Did you know that a whopping 86% of job seekers go through company reviews and ratings before applying for a position? And what’s more surprising is that half of them would turn down a job offer—even if it came with a higher salary—if they came across negative reviews. This underlines the critical role of HR professionals in maintaining a company’s reputation and attractiveness to potential employees.
Further, one effective way HR achieves this is by establishing and consistently implementing well-documented HR policies and procedures. These policies, in turn, not only govern internal practices but also serve to communicate the organization’s values and environment externally.
With one of the world’s largest workforces, HR policies in India carry even more weight. Additionally, they provide an important legal framework that ensures fair treatment and protects the rights of workers and employers.
Curious to know more about the top 6 HR policies in India? Join us in this blog as we understand essential guidelines, aiming to empower employees and HR professionals with a deeper understanding of their rights and responsibilities within the workplace.
Define HR Policy
A human resources policy serves as the backbone for organizing, managing, and administering a company’s most valuable asset—its employees. It’s essentially a roadmap that outlines guidelines for various aspects of employment, including recruitment, compensation, benefits, and training.
Moreover, research indicates that a thorough HR policy streamlines operations, fosters a positive work culture, and enhances employee satisfaction. A study by the Society for Human Resource Management (SHRM) found that companies with clearly defined HR policies experience higher levels of employee engagement and productivity.
Further, because people are critical to business success, HR strategies need to address both managers’ and workers’ needs and perspectives. By striking this balance, organizations can ensure fairness, transparency, and alignment with their overarching values and objectives.
In conclusion, a well-crafted HR policy serves as a reflection of a company’s identity, influencing its reputation and attractiveness to potential hires, as well as improving the retention rate. But what exactly constitutes a well-designed HR policy? Let’s understand the top 6 elements that contribute to creating an effective and comprehensive set of HR guidelines.
Top 6 HR Policies in India
Based on our research, the top 10 HR policies that Indian companies should have are:
1. Employee Contract
Leading the charge among HR policies in India are the regulations governing employee contracts policy. This policy acts as a vital blueprint and explains:
- Job Description: Providing a detailed outline of the roles, responsibilities, and performance expectations associated with the position. According to a survey by Glassdoor, job descriptions that accurately reflect the role and responsibilities can increase applicant quality by 36%. Next, the contract clarifies the compensation structure.
- Compensation Structure: Defining the intricacies of salary, benefits, bonuses, and other financial incentives. Research by Mercer indicates that companies with modernised compensation structures attract and retain top talent more effectively. Further, under the Minimum Wages Act of 1948, all employers in the organised sector must provide ‘the basic cost of living’ with clearly defined wages, frequency of payment, and calculation of overtime pay. Moving on, the contract outlines work hours.
- Work Hours: Clearly stipulating the standard working hours, overtime policies, and any flexibility arrangements. A Gallup study found that employees with flexible work schedules are 1.3 times more likely to be engaged at work. Finally, the contract establishes procedures for termination.
- Termination Procedures: Outlining the protocol and legal considerations for termination or resignation. As per a report by Willis Towers Watson, a termination policy can reduce legal risks and ensure fair treatment of employees.
For instance, within the context of an IT company in India, an employment contract for a software engineer would include specifics like job title, duties, compensation package, contractual hours, probationary period, termination clauses, and compliance with Indian labor laws. These rules make sure that everyone is treated fairly and that the company complies with the law. This helps to create a positive atmosphere at work and reduces the risks for both employers and employees.
2. Code of Conduct
The Code of Conduct serves as a compass guiding employee behavior within the workplace. This policy outlines expectations, sets boundaries, and details the repercussions of non-compliance. To achieve this, the code of conduct policy of an Indian company typically includes guidelines on:
- Professional Behaviour: Establishing standards for professionalism, respect, and integrity in all interactions. According to a survey by Harvard Business Review, 80% of employees who get mistreated spend time considering bad behaviour, and 48% reduce their efforts. Next, the policy addresses anti-corruption measures.
- Anti-corruption Measures: Prohibiting bribery, kickbacks, and other forms of corrupt practices. The Global Economic Crime and Fraud Survey 2022 by PwC revealed that 52% of organisations in India experienced economic crime in the past two years, highlighting the importance of anti-corruption policies.
- Conflicts of Interest: Addressing situations where personal interests may conflict with the company’s interests. A study found that 43% of employees globally have observed unethical behaviour related to conflicts of interest in their corporations.
- Social Media Usage: Providing guidelines on responsible and professional use of social media platforms, both during and outside of work hours. Research by CareerBuilder showed that 70% of employers use social media to screen candidates during the hiring process, emphasising the need for clear social media policies.
