Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

Q.1 Explain staffing in detail.

Staffing is a term that refers to the management of employee schedules. It can be described as the
process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality to
create positive impacts on the organization's effectiveness.

The ideal staffing level for an organization depends on the amount of work to be done and the skills
required for doing it. If the number and quality of staff employed are greater than necessary for the
workload, an organization may be deemed to be overstaffed or if the number of staff is insufficient for
the workload, an organization is deemed to be understaffed.
Effective human resource planning will determine the appropriate staffing level for an organization at
any given point in time. Staffing includes various aspects to ensure the best practices in an
organization
.
Workforce planning: Workforce planning is one of the most important activities in a business. It
starts with analysis of the strategic position of the business. The results of this analysis then feed into a
forecast of the required demand for labor by the business and how this is likely to be supplied. The final
stage involves the creation and implementation of a human resources plan which aims to deliver the
right number of the right people for the business.

Specifying Jobs and Roles: Clearly defining
efficiency. When employees understand what
productive. Employees should also know what
Employees that do not know what is expected
unnecessary conflict and misunderstandings.
employee roles in your company is vital to work
their role is in your company they will be more
is expected of them and the work they produce.
of them or their role in your company can lead to

Here are some tips to help you to clearly define employee roles:
 Clearly tell people what is expected of them.
 Balance the work load.
 Update your employee's progress continuously.
 Weekly progress reports should be implemented.
 Encourage employees to openly communicate with you and other employees.
 Share information about the company with your employees.
 Along with knowing what an employee's role is in the company, they should also be trained and
educated for this role.

If your company continues to grow and develop you may realize that there is a need for a new job role.
When employees continue to report being short-handed and mention that some tasks are not
being done this could mean it is time to plan a new job role.

Management should draft a job description which states the general responsibilities of the position,
along with some specific job duties to be conducted by the role.

 Get feedback from other managers and supervisors about the new job role, the job description and
the responsibilities that the new employee will have.
 Make changes if necessary to maintain a balanced work load.
 Finalize the job description. It is important the job description is accurate because it is what you
have based the new employee's salary, required training and skills on.
Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

 Remember to help your company grow and advance it is vital that all employees know what their
roles are in your company.

Recruiting: It involves the process of identifying and hiring best-qualified candidate (from within or
outside of an organization) for a job vacancy, in a most timely and cost effective manner.

Outsourcing: Employee Outsourcing can be a cost effective alternative to the expense and
administrative burden of a traditional employer-employee relationship. Outsourcing your human
resource functions allows you to focus on business development and provides administrative relief from
many employment responsibilities such as payroll preparation, income tax reporting, employee benefits
and workers compensation.

Outsourcing is accomplished by transferring many of your employer responsibilities to a Professional

Employment Organization (PEO). A PEO is not simply a temp firm, staffing agency, payroll service or
placement agency. The PEO acts as your off-site human resource department. Your company enters
into an agreement with the PEO to establish a three-way relationship between you, your employees
and the PEO. You and the PEO become co-employers instead of the traditional employment
relationship.

The other staffing processes involve

 Screening Applicants
 Selecting (Hiring) New Employees
 Succession Planning
 Job and Task Analysis
 Job Description

Specifying Competencies

 New Employee Orientation

 Training and Development
 Retaining Employees
 Out placing and Downsizing (laying off employees)
 Exit Interviews

HRD audit and staffing

HR auditors review the process of staffing and policies pertaining to staffing. It includes reviewing the
recruitment process, the interview process, the employee orientation process, the job
analysis and job description, promotion and growth opportunities.

Q.2 Discuss approaches to HR Audit.

The following are the approaches to Human Resources Audit, which are adopted for purpose of
evaluation:

• Comparative approach
• Outside authority approach
Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

• Statistical approach
• Compliance approach
• Management by objectives (MBO) approach

Comparative approach

In this, the auditors identify Competitor Company as the model. The results of their organization are
compared with that of the Model Company/ industry.

Outside authority approach

In this, the auditors use standards set by an outside consultant as benchmark for comparison of own
results.

