HR audit of the company

+38 (032) 247-04-00; +38 (067) 673-35-99 е-mail:  za@zkg.ua

Every year, the issues of record keeping in companies are fading into the background from management’s point of view, but not from the point of view of the Law. In the era of automation of planning and accounting processes, paperwork with staffing tables, job descriptions and personal files of each employee causes an understandable desire to leave such tasks for better, less busy times. The truth is, however, that such times usually do not come if a company is growing, scaling and developing. It means most successful companies must keep their HR records better. Moreover, in the event of inspections by regulatory authorities, errors in HR records are the biggest risks for top management and owners.

A timely and high-quality HR audit will help resolve the issue. Its task is to identify weaknesses in HR records, calculate possible risks and their consequences, and find the best ways to eliminate them before the company comes to the attention of the relevant authorities. How to conduct an HR audit? What should you expect regarding time and financial resources to protect yourself and your company from unplanned sanctions from the state? What should be the essence of an organization’s HR policy and audit? Let’s find out.

HR policy is an area of company development that usually receives little or no attention at first. While the director, accounting department and owners of the organization focus on maximizing profits at minimal costs, launching their brand, educating their target audience and getting a specific niche in the market, they pay minimal attention to the employment of full-time employees. As a rule, it is limited to employment contracts and leave applications. However, there is a whole area of control over HR records, which is subject to fines – in some cases quite large. An HR audit will help you analyze:

• the state of the company’s HR records;
• the structure of the organization’s staff;
• It complies with the required standards and the correctness of all documents governing the relationship between the employer and employees.

It will save not only working capital in the event of an unexpected audit but also the company’s director’s time, energy and health.

1. Preparation for the audit and assessment of the company’s HR policy. At this stage, a group of employees or a list of auditors is determined to work with employees and documents.
2. Examination and evaluation of the package of available documents in HR records management. Here, it is important to fully examine previously executed contracts, staffing schedules and other documents, if any.
3. Check the list of available documents for compliance with the full list of documents required by Ukrainian Law. At this stage, it is important to understand where there are gaps in the proper HR record keeping.
4. Analysis of high-risk areas for a particular company: i.e., the presence of foreigners in the staff and the legality of their employment, overtime and overtime work and a payroll audit, terms of cooperation during the probationary period, documenting the material responsibility of individual employees, the presence of disabled people and people with disabilities in the company’s staff and the procedure for labor relations with them.
5. Developing a list of recommendations for changing the HR policy due to the HR audit. At this stage, a detailed list of recommendations is created that addresses immediate and long-term actions designed to optimize the company’s HR records, bring them in line with the requirements of the Law and eliminate the risks of being held liable as a result of scheduled or unscheduled inspections by labor law enforcement authorities.

These stages can be part of a single HR audit process. In this case, the audit lasts from two to eight weeks, depending on the company’s size and the HR audit’s objectives in a particular case. Sometimes, the stages of checking the competence of the company’s HR policy are carried out with gaps between them if this is due to the peculiarities of the company’s operation and the presence of previously planned activities (restructuring of project teams, the end of the season for certain works, etc.)

There are two ways to conduct an HR audit in a company:

1. Internal HR audit – provided by the company’s employees. It usually involves the director responsible for the employee’s HR records (usually an accountant or clerk), the director’s secretary, a lawyer, a psychologist and a full-time business coach, if any. The task of an internal audit is to identify weaknesses in HR records management, study the climate of relationships within the company and the procedure for distributing responsibilities among employees. It is cheaper (sometimes without additional costs) but provides a limited picture. On the one hand, not all employees are willing to answer questions honestly for fear of dismissal or discontent. On the other hand, non-specialized employees may only sometimes be able to consider all the risks, especially in light of recent changes in labor law.
2. An external HR audit is a set of measures to assess a company’s HR policy, carried out with the involvement of specialized external auditors. This method has its advantages: it provides the most objective picture of reality, allows you to scrutinize each area without interrupting employees from their direct duties, and soberly assesses both the risks and possible sanctions, as well as the performance of each employee, the involvement of teams in solving problems of varying complexity, and the atmosphere in the team.

It is up to the top managers or owners of a company to decide whether to conduct an HR audit on their own or with the involvement of independent experts. It often depends on what type of audit is required at this stage:

1. An organization’s full HR audit involves assessing HR records in all areas (employment contracts, payroll, leave policies, bonuses, internal penalties, working hours, business trips, and distribution of duties and responsibilities).
2. A selective HR audit of an organization is aimed at performing a specific task in the area of HR records management. It is most often the development of labor contracts, staffing schedules and job descriptions.

While a selective HR audit is often carried out internally by the company itself and makes sense, in the case of a full audit, world-class consultants and owners of successful companies advise engaging specialists. This approach will allow you not just to tick a box but to get a complete picture of the company’s organizational structure, assess the motivation and efficiency of staff and protect yourself from any risks in the event of an audit by the authorities. The cost of an HR audit conducted by experts will be higher. However, this is likely an investment rather than an expense, reflected in the company’s capitalization and often brings large dividends. If you are looking for an organization that can provide high-quality services at an affordable price in Kyiv or Lviv, please contact the specialists of the company of JANOVSKY & PARTNERS of the Western Consulting Group holding. Invest correctly!

A question often goes unaddressed until changes have to be implemented due to inspections and sanctions from regulatory authorities. Knowledge of the Labour Code and its amendments and additions is mandatory for the organization’s management. However, managers do not have enough time to deal with such issues. When a company is small, HR records are at a more or less decent level. But as soon as the company enters a rapid growth and expansion phase, chaos begins to reign in HR policy, with staff turnover, duplication of job responsibilities, or the loss of some. An HR audit of an organization should be carried out on a scheduled and regular basis every time there is a large-scale change in the company’s personnel structure. If this is not possible, it is mandatory to conduct an audit and assessment of the labor records if:

• a new director has taken over the management of the organization, or there has been a change of ownership;
• the dismissal or replacement of an employee responsible for HR records in the company is planned;
• a mandatory scheduled inspection is about to expire;
• There have been changes in the labor legislation of Ukraine, and numerous innovations have appeared;
• an employee of the company has been dismissed, who may apply to the regulatory authorities with a statement about violations of labor legislation in a particular company;
• the company has undergone a restructuring or a change of activities.

A properly conducted HR audit of an organization will not only mitigate the risks associated with labor law violations. It also opens up great opportunities for increasing labor productivity, improving the climate within the company and shaping modern brand and company values.

Contacts of the Accounting Company “Збережені активи”

+38 (032) 247-04-00; +38 (067) 673-35-99

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