Critical Employment Policies Every Domestic Company Must Implement
Managing a business in India requires compliance with multiple employment statutes. Regardless of whether you're a growing company or an well-known organization, knowing and implementing the right frameworks is crucial for legal compliance and fostering a fair workplace.
Why Employment Policies Are Important
Employment policies act as the framework of your company's HR operations. They provide transparency to employees, safeguard both businesses and employees, and maintain you're meeting your statutory requirements.
Neglecting to adopt required policies can result in significant penalties, harm to your standing, and employee unhappiness.
Key Employment Policies Required in India
Let's look at the most essential employment policies that every Indian business should maintain:
1. Anti-Sexual Harassment Policy (Prevention of Sexual Harassment Policy)
The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 is required for all companies with 10 or more employees. This act mandates organizations to:
Adopt a thorough anti-harassment policy
Constitute an Internal Complaints Committee (ICC)
Communicate the policy clearly in the workplace
Hold regular awareness programs
Even compact teams with less than 10 employees should implement a zero-tolerance stance and can use the Local Complaints Committee (LCC) for grievances.
For businesses seeking to automate their HR policy creation, policy management tools can support you generate regulation-following policies quickly.
2. Maternity Benefit Policy
The Maternity Benefit Act, 1961 grants female employees substantial provisions:
Up to 26 weeks of paid pregnancy leave for the first two children
12 weeks of paid leave for further children
Mandatory to companies with 10+ employees
Employers must ensure that maternity-bound employees are provided their entire benefits without any discrimination. The policy should clearly specify the application process, requirements needed, and payment terms.
3. Leave Policy (Medical, Casual, and Earned Leave)
Under the Shops & Establishments Act and the Factories Act, 1948, employees are qualified to:
Sick Leave: Typically 12 days per year for medical issues
Casual Leave: Usually 12 days per year for personal matters
Earned Leave: Generally 15 days per year, built up based on service duration
Your leave policy should transparently define:
Entitlement criteria
Application process
Rollover terms
Advance intimation requirements
4. Working Hours and Additional Hours Policy
According to Indian labor laws, working hours are capped at:
8-9 hours per day
48 hours per week
Any duty beyond these limits must be paid as overtime at 2x the normal wage rate. Your policy should specifically state meal times, work schedule arrangements, and overtime calculation methods.
5. Wages and Payment Policy
The Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 ensure that:
Employees get at least the minimum wage rates
Salaries are paid on time—typically by the 7th or 10th day of the following month
Deductions are capped and explicitly stated
Your wage policy should outline the compensation breakdown, payout timeline, and allowable withholdings.
6. Provident Fund (PF) and Employee State Insurance (ESI) Policy
Social security benefits are compulsory for certain organizations:
EPF (Employees' Provident Fund): Compulsory for organizations with 20+ employees
ESI (Employee State Insurance): Applicable for establishments with 10+ employees, covering staff earning under ₹21,000 per month
Both organization mandatory HR policies India and employee pay to these programs. Your policy should detail deduction rates, enrollment process, and benefit procedures.
For complete HR compliance management, modern HR tools can manage PF and ESI deductions automatically.
7. Gratuity Policy
The Payment of Gratuity Act, 1972 applies to organizations with 10+ employees. Important provisions include:
Due to employees with 5+ years of consistent service
Computed at 15 days' salary for each completed year of service
Disbursed at separation
Your gratuity policy should transparently outline the computation method, payout timeline, and eligibility criteria.
8. Equal Opportunity and Disability Policy
The Rights of Persons with Disabilities Act, 2016 mandates workplaces with 20+ staff to:
Implement an equal opportunity policy
Provide support accommodations
Eliminate discrimination based on disability
This policy reflects your commitment to inclusion and fosters an welcoming workplace.
9. Appointment Letter and Employment Contract Policy
Every incoming hire should be provided a documented appointment letter specifying:
Job designation and responsibilities
Compensation structure and perks
Working hours and location
Holiday entitlements
Separation period
Additional terms and conditions
This contract acts as a official record of the employment terms.
Frequent Errors to Prevent
Several companies make these mistakes when drafting employment policies:
Copying Generic Templates: Documents should be tailored to your particular business, industry, and state laws.
Neglecting State-Specific Laws: Numerous labor laws differ by state. Make sure your policies conform with local laws.
Failing to Distribute Policies: Drafting policies is ineffective if employees haven't know about them. Consistent training is critical.
Not Updating Policies Periodically: Labor laws evolve. Update your policies yearly to ensure continued compliance.
Lacking Records: Always maintain documented policies and employee acknowledgments.
Process to Create Employment Policies
Follow this systematic approach to establish comprehensive employment policies:
Step 1: Assess Your Requirements
Identify which policies are required based on your:
Company size
Industry domain
State
Workforce composition
Step 2: Create Comprehensive Policies
Work with HR experts or legal experts to prepare comprehensive, law-abiding policies. Evaluate using digital tools to streamline this process.
Step 3: Review and Sign Off
Secure management approval to confirm all policies fulfill statutory requirements.
Step 4: Distribute to Employees
Conduct awareness sessions to communicate policies to all staff members. Ensure everyone grasps their rights and duties.
Step 5: Collect Confirmations
Preserve signed records from all employees confirming they've read and acknowledged the policies.
Step 6: Track and Update Regularly
Schedule periodic audits to modify policies based on law amendments or organizational evolution.
Value of Well-Defined Employment Policies
Establishing comprehensive employment policies provides several advantages:
Regulatory Protection: Minimizes exposure of legal action
Defined Expectations: Employees know what's expected of them
Fairness: Maintains uniform handling across the company
Improved Staff Relations: Well-communicated policies build trust
Streamlined Management: Eliminates ambiguity and disputes
Summary
Employment policies are not just regulatory requirements—they're fundamental instruments for establishing a fair, well-managed, and harmonious workplace. Whether you're a small business or an established corporation, putting effort time in creating comprehensive policies delivers returns in the future.
With digital HR platforms and expert assistance, implementing and updating legally-sound employment policies has turned into easier than ever. Initiate the initial step today to safeguard your company and build a positive workplace for your team.