Statistical approach

In this, Statistical measures are performance is developed considering the company’s existing
information.

Compliance approach

In this, auditors review past actions to calculate whether those activities comply with legal
requirements and industry policies and procedures.

Management by objectives (MBO) approach

This approach creates specific goals, against which performance can be measured, to arrive at final
decision about industry’s actual performance with the set objectives.

The Legal Approach in HR Auditing

This first concept of HR auditing is based on a legal outlook. According to Antona [1993, p. 2], the audit
of performance or conformity consists of "making an inventory of the social situation of the company,
considering the labor law norms and regularly verifying the company's compliance with the applicable
regulations." Thus, this concept is centered on the verification that the current labor laws are being
fulfilled. The audit should verify if the firm's policies, practices, and documents regarding employee
hiring, retention, discipline, termination, and post-employment are both fair and legal [Higgins, 1997].
These practices and policies must: prohibit discrimination by offering equal employment opportunities;
protect the employment seeker from being discriminated against on the basis of age; carry out
minimum wages; and contain provisions regarding mental disabilities and reasonable accommodations
for disabled workers.

According to Nevado [1998, p. 49], the basic functions of the audit of conformity or of performance as
an element of HR auditing are threefold. The first function is examining to see if the firm is fulfilling all
its administrative social obligations, as well as those relative to the collective rights of its personnel.
The second is to study the relationship between the employees and the firm based on the legal
statutes. The final function is verifying if the firm fulfills its financial obligations (for example, social
security payments), as well as its informative ones.

Concern about labor risks has created a function within HRM with the purpose of altering working
conditions by identifying the risks that could stem from them and implementing necessary preventive
measures. Such preventive activity could fit perfectly into the legal approach of HR, although the effort
that the company can make in this sense can go beyond the application of the existing risk prevention
Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

laws. The requirement for labor security and hygiene is a part of the search for quality of life in the
workplace, which is becoming increasingly demanded from companies.

Q.3 Describe How to approach a HR Scorecard.

This mode of scorecard is based on the assumption that competent and committed employees are
needed to provide quality products and services at competitive rates emphasizing on the ways to
enhance customer satisfaction. Look at Figure 9.1 for understanding the steps in HR Scorecard
approach.

The Seven Steps in the HR Scorecard approach to formulating HR policies activities and strategies are
as follows:

 The first step is to formulate business strategies i.e. define the business strategy of the organization
so as to be very clear about the way to exploit the human resource towards the achievement of the
organizational goal.
 The next step is to outline the company’s value chain activities and identify the strategically required
organizational outcomes.
 Now after the outcomes have been decided clearly, identify the workforce requirements and
behaviors expected so as to achieve the desired outcomes.
 The next step is to formulate HR policies and practices which are strategically relevant such as new
training and grievance systems.
 After ensuring that all above steps are correctly conducted then develop detailed scorecard.
 Then design the HR Scorecard measurement system.
 In order to ensure the productivity, periodically re-evaluate the measurement system.

Q.4 Explain the process of workplace behaviors that support legal compliance.

Workplace behaviors that support legal compliance

Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

A safe, dignified, and respectful work environment is not only mandated by the law, but also increases
motivation and productivity of the employees. An example of review of business practices used to deal
with allegations of harassment safe working environments should be considered especially for the
females in the offices so as to make them feel confident and concentrate on work.

Many smaller companies do not like writing certain aspects of ways of conducting business. For such
companies, it is mere formality and they do not appreciate “people-oriented culture.” Though it should
be avoided because it is patently illegal because laws require that companies should mention very
clearly the policies about guaranteeing specific protections to employees

Safeguarding employee information

Employees‟ personal information should be safeguarded. Separate files should be maintained for
personal information as contrasted with employment related information.
Main objective behind it to ensure that while deciding the employee’s career with the company his
personal information should not be considered. For example while deciding whether to promote
employee or not, instead of his personal information like his religion, his work experience and
capabilities should be considered.
The employment decision needs to be made on work/performance-related information, not the personal
information. Relevant materials in the work file include information on the employee’s education,
related work experience, and performance evaluations in other positions within the company. An audit
can clarify what information must be segregated and the laws that govern employees‟ access to and
copying of their files. Other employee information that must be safeguarded includes any materials that
contain medical information.

