A business in India is an initiation for some or the next step for others. Regardless of the situation, a foreign company or an Indian startup must strike a balance between its own HR policies and the local norms in India when establishing its human resources policies.
As a foundation for their HR policies in India, foreign companies or startups must gain a deep understanding of the laws and regulations that inform HR administration. A country like India has multiple regulations governing labour laws, including federal, state, and industry-specific requirements.
In addition, employers may also use HR policies as a competitive advantage. Effective HR policies can improve employers' ability to attract talent and lower their attrition rates. Meanwhile, HR and payroll operations in India can support the implementation of company values locally and improve workplace efficiency.
Foreign companies usually evaluate local HR costs and practices before entering India. In contrast, companies that already operate in India often conduct HR audits and health checks to ensure HR compliance in India and best practices.
Below are a few pertinent areas foreign employers must consider when handling staff in India. Before that, let's briefly discuss ‘Why HR Policies are essential for any organisation’.
HR Policies in India: What are they for?
Generally, HR policies aim to improve employee efficiency and maintain smooth organisational operations by providing a code of conduct that ensures a safe and secure working environment. An HR policy's purpose is to provide a solid foundation for employees to progress toward advancement and welfare. Furthermore, it prevents employees from bringing lawsuits against the company.
Every company requires a set of human resources policies to ensure smooth operation. When it comes to fostering a safe and secure work environment, a company's policies guide the company and its employees on how to conduct themselves and work effectively.
An HR strategy can also be described as a set of behaviours and concepts that govern an organisation's relationship with its workers. An HR policy proposal of this type sets the guidelines for a broad range of employment connections within an organisation. It is evident that HR rules are essential to promote regular behaviour and equality among employees in every firm.
Employment Contracts
Code of Conduct
Employee Wages
Leave Policy
Employee Provident Fund
Gratuity Policy
Maternity and Paternity Leave Policy
Sexual Harassment in The Workplace Policy
Probation and Confirmation Policy
Termination of Employment Policy
Grievance Policy
Communications Policy
Nondiscrimination Policy
Work from Home Policy
1. Employment Contracts- Employee contracts are not legally required in India but are essential for every organisation. Employee contracts serve as a framework for all personnel-related agreements. It is crucial to have current documents demonstrating compliance with regulations for several years to understand Indian employment laws, which are complex and diverse. A company's employment agreements should be drafted in accordance with wage laws, labour laws, the Contract Act of 1872, and the local state's employment law.
2. Code of Conduct- A company's code of conduct describes the company's vision, ethics, and mission. It also provides a code of conduct for employees to follow. It aims to create and maintain a positive working environment. In India, a code of conduct policy includes a number of policies, including equal rights, electronic usage policies, dress codes, policies on enabling work environments, media policies, conflict of interest policies, and so on. It is also necessary to specify how breaches of the code should be reported in the code of conduct.
3. Employee Wages- An HR department's job involves managing employee payroll and ensuring employee salaries are competitive in the market and comply with government regulations. An employee's wages are covered by several acts in India, among which is the Minimum Wage Act of 1948, which sets the minimum wages that skilled and unskilled workers should receive. It also provides employees a means to earn 'basic living wages '. As part of the Payment of Wages Act of 1936, employees are guaranteed to receive their payments on time without deductions. In order to follow compliances, it is essential to pay attention to the compliances required for all employee wages, even if it may seem tempting to focus only on the market's competitive rates.
4. Leave Policy- A company's leave policy should clearly show how many leaves workers are entitled to each year as required. A suitable leave policy includes a proper division of leaves into paid, sick, casual, etc. Public holidays should also be included. A comprehensive HR policy in India should also include provisions for unpaid leaves and rules on the salary cut for late arrivals and half-days. The Factories Act of 1948 outlines that employees are entitled to receive payment for any additional work they perform beyond their regular working hours. In addition, employees are entitled to receive payment for holidays every week.
5. Employee Provident Fund-In accordance with the Employees Provident Fund Act of 1947, employers are required to set up employee provident funds accounts for their employees. These funds provide employees with income security after they retire. Employee benefits include housing care, medical insurance, and retirement pensions. This is more like a security fund. For companies with more than ten employees, provident funds benefits must be provided to their employees. Therefore, you must give provident funds if you have over ten employees.
6. Gratuity Policy- Companies have a gratuity policy to recognise employees' contributions to the company. Employees with over five years of continuous service are entitled to receive gratuities. When an employee is laid off or resigns but has served for at least five years continuously, the company is legally required to pay a gratuity payout as a one-time payment as a gratuity payout to them. Companies are legally obligated to pay gratuities to their employees according to The Payment of Gratuity Act, 1972.
7. Maternity and Paternity Leave Policy- According to The Maternity Benefits (Amendment Act, 2017), every company with more than