Mandatory Employment Policies Every Indian Company Must Establish
Managing a organization in India demands adherence with several employment laws. Whether you're a small business or an established firm, knowing and implementing the right policies is crucial for regulatory compliance and building a just workplace.
Why Employment Policies Matter
Employment policies serve the framework of your company's HR management. They provide clarity to employees, safeguard both employers and employees, and maintain you're satisfying your regulatory requirements.
Neglecting to adopt compulsory policies can cause substantial penalties, damage to your reputation, and employee discontent.
Key Employment Policies Necessary in India
Let's look at the most critical employment policies that every Indian business should have:
1. Anti-Sexual Harassment Policy (POSH Policy)
The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 is compulsory for all businesses with 10 or more employees. This legislation requires employers to:
Implement a comprehensive anti-harassment policy
Form an Internal Complaints Committee (ICC)
Communicate the policy visibly in the workplace
Organize periodic awareness programs
Even compact teams with fewer than 10 employees should implement a zero-tolerance stance and can leverage the Local Complaints Committee (LCC) for complaints.
For businesses seeking to streamline their HR compliance, policy management tools can help you create regulation-following policies efficiently.
2. Maternity Protection 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 additional children
Required to organizations with 10+ employees
Businesses must guarantee that expecting employees are provided their entire benefits without any unfair treatment. The policy should transparently outline the application process, documentation needed, and payment terms.
3. Leave Policy (Sick, Casual, and Earned Leave)
Under the Shops & Establishments Act and the Factories Act, 1948, employees are qualified to:
Sick Leave: Generally 12 days per year for illness-related matters
Casual Leave: Usually 12 days per year for unplanned matters
Earned Leave: Usually 15 days per year, accumulated based on service duration
Your leave policy should explicitly outline:
Eligibility criteria
Application process
Carry-forward rules
Notice requirements
4. Working Hours and Extra Time Policy
According to Indian labor laws, working hours are restricted company policies India at:
8-9 hours per day
48 hours per week
Any employment beyond these thresholds must be remunerated as overtime at 2x the regular wage rate. Your policy should clearly outline meal times, timing patterns, and overtime payment methods.
5. Compensation and Payment Policy
The Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 guarantee that:
Employees are paid at least the prescribed wage rates
Salaries are paid on time—usually by the 7th or 10th day of the following month
Deductions are capped and transparently stated
Your wage policy should specify the salary breakdown, payout dates, and authorized reductions.
6. Provident Fund (PF) and Employee State Insurance (ESI) Policy
Employee security benefits are compulsory for certain establishments:
EPF (Employees' Provident Fund): Compulsory for organizations with 20+ employees
ESI (Employee State Insurance): Applicable for establishments with 10+ employees, including staff earning under ₹21,000 per month
Both organization and employee pay to these schemes. Your policy should clarify contribution rates, registration process, and benefit procedures.
For all-inclusive HR compliance management, contemporary HR platforms can automate PF and ESI deductions efficiently.
7. Gratuity Policy
The Payment of Gratuity Act, 1972 applies to companies with 10+ employees. Critical provisions include:
Entitled to employees with 5+ years of consistent service
Computed at 15 days' wages for each completed year of service
Payable at retirement
Your gratuity policy should explicitly explain the computation method, disbursement timeline, and eligibility criteria.
8. Equal Opportunity and Differently-Abled Policy
The Rights of Persons with Disabilities Act, 2016 compels establishments with 20+ staff to:
Maintain an equal opportunity policy
Offer accommodation accommodations
Eliminate discrimination based on disability
This policy shows your commitment to equal opportunity and fosters an welcoming workplace.
9. Appointment Letter and Employment Terms Policy
Every new hire should receive a written appointment letter specifying:
Job designation and duties
Pay structure and perks
Working hours and office
Holiday entitlements
Separation period
Other terms and conditions
This document acts as a official record of the employment terms.
Frequent Errors to Prevent
Numerous employers commit these blunders when creating employment policies:
Replicating Generic Templates: Documents should be customized to your specific organization, industry, and state requirements.
Overlooking State-Specific Laws: Several labor laws vary by state. Verify your policies align with state-level requirements.
Not managing to Share Policies: Having policies is pointless if employees don't aware about them. Consistent training is necessary.
Not Revising Policies Annually: Labor laws change. Review your policies annually to guarantee continued compliance.
Missing Written Proof: Always keep written policies and staff acknowledgments.
Steps to Establish Employment Policies
Adopt this step-by-step method to implement comprehensive employment policies:
Step 1: Evaluate Your Requirements
Figure out which policies are compulsory based on your:
Business size
Industry domain
State
Employee composition
Step 2: Write Detailed Policies
Work with HR experts or legal advisors to draft comprehensive, regulation-following policies. Evaluate using software-based platforms to expedite this process.
Step 3: Verify and Sign Off
Obtain legal approval to ensure all policies meet regulatory requirements.
Step 4: Share to Employees
Hold awareness sessions to explain policies to all workers. Make sure everyone understands their rights and responsibilities.
Step 5: Get Confirmations
Keep written records from all employees verifying they've received and understood the policies.
Step 6: Track and Modify Regularly
Set up annual reviews to modify policies based on compliance changes or business requirements.
Benefits of Well-Defined Employment Policies
Implementing clear employment policies provides several benefits:
Compliance Protection: Reduces exposure of penalties
Defined Expectations: Employees know what's demanded of them
Consistency: Maintains fair management across the company
Better Employee Morale: Transparent policies foster positive relationships
Smooth Management: Minimizes confusion and conflicts
Conclusion
Employment policies are not just regulatory necessities—they're essential frameworks for establishing a positive, transparent, and harmonious workplace. Whether you're a growing company or an established organization, putting effort time in creating comprehensive policies provides benefits in the long term.
With digital HR platforms and expert guidance, implementing and managing legally-sound employment policies has gotten more manageable than ever. Initiate the first step today to secure your business and create a supportive workplace for your team.