- Disciplinary Procedures: Outlining the steps and consequences for breaches of the Code of Conduct. According to an Ethics & Compliance Initiative (ECI) survey, companies with effective discipline and ethics cultures are 467% more likely to show positive impact than those with ineffective practices.
By communicating these principles, the Code of Conduct not only promotes a culture of ethics and compliance, but also protects the organization’s reputation and integrity. In short, it explains what employees must do to contribute to a good working environment.
3. Leave Policy (among most-discussed HR policies in India)
The HR leave policy is a widely discussed topic. This policy tells employees about the different types of leaves they can take, including:
- Sick Leave (SL): Provides employees with time off to recover from illness or injury without loss of pay. According to ILO, providing sick leave benefits can reduce employee turnover rates by up to 50%.
- Casual Leave (CL): Intended for short-duration absences, typically for personal reasons or unforeseen circumstances. A survey by Kronos Incorporated found that 43% of employees cited the availability of paid time off improves job satisfaction.
- Earned Leave (EL): Accrued based on the length of service and typically used for planned vacations or personal time off. The Indian labour laws mandate that employees earn leave for every 20 or 15 days of work, depending on their age, ensuring fair and equitable distribution of leave benefits.
- Leave Without Pay (LWP): Allows employees to take time off from work without pay, subject to approval and company policies. Research by Harvard Business Review suggests that offering unpaid leave options can improve employee retention and morale by providing flexibility during challenging life circumstances.
- Maternity and Paternity Leave: Provides new parents with time off to care for and bond with their newborn or newly adopted child. A study by ILO revealed that access to paid parental leave can positively impact maternal and child health outcomes while also promoting gender equality in the workplace.
Earned leave accrual is not affected by public holidays, ensuring fair compensation for employees. By aligning a leave policy with legal requirements and employee needs, organizations can improve employee satisfaction, well-being, and productivity while maintaining compliance with labor laws.
4. Prevention of Sexual Harassment
Sexual harassment remains a persistent issue in workplaces worldwide, highlighting the importance of implementing strong HR policies to prevent such behavior. Therefore, every company is obligated to take proactive measures to address and prevent sexual harassment through a well-defined policy framework.
In addition to internal policies, companies must adhere to legal mandates such as the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013, which aims to ensure a safe working environment for women. For instance, in India, the anti-sexual harassment policy would outline prohibited behaviors, establish an internal complaints committee, and outline the redressal process under the POSH Act of 2013.
Further, according to a poll by TUC, approximately 1 in 3 women worldwide has experienced sexual harassment in the workplace. This alarming statistic reinforces the urgent need for effective prevention and redressal mechanisms.
Creating a safe workplace environment not only promotes employee well-being but also enhances organizational productivity and reputation. However, crafting a comprehensive anti-sexual harassment policy requires careful consideration and legal expertise. Therefore, companies should seek legal counsel to ensure compliance with relevant laws and regulations.
Note: This is the most sensitive of all the HR policies in India, so please take legal advice before you create this policy for your organization.
5. Gratuity and Employee Provident Fund (EPF)
Employee Provident Fund (EPF) and Gratuity play pivotal roles in ensuring employee financial security and well-being.
Gratuity: According to the Payment of Gratuity Act, of 1972, a company must pay gratuity to all employees who leave the service after completing four years and 240 days with the same employer. It serves as a significant financial benefit, providing employees with a lump sum payment upon retirement, resignation, or termination, based on their length of service and last drawn salary. Notably, the maximum amount of gratuity payable is capped at ₹20 lakhs, as per recent amendments to the Act.
Employee Provident Fund (EPF): Widely regarded as one of the most beneficial HR policies in India for workers, EPF ensures long-term financial stability for employees. Enforced under the Employees’ Provident Funds Scheme of 1952, EPF mandates both employees and employers to contribute 12% of the employee’s basic monthly salary towards the fund. This contribution serves as a retirement savings mechanism and offers financial flexibility during the employee’s tenure. Additionally, employees can use their EPF savings for loans or to withdraw funds after retirement. Moreover, EPF accounts accrue interest, providing employees with additional earnings on their savings over time.
Furthermore, statistics reveal the widespread adoption and impact of EPF among Indian workers. As of 2021, the EPF Scheme covers over 69 million contributing members and boasts a massive corpus of approximately ₹15.6 lakh crore, highlighting its significance in ensuring financial security for the workforce.
Overall, by implementing Gratuity and EPF policies, companies demonstrate their commitment to employee welfare and financial stability, fostering a positive work environment and enhancing employee loyalty and retention.
6. Learning and Development
Learning and Development (L&D) plays a vital role in organizational success in India. It focuses on employee training, career development, and performance management. L&D encompasses various opportunities to enhance employees’ skills and abilities, such as employee coaching, mentoring, succession planning, and organization development.
