Hr Audit My one

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Auditing HR Function

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Dimensions of HR Audit

HR Auditing

Human Resource

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Human Resource Information

System (HRIS)

A method by which an Organization

collects, analyses, and reports information

about people and jobs. An integration between IT System and

HRM process.

Offers an adequate, comprehensive andon-going information system about people

and jobs.

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HRIS: System Workflow

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HR Accounting

First developed byRensis Likert , and he pointedout that the expenses on human resource are fixedin nature and do not offer any immediate return.

According to Flamhotiz, HRA is accounting forpeople as an organizational resource. It involves

measuring the costs incurred by organization torecruit , select , hire, train and develop humanassets. It also involves the measuring economicvalue of people to the organization.

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Objectives of HR Accounting

Provide cost value information about acquiring,developing , allocating and maintaining humanresources.

Enable management to effectively monitor the use ofhuman resources.

Find whether human assets are appreciating or

depreciating over a period of time.Assist in development of effective management

practices on the basis of financial consequences.

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Approaches of HRA

Monetary Measures

Non Monetary Measures

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Monetary Methods

Historical cost method

Replacement cost method

Opportunity cost methodEconomic value method

Assets multiplier method

Discounted present value of future earnings method

Non-monetary MeasuresExpected realizable value method

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How to Calculate the value

of Manpower?

Lev and Schwartz model

Where,Vr = the value of an Individual r year old.

I(t)= the individuals annual earnings up to retirement

t = retirement age

r= a discount rate specific to the cost of capital to thecompany

Vr=

Vr=9


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Historical cost method

= Recruitment cost + selection cost

+ Orientation Costs + TrainingCosts + Development Costs

Where,

RC= Advertising, travel exp., consultants fee, incidental exp.SC= Form costs, testing and interview exp. and other Adm. exp.

TC= Trainers salary, Facilities cost, trainee's time spent in the

program measured financially, low productivity during training.

DC= Costs incurred in enhancing employee skills and expertise.

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Controlling Cost of

Manpower

Ratio Analysis

Cost per hire=

Recruitment Cycle time= Total time taken to

recruit new employee

Turnover Rate=

Cost of Training= 11


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Personnel Productivity

=

Management By Objectives

Finally Personnel budgets and Audit

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Auditing HR Functions

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What is AUDIT ?

Latin verb-audire-means-to listen

Listening implies an attempt to know thestate of the affairs as they exist & as they

are expected to exist

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AUDIT

An audit is an evaluation of a person,

organization, system, process, project or

product. Audits are performed to ascertainthe validity and reliability of information;

also to provide an assessment of a system's

internal control.

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What is HR audit?

An HR audit is a process to review

implementation of policies, strategies,

structure and procedures with respect to the

organization's HRM, ensure compliance with

employment law, eliminate liabilities (gap) ,

and educate the managers (feedback).

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Why Auditing HR Function?

To reveal the strengths and weaknesses in the humanresources system, and any issues needing resolution.

To know the extent of HR as CSF, HR can be a CSF if

employees are have unique skillsTo find out current manpower inventory and shortfall or

excess, if any for new project.

To evolve its HR function to a level where its full

potential to support the organizations mission andobjectives can be realized.

To find out the effectiveness of various personnelpolicies and practices.

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Approaches of HR Audit

Legal ApproachFunctional Approach

Strategic Approach

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Functional Approach

Strategic Approach

This concept is centered on the verification

that the current labor laws are being

fulfilled.

The audit should verify if the firms

policies, practices, and documents

regarding employee hiring, retention,

discipline, termination, and post-

employment are both fair and legal

HR practices and policies must notdiscrimination on: equal employment

opportunities; basis of age and sex;

reasonable accommodations for disabled

workers; minimum wages etc.

Legal Approach

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Legal Approach

Strategic Approach

Observing the procedures applied are theadequate ones and they function correctly

in the most cost effective manner.

The function of this level of the HR audit

is to study and analyze each one of the

specific areas of HRM. Area of HR Audit:

Description of companys staff

Job analysis

HR planning

Recruiting and personnel selection Training

Development of professionals

Retribution

Performance evaluation

Work condition

Functional Approach

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Legal Approach

Functional Approach

The evaluation of the adaptation of the

HR policies and practices in their support

of the companys general strategy..Strategic approach has been developed as

a means of determining if the HR function

is a source of competitive advantage for

the company.Supplies information about the

knowledge, abilities, values, managing

experience, or other factors of each

employee to meet new strategy.

Strategic Approach

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Process of HR Audit

Step 1:Defining Auditing Statement

Step 2:Accessing Current Practices

Step 3:Analyzing the Result

Step 4:Preparing the Audit Report

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Before beginning the auditprocess

1. Determine who will conduct the audit.

Internal vs. External

2. Secure senior management commitment.

a. Are they ready to fix whats broken, even if it

costs $$$$?

b. Do they agree with the methodology?

c. Will they allow access to all

departments/information?

d. Will they publicly support the process? 23


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3. Define the parameters.

3. Who will be audited?

4. What do you want to audit?

5. What audit tools will you use?

6. How will the process be rolled out?

7. How will results get reported?

8. Who will get the results?

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4. Introduce the audit process to your

managers.

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Step 1: Defining Audit

Statements

Determine whether legal, functional or

strategic audit.

Determine the area of the HR audit whereauditor wants to audit.

Determining the every aspects of the each

area (detailed)Areas like quality of lifecycle, team based

work system and other contemporary issues

on HR are should be considered 26


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Step 3: Analysis of Results

The purpose of analysis is to sort through the areas

of strength and opportunities for improvement in

order to take positive action steps to improve theeffectiveness of the HR function

Examining different indices, ratios

Finding out strength and weakness point andopportunity for improvements.

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Ratios that should be

analyzed

Quit rate

Termination rate

Layoff rate

Retirement rate

Length of service rate

Salary and benefits package

Supervisory practices

Job design

Retirement plan

Rate Personnel functions to examine

Turnover Rate

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Absence rate

Tardiness rate

Exit interviewsDisciplineConvenience of lunchroom

and rest roomSick-pay policy

Job Attendance Rate


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Overtime rate Employee planning and

scheduling

Shortage of staff

Selection and trainingprocess

Overtime Rate


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Position

Vacancy Rate

Recruitment and selection

process

Salary and benefit package

Company image incommunity

Position/Vacancy Rate


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Error/scrap rate Recruitment selection and

placement

Training and development

Job satisfaction

Error/Scrap Rate


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Training and

development rate

Recruitment and selection

Training and development

Training and Development Rate


Grievance Rate


Grievance rate Supervisory practices Job dissatisfaction

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Step 4: Preparing Audit

Report

Table of contents Preface Statement of objectives, methodology, scope and techniques

used. Summary, conclusion and recommendation of the audit that

has been carried out. A clear and in-depth analysis of the data and information,

furnished area-wise. Evaluation, discussion, and analysis. Appendix Bibliography

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Problems in Auditing HR

Functions

No any fixed rules, systems, and regulation for auditing.

It compares past ratios, rates of turnover, expenditure etc.,

with those of other departments and organizations.

Organization cannot be taken as standard for comparison

and a decision arrived at.

Tendency to turn the HR audit into a fault-finding Process.

If not done properly, may create more troubles thansolutions.

Employee may try to pass the buck.

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Prepared By:

Tola Kanta Neupane

MBA , 2

nd

semester, IB&MS

Documents

Hr Audit My one