee life cycle – hiring (contracts or job descriptions), performance evaluation, employee discipline or termination. If you want to avoid unnecessary labour disputes, it is a wise decision to start with an HR audit. The results will help you plan for the future. Contact Leapfrog HR to enquire about an HR audit.
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