In India, HR policies on L&D are crucial for organizational success. A comprehensive L&D policy equips employees with the necessary skills and knowledge to perform their roles effectively. It enhances employee performance, engagement, and motivation, while reducing turnover and improving employer branding.
Key elements of an effective L&D policy include:
- Analyzing organizational objectives: Understanding the organization’s goals and identifying the skills and knowledge required to achieve them.
- Designing training materials: Creating engaging and relevant training materials that cater to different learning styles and preferences.
- Providing mobile learning opportunities: Offering flexible and accessible learning opportunities through mobile devices and online platforms.
- Involving employees in training programs: Encouraging employee participation and feedback in the design and delivery of training programs.
- Continuous review and revision: Regularly reviewing and updating the L&D policy to ensure it remains relevant and effective.
By implementing a well-structured L&D policy, organizations in India can foster a skilled and engaged workforce, driving organizational success and growth.
Benefits of HR Policies in India
Implementing comprehensive HR policies offers numerous advantages for both companies and prospective employees:
- Coherence and Structuring: HR policies ensure the consistency and proper structuring of company’s procedures. By detailing how policies should be applied, they leave no room for ambiguity or loose ends. According to a study by SHRM, corporations with well-defined HR policies experience 35% fewer procedural errors and inconsistencies.
- Flow and Transparency of Information: These policies enhance the flow and transparency of information within the corporation. By sharing policies with all employees, individuals are informed about their duties and obligations to the HR department. Research by Deloitte found that transparent communication about HR policies can increase employee engagement by up to 40%.
- Contribution to Employer Brand: HR policies play a crucial role in shaping the employer brand and attracting top talent. Also, policies that align with the expectations and realities of the labour market enhance the organisation’s reputation and contribute to talent retention.
- Reduction of Complaints and Legal Problems: Well-defined HR policies reduce complaints, disputes, and legal issues within the company. By detailing requirements and conditions for specific situations, policies help prevent misunderstandings and conflicts. According to a report by EY, companies with effective HR policies experience a 50% reduction in legal disputes and compliance issues.
- Reflection of Company Culture and Vision: HR policies reflect the culture and vision of the company, providing a common frame of reference for all employees. Consequently, this fosters a sense of belonging and alignment with organisational values.
By embracing HR policies, companies can streamline operations, reduce risks, foster a positive work environment, and strengthen their competitive advantage in the marketplace. These policies serve as foundational pillars for organisational success, promoting transparency, fairness, and employee satisfaction.
How to Make HR Policies and Procedures?
- Conduct a Needs Assessment: Begin by assessing the specific needs and challenges of your company. Also, identify areas where policies and procedures are lacking or need improvement.
- Research Legal Requirements: Familiarise yourself with relevant Indian labour laws, regulations, and industry standards. Ensure that your policies comply with statutes such as the Factories Act of 1948 and the Industrial Employment (Standing Orders) Act of 1946 when creating HR policies in India.
- Consult Stakeholders: Engage key stakeholders, including management, employees, legal advisors, and HR professionals, in the policy development process. Moreover, gather feedback and insights to ensure that policies reflect the needs and expectations of all stakeholders.
- Draft Policies and Procedures: Develop clear, concise, and comprehensive policies and procedures that address key areas such as recruitment, compensation, performance management, and employee relations. Ensure that policies are easily understandable and accessible to all employees.
- Review and Revise: Regularly review and update HR policies to reflect changes in laws, regulations, and organisational needs. Further, solicit feedback from employees and stakeholders to identify areas for improvement.
- Communicate and Train: Communicate new and revised policies to all employees through multiple channels, such as employee handbooks, intranet portals, and training sessions. Additionally, provide training and guidance on policy implementation and enforcement to ensure understanding and compliance. Research shows that companies with comprehensive training programs have 218% higher revenue per employee.
- Monitor and Evaluate: Establish mechanisms to monitor policy adherence and effectiveness. Track metrics such as employee satisfaction, turnover rates, and compliance incidents to gauge the impact of policies on organisational performance.
By following these steps, companies can develop and implement HR policies and procedures that promote compliance, fairness, and success.
NYGGS HRMS Software: A Tool to Ensure Everyone Is Following HR Policies in India
NYGGS Human Resource Management Software plays an important role in ensuring that everyone follows HR policies. The system allows HR professionals to access essential data that is directly related to HR policies. Some of the information it provides are:
- The working hours of each employee,
- The leave patterns of each employee,
- Recruitment, training, compensation data, and much more.
Additionally, this cloud-based HRMS system constantly updates with the latest Indian labour laws, allowing the HR department to comply with legislation such as LWF, Professional Tax (PT), TDS, and EPF.
In short, NYGGS HRMS is committed to developing customized software that can meet all your HR policies in India. Do you have questions? We’ve got answers. Contact us today!