Mandatory Employment Policies Every Domestic Company Must Adopt
Running a organization in India necessitates adherence with numerous employment regulations. Whether you're a small business or an mature organization, knowing and implementing the right guidelines is essential for regulatory compliance and fostering a equitable workplace.
Why Employment Policies Are Critical
Employment policies serve the backbone of your business's HR management. They provide transparency to employees, safeguard both companies and employees, and ensure you're satisfying your statutory obligations.
Failing to establish compulsory policies can lead to serious fines, harm to your reputation, and workforce unhappiness.
Key Employment Policies Mandated in India
Let's examine the most important Payment of Wages Act compliance employment policies that every domestic employer should maintain:
1. Anti-Sexual Harassment Policy (POSH 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 companies to:
Establish a detailed anti-harassment policy
Create an Internal Complaints Committee (ICC)
Display the policy visibly in the workplace
Conduct regular training programs
Even lean teams with less than 10 employees should implement a zero-tolerance approach and can use the Local Complaints Committee (LCC) for issues.
For organizations seeking to simplify their HR compliance, policy management tools can support you generate legally sound policies quickly.
2. Maternity Benefit Policy
The Maternity Benefit Act, 1961 grants female employees generous provisions:
Up to 26 weeks of paid pregnancy leave for the first two children
12 weeks of paid leave for subsequent children
Required to companies with 10+ employees
Employers must guarantee that maternity-bound employees receive their complete rights without any bias. The policy should explicitly outline the request process, paperwork 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: Usually 12 days per year for health matters
Casual Leave: Usually 12 days per year for short-term matters
Earned Leave: Generally 15 days per year, built up based on employment duration
Your leave policy should transparently specify:
Eligibility criteria
Request process
Rollover provisions
Prior notification requirements
4. Working Hours and Extra Time Policy
According to Indian labor laws, working hours are capped at:
8-9 hours per day
48 hours per week
Any work beyond these hours must be compensated as overtime at double the standard wage rate. Your policy should clearly outline meal times, shift rotations, and overtime computation methods.
5. Salary and Payment Policy
The Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 mandate that:
Employees get at least the mandated wage rates
Compensation are paid on time—generally by the 7th or 10th day of the subsequent month
Cuts are capped and explicitly communicated
Your salary policy should detail the salary structure, payout dates, and permitted withholdings.
6. Provident Fund (PF) and Employee State Insurance (ESI) Policy
Employee security schemes are required for specific companies:
EPF (Employees' Provident Fund): Required for companies with 20+ employees
ESI (Employee State Insurance): Mandatory for companies with 10+ employees, including staff earning under ₹21,000 per month
Both company and employee deposit to these funds. Your policy should explain deduction rates, enrollment process, and benefit procedures.
For all-inclusive HR compliance management, contemporary HR software can automate PF and ESI contributions automatically.
7. Gratuity Policy
The Payment of Gratuity Act, 1972 is applicable to organizations with 10+ employees. Important terms include:
Due to employees with 5+ years of uninterrupted service
Computed at 15 days' pay for each finished year of service
Paid at resignation
Your gratuity policy should transparently outline the determination method, disbursement timeline, and eligibility criteria.
8. Equal Opportunity and Accessibility Policy
The Rights of Persons with Disabilities Act, 2016 requires establishments with 20+ staff to:
Adopt an equal opportunity policy
Offer accessibility accommodations
Eliminate discrimination based on disability
This policy demonstrates your commitment to inclusion and fosters an inclusive workplace.
9. Appointment Letter and Employment Contract Policy
Every incoming hire should get a documented appointment letter detailing:
Job title and functions
Salary structure and benefits
Working hours and office
Leave entitlements
Separation period
Relevant terms and conditions
This contract serves as a official proof of the employment relationship.
Frequent Errors to Prevent
Numerous companies make these mistakes when creating employment policies:
Copying Generic Templates: Policies should be customized to your unique company, industry, and state regulations.
Ignoring State-Specific Regulations: Many labor laws change by state. Verify your policies align with state-level laws.
Neglecting to Distribute Policies: Having policies is ineffective if employees don't know about them. Periodic awareness programs is essential.
Not Revising Policies Periodically: Labor laws change. Audit your policies yearly to guarantee sustained compliance.
Not having Written Proof: Always keep recorded policies and employee confirmations.
Steps to Implement Employment Policies
Follow this systematic process to establish comprehensive employment policies:
Step 1: Assess Your Obligations
Figure out which policies are compulsory based on your:
Organization size
Industry type
State
Workforce composition
Step 2: Write Thorough Policies
Work with HR professionals or compliance counsel to prepare comprehensive, law-abiding policies. Evaluate using automated tools to streamline this process.
Step 3: Validate and Finalize
Get management approval to verify all policies meet statutory requirements.
Step 4: Communicate to Employees
Conduct awareness sessions to explain policies to all staff members. Make sure everyone grasps their rights and obligations.
Step 5: Get Confirmations
Maintain signed confirmations from all employees confirming they've received and accepted the policies.
Step 6: Review and Modify Periodically
Set up periodic reviews to update policies based on compliance changes or organizational needs.
Value of Comprehensive Employment Policies
Having well-defined employment policies delivers several benefits:
Legal Protection: Eliminates liability of lawsuits
Clear Standards: Employees understand what's demanded of them
Uniformity: Guarantees fair management across the company
Better Employee Relations: Transparent policies build positive relationships
Streamlined Processes: Minimizes ambiguity and disputes
Final Thoughts
Employment policies are not just regulatory obligations—they're fundamental instruments for building a positive, clear, and efficient workplace. Whether you're a startup or an mature enterprise, focusing time in implementing comprehensive policies delivers benefits in the future.
With digital HR platforms and expert assistance, creating and maintaining legally-sound employment policies has become easier than ever. Take the important step today to safeguard your company and foster a better workplace for your employees.