Employee performance management

An audit can review company’s job descriptions for compliance (i.e., to determine whether the
descriptions list the essential functions of the job). Various legal issues can arise due to performance
related problems of employees. Audit will help in following improvements and reviews:
• A 90-day written standard performance evaluation form,
• An annual written standard performance evaluation form,
• A performance management/performance improvement plan,
• A description of the company’s policy for both voluntary resignation and company-initiated
termination,
• Wage and salary administration program,
• Bonus/stock option criteria.

Safe work environment

Audit practices may also help the companies to know about factors that contribute to a safe work
environment. A company may choose to develop an audit sheet tailored to a particular issue, such as
the company’s zero-tolerance policy for harassment. For example, a company may wish to review and
evaluate its practices of dealing with inappropriate harassing behavior in its workplace.

Q.5 What are the issues in Human Capital Measurement and reporting .Explain

Issues in Human Capital Measurement and Reporting

The human capital can be defined as "the knowledge that individuals acquire during their life and use to
produce goods services or ideas in market or non-market circumstances."
Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

Organizations know that that measurement is a prerequisite for good management. As the popular
saying goes, “What gets measured gets managed”. But in most of the organizations today, the most
basic source of wealth creation – human capital – is not managed properly. This is primarily because
most organizations‟ systems of measurement, shaped in part by accounting and reporting
requirements, are still overly influenced by measurement concepts that date back to the industrial era
when physical capital was the primary source of wealth creation.
Expenditures incurred on the development of the employees – education and training being perhaps the
most prominent – are treated as costs although, these expenditures possess the traits of an investment
(expenditure at one point in time that is made with the intention of generating an increase in capacity
at some future point in time). But this outright focus on costs and cost cutting is not baseless. Often
the known costs associated with people and their development, because measurement and accounting
practices associated with human capital are remains of the industrial era, the measured costs are only
a portion of the total costs. Moreover, because benefits are both uncertain and unknown, a
conservative strategy has its merits. And finally, because human capital cannot be owned, spending on
the development of people does not meet the traditional accounting concept of an investment, since
employers cannot control the asset, i.e., the people in whom an investment is being made. There are
genuine arguments in favor of the status quo with regard to measurement, accounting and reporting of
human capital development and management. There are, however, also powerful arguments to be
made that change is necessary.
Human capital represents a huge operating cost that must be managed efficiently because of its
absolute scale. At the same time – because human capital is also the only asset that cannot be owned
– it must be managed wisely, but also with humanity. As a result, a strategy that focuses exclusively
on efficiency and cost containment can, at best, only be successful in the short-run. This creates a
fundamental paradox.
Exceptional management in the knowledge era is defined by the ability to resolve this paradox through
a “both/and,” rather than an “either/or” strategy. The both/and strategy requires a relentless focus on
finding ways to cut costs and improve productivity, while simultaneously evoking the passion,
creativity, loyalty and best efforts of the people on whom an organization relies.

Q.6 Discuss the auditing for HR professionals.

Human Resource Audits

Scope—Human resource audits involve a company’s strategic actions to take an intensely objective
look at its HR policies, procedures and practices. This type of comprehensive review of the company’s
current state can help to identify whether specific practice areas or processes are adequate, legal
and/or effective. The results obtained from this review can help to identify gaps in HR practices, and
these gaps can then be prioritized for attention in an effort to minimize lawsuits and/or regulatory
violations, as well as to achieve and maintain world-class competitiveness in key HR practice areas.

Overview
Human resource audits are a vital means of avoiding legal and/or regulatory liability that may arise
from a company’s HR policies and practices. In addition to identifying areas of legal risk, audits often
are designed to provide a company with information about the competitiveness of its HR strategies by
looking at the “best practices” of other companies in its industry. In essence, an HR audit involves
identifying issues and finding solutions to problems before they become unmanageable. It is an
opportunity to assess what an organization is doing right, as well as how things might be done
differently, more efficiently or at a reduced cost.

