Critical Employment Policies Every Domestic Company Must Adopt
Managing a company in India necessitates conformity with multiple employment laws. Regardless of whether you're a growing company or an mature enterprise, knowing and implementing the right policies is vital for statutory compliance and creating a equitable workplace.
Why Employment Policies Matter
Employment policies serve the foundation of your business's HR operations. They ensure transparency to employees, protect both employers and workers, and maintain you're meeting your regulatory obligations.
Not managing to establish mandatory policies can result in serious legal consequences, hurt to your reputation, and workforce discontent.
Essential Employment Policies Required in India
Let's look at the most essential employment policies that every domestic employer should implement:
1. Anti-Sexual Harassment Policy (Workplace Safety Policy)
The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 is mandatory for all organizations with 10 or more employees. This legislation mandates employers to:
Establish a detailed anti-harassment policy
Constitute an Internal Complaints Committee (ICC)
Communicate the policy visibly in the workplace
Conduct periodic education programs
Even compact teams with fewer than 10 employees should adopt a zero-tolerance approach and can utilize the Local Complaints Committee (LCC) for issues.
For companies looking to simplify their HR compliance, policy management tools can assist you draft regulation-following policies rapidly.
2. Maternity Benefit Policy
The Maternity Benefit Act, 1961 grants female workers generous entitlements:
Up to 26 weeks of paid parental leave for the first two children
12 weeks of paid leave for additional children
Applicable to companies with 10+ employees
Companies must make certain that pregnant employees are provided their entire benefits without any bias. The policy should explicitly outline the application process, requirements needed, and compensation terms.
3. Leave Policy (Health, 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 medical concerns
Casual Leave: Typically 12 days per year for short-term matters
Earned Leave: Typically 15 days per year, accrued based on employment duration
Your leave policy should transparently specify:
Entitlement criteria
Approval process
Carry-forward rules
Prior notification requirements
4. Working Hours and Additional Hours Policy
Under Indian labor laws, working hours are capped at:
8-9 hours per day
48 hours per week
Any duty beyond these hours must be remunerated as overtime at twice the regular wage rate. Your policy should clearly state rest times, timing rotations, and overtime payment methods.
5. Compensation and Payment Policy
The Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 ensure that:
Employees receive at least the mandated wage rates
Compensation are paid on time—usually by the 7th or 10th day of the subsequent month
Withholdings are capped and clearly disclosed
Your salary policy should outline the compensation breakdown, payment schedule, and permitted withholdings.
6. Provident Fund (PF) and Employee State Insurance (ESI) Policy
Social security provisions are compulsory for particular establishments:
EPF (Employees' Provident Fund): Required for organizations with 20+ employees
ESI (Employee State Insurance): Mandatory for companies with 10+ employees, including staff earning under ₹21,000 per month
Both employer and employee pay to these funds. Your policy should explain payment rates, enrollment process, and withdrawal procedures.
For complete HR compliance management, modern HR tools can manage PF and ESI deductions seamlessly.
7. Gratuity Policy
The Payment of Gratuity Act, 1972 pertains to establishments with 10+ employees. Key terms include:
Entitled to employees with 5+ years of continuous service
Calculated at 15 days' wages for each completed year of service
Disbursed at retirement
Your gratuity policy should transparently detail the calculation method, payment timeline, and entitlement criteria.
8. Equal Opportunity and Accessibility Policy
The Rights of Persons with Disabilities Act, 2016 requires workplaces with 20+ staff to:
Adopt an equal opportunity policy
Provide accessibility accommodations
Prevent discrimination based on disability
This policy demonstrates your commitment to diversity and fosters an accessible workplace.
9. Appointment Letter and Employment Agreement Policy
Every fresh hire should be provided a written appointment letter outlining:
Job role and responsibilities
Compensation structure and perks
Working hours and place of work
Holiday entitlements
Separation period
Relevant terms and conditions
This document functions as a official record of the employment terms.
Common Errors to Steer Clear Of
Several employers commit these blunders when drafting employment policies:
Copying Generic Templates: Guidelines should be adapted to your particular company, industry, and state requirements.
Ignoring State-Specific Laws: Many labor laws differ by state. Verify your policies conform with regional laws.
Failing to Share Policies: Having policies is useless if employees haven't aware about them. Periodic training is essential.
Not Updating Policies Periodically: Labor laws change. Review your policies regularly to ensure continued compliance.
Missing Written Proof: Always keep recorded policies and employee acknowledgments.
Guide to Implement Employment Policies
Adopt this step-by-step approach to create robust employment policies:
Step 1: Determine Your Needs
Determine which policies are compulsory based on your:
Company size
Industry sector
Geography
Employee composition
Step 2: Create Thorough Policies
Partner with HR experts or compliance counsel to prepare comprehensive, law-abiding policies. Evaluate using automated solutions to streamline this process.
Step 3: Verify and Sign Off
Obtain legal approval to verify all policies meet statutory standards.
Step 4: Share to Employees
Organize training sessions to clarify policies to all employees. Ensure everyone grasps their entitlements website and responsibilities.
Step 5: Obtain Sign-Offs
Preserve written confirmations from all employees verifying they've understood and accepted the policies.
Step 6: Monitor and Revise Regularly
Set up periodic reviews to revise policies based on compliance amendments or business needs.
Advantages of Comprehensive Employment Policies
Implementing clear employment policies provides numerous advantages:
Compliance Protection: Minimizes exposure of penalties
Defined Guidelines: Employees understand what's required of them
Fairness: Ensures fair management across the workforce
Enhanced Worker Relations: Well-communicated policies foster trust
Smooth Management: Reduces ambiguity and grievances
Summary
Employment policies are not just compliance obligations—they're fundamental tools for building a positive, clear, and harmonious workplace. No matter if you're a small business or an established enterprise, putting effort time in implementing comprehensive policies pays returns in the long run.
With contemporary HR solutions and proper guidance, creating and updating legally-sound employment policies has turned into more manageable than ever. Make the initial step today to safeguard your company and create a supportive workplace for your workforce.