Mandatory Employment Policies Every Domestic Company Must Establish
Managing a business in India demands conformity with numerous employment laws. Regardless of whether you're a startup or an mature firm, knowing and adopting the right frameworks is essential for regulatory compliance and building a just workplace.
Why Employment Policies Matter
Employment policies serve the foundation of your organization's HR management. They offer clear guidelines to employees, protect both employers and staff members, and guarantee you're meeting your statutory requirements.
Neglecting to establish compulsory policies can cause serious legal consequences, damage to your brand image, and staff unhappiness.
Key Employment Policies Necessary in India
Let's look at the most essential employment policies that every Indian business should implement:
1. Anti-Sexual Harassment Policy (Prevention of Sexual Harassment Policy)
The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 is compulsory for all organizations with 10 or more employees. This law requires employers to:
Adopt a detailed anti-harassment policy
Form an Internal Complaints Committee (ICC)
Post the policy visibly in the workplace
Hold periodic training programs
Even smaller teams with less than 10 employees should adopt a zero-tolerance policy and can utilize the Local Complaints Committee (LCC) for grievances.
For organizations seeking to automate their HR policy creation, policy management tools can help you draft compliant policies efficiently.
2. Maternity Benefit Policy
The Maternity Benefit Act, 1961 offers female employees substantial provisions:
Up to 26 weeks of paid maternity leave for the first two children
12 weeks of paid leave for further children
Mandatory to establishments with 10+ employees
Employers must ensure that expecting employees get their entire benefits without any bias. The policy should explicitly define the leave submission process, documentation needed, and compensation terms.
3. Leave Policy (Health, Casual, and Earned Leave)
Under the Shops & Establishments Act and the Factories Act, 1948, employees are eligible to:
Sick Leave: Typically 12 days per year for medical matters
Casual Leave: Usually 12 days per year for personal matters
Earned Leave: Usually 15 days per year, accumulated based on service duration
Your leave policy should explicitly define:
Entitlement criteria
Approval process
Rollover provisions
Notice requirements
4. Working Hours and Extra Time Policy
Under Indian labor laws, working hours are limited at:
8-9 hours per day
48 hours per week
Any employment beyond these hours must be paid as overtime at twice the standard wage rate. Your policy should clearly state break times, timing arrangements, and overtime calculation methods.
5. Compensation and Payment Policy
The Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 ensure that:
Employees are paid at least the mandated wage rates
Wages are paid on time—generally by the 7th or 10th day of the subsequent month
Withholdings are capped and transparently communicated
Your compensation policy should detail the compensation breakdown, disbursement schedule, and allowable withholdings.
6. Provident Fund (PF) and Employee State Insurance (ESI) Policy
Social security schemes are compulsory for specific organizations:
EPF (Employees' Provident Fund): Compulsory for companies with 20+ employees
ESI (Employee State Insurance): Required for organizations with 10+ employees, including staff earning under ₹21,000 per month
Both organization and employee deposit to these schemes. Your policy should detail contribution rates, joining process, and withdrawal procedures.
For comprehensive HR compliance management, advanced HR software can automate PF and ESI contributions seamlessly.
7. Gratuity Policy
The Payment of Gratuity Act, 1972 pertains to companies with 10+ employees. Key conditions include:
Entitled to employees with 5+ years of continuous service
Calculated at 15 days' wages for each full year of service
Payable at separation
Your gratuity policy should clearly detail the determination method, payout timeline, and qualification criteria.
8. Equal Opportunity and Accessibility Policy
The Rights of Persons with Disabilities Act, 2016 requires workplaces with 20+ staff to:
Implement an equal opportunity policy
Provide accommodation accommodations
Eliminate discrimination based on disability
This policy reflects your pledge to equal opportunity and fosters an inclusive workplace.
9. Appointment Letter and Employment Terms Policy
Every incoming hire should be provided a written appointment letter outlining:
Job role and duties
Pay structure and perks
Working hours and place of work
Time off entitlements
Notice period
Relevant terms and conditions
This contract functions as a binding proof of the employment relationship.
Typical Errors to Prevent
Many companies commit these errors when implementing employment policies:
Copying Generic Templates: Policies should be tailored to your particular company, industry, and state requirements.
Neglecting State-Specific Regulations: Several labor laws differ by state. Verify your policies comply with local requirements.
Failing to Share Policies: Drafting policies is ineffective if employees haven't aware about them. Consistent training is critical.
Not Reviewing Policies Annually: Labor laws evolve. Review your policies yearly to ensure ongoing compliance.
Missing Records: Always preserve written policies and worker confirmations.
Guide to Establish Employment Policies
Follow this step-by-step method to implement effective employment policies:
Step 1: Evaluate Your Requirements
Figure out which policies are mandatory based on your:
Business size
Industry sector
State
Employee composition
Step 2: Write Thorough Policies
Partner with HR consultants or legal counsel to prepare comprehensive, legally-compliant policies. Think about using digital solutions to simplify this process.
Step 3: Validate and Approve
Get legal sign-off to verify all policies satisfy legal obligations.
Step 4: Communicate to Employees
Conduct awareness sessions to communicate policies to all employees. Ensure everyone grasps their rights and responsibilities.
Step 5: Obtain Sign-Offs
Preserve signed confirmations from all employees stating they've understood and accepted the policies.
Step 6: Monitor and Update Consistently
Plan annual audits to revise policies based on regulatory amendments or operational requirements.
Advantages of Well-Defined Employment Policies
Having comprehensive employment policies offers multiple positive outcomes:
Compliance Protection: Eliminates liability of penalties
Defined Guidelines: Employees are aware of what's required of them
Consistency: Ensures fair handling across the organization
Enhanced Worker Morale: Clear policies build confidence
Smooth Operations: Reduces confusion and disputes
Final Thoughts
Employment policies are not salary payment deadline India just legal necessities—they're fundamental tools for creating a positive, well-managed, and harmonious workplace. Regardless of whether you're a startup or an mature corporation, putting effort time in implementing thorough policies provides benefits in the long run.
With digital HR solutions and professional guidance, creating and updating regulation-following employment policies has become simpler than ever. Take the first step today to protect your company and create a better workplace for your team.