Human Resource Audits: Why Your Business Needs One?

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The human resources department is one of the integral departments in a business. This is because it manages the company’s most vital asset i.e. its staff. HR personnel look after various employee concerns and work hard to retain content and a happy workforce. For example, the HR department can conduct exit interview to identify possible reasons behind employees leaving the organization.


This can help to unearth any underlying factors that are causing people to leave the company.



How HR audit can help?

The main goal of human resource audit is unbiased and independent assessment of the quality and efficiency of an organisation’s human resources management functions including HR compliance. It assists in determining the following key aspects:


1. Is your company gaining optimum benefit from all the HR functions?

2. Are HR functions in line with organisational strategy and goals?

3. How cost-efficient and results-driven are your HR functions?

4. Are your company’s HR policies and functions compliant with all the statutory regulations?



As a rule of thumb, HR audits entail the following:

1. Verification of payroll data in connection with statutory laws, net amount paid (salary/CTC, etc.)

2. Verification of investment proofs

3. Verification of leave and attendance records, HR MIS reports, etc.

4. Verifying historical HR data to root out any discrepancies

5. Checking/validating all the data pertaining to full and final settlement processes, gratuity, etc.

6. Verification of various job profiles

7. Verifying performance appraisals and perks awarded

8. Auditing all the statutory regulations pertaining to TDS, Income Tax, Professional Tax, ESIC, Provident Fund (PF), etc.



Don’t forget to read: Statutory Compliances and Payroll in India – All an Employer should know



Prominent benefits of HR audits are as follows:

1. (Strength, Weakness, Opportunities, Threats) SWOT analysis of your human resources management department including suggestions for improvement.

2. Feedbacks on implemented HR functions compared to industry practices

3. Reduction in costs related to non-compliant risks

4. Verification of all the statutory HR compliances

5. Verification of tax for the payments provided to your employees in terms of income tax, medi-claims, etc.

6. Identification of key HR metrics aka KPIs (Key Performance Indicators) to benchmark the current efficiency and quality of HR functions in comparison to industry practices.



Bottom Line:

Long story short, HR audits can help attain a myriad of organizational objectives like ensuring total legal compliance, helping to improve or maintain competitive advantage, efficient documentation and best tech practices besides identifying weaknesses and strengths in employment, hiring, and training practices.



To know how HRIS software can manage HR & statutory compliances, contact us here. You can also give us a shout-out at Twitter and Facebook or write to us at


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