In today’s competitive climate, companies operate within the confines of a heavily-regulated employee
environment. This includes dealing with myriad complex laws and regulations. The scope of the HR
Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

function includes establishing and administering a host of policies and practices—many of which involve
compliance implications—that significantly influence the productivity and profitability of the enterprise.
Just a handful of these are:

Benefit administration issues

• Disciplinary matters
• Employee development
• Employees’ eligibility to work
• Interim/contingent staffing
• Interviewing and hiring
• Job descriptions
• Organizational development
• Payroll management
• Performance management
• Problem or conflict resolution
• Stress management
• Substance abuse
• Team building
• Termination
• Workplace violence

Given that many HR departments are both understaffed and overworked, only in retrospect do many
companies become aware of the monetary costs of ignoring HR-related legal hot buttons.
Noncompliance with applicable laws and regulations involves significant financial risk. To minimize the
risk, many organizations purchase employment practices liability insurance. While this is a sound
strategy, companies can take other proactive measures. Chief among these is a voluntary HR
compliance audit.

Types of Audits

An HR audit can be structured to be either comprehensive or specifically focused, within the constraints
of time, budgets and staff. There are several types of audits, and each is designed to accomplish
different objectives. Some of the more common types are:

• Compliance: Focuses on how well the company is complying with current federal, state and
local laws and regulations.
• Best Practices: Helps the organization maintain or improve a competitive advantage by
comparing its practices with those of companies identified as having exceptional HR practices.
• Strategic: Focuses on strengths and weaknesses of systems and processes to determine
whether they align with the HR department’s and/or the company’s strategic plan.
• Function-Specific: Focuses on a specific area in the HR function (e.g., payroll, performance
management, records retention, etc.).

What to Audit

Deciding what to audit will depend largely on the perceived weaknesses in the company’s HR
environment, the type of audit decided on and the available resources. Keeping a log of issues that
have arisen but are not covered in the company’s procedures or policies will help identify areas of
potential exposure that can be addressed during the annual review process (if they do not need to be
addressed immediately.)
Sikkim Manipal University - MBA - MU0013 – Human Resource Audit

Semester: 3 - Assignment Set: 2

There are, however, certain areas in which companies are particularly vulnerable. Most lawsuits can be
traced to issues related to hiring, performance management, discipline or termination. Some additional
risk areas that should be carefully reviewed include:

• Misclassification of exempt and nonexempt jobs. Almost every company has job positions
that have been misclassified as exempt from overtime eligibility. The complexity of wage and
hour laws and regulations makes it easy to err in classifying a job as exempt, thereby exposing
the company to liability for past overtime.
• Inadequate personnel files. A review of sample personnel files often reveals inadequate
documentation of performance—for example, informal, vague and/or inconsistent disciplinary
warnings. Performance evaluations may be ambiguous, inaccurate or outdated. Personal health
information is often found in personnel files, despite medical privacy laws requiring such data to
be kept separate. Accurate and detailed records are essential for employers to defend any type
of employee claim, particularly unemployment compensation or wrongful termination claims.
• Prohibited attendance policies. Controlling excessive absenteeism is a big concern for most
employers. However, the complexity of family and medical leave laws, with sometimes
conflicting state and federal protections, has made many formerly acceptable absence control
policies unacceptable. Absences affect workers’ compensation, family and medical leave,
disability accommodations and pregnancy laws. Companies often have attendance policies that
either do not comply with relevant laws and regulations or grant employees more protections
than required.
• Inaccurate time records. Employers typically require nonexempt employees to punch a time
clock or to fill out time sheets reflecting their time worked each week. The records generated by
these systems typically are the employer’s primary means of defense against wage and hour
claims, so it is essential that timekeeping policies and practices be clearly communicated and
consistently administered.
• Insufficient documentation. Reviews of employer hiring practices often uncover inadequate
documentation, such as missing or incomplete I-9 Forms. Employers can be fined between $100
and $1,000 for each failure to accurately complete an I-9 Form. Fines for these violations can
easily add up, with reported cases of repayment totaling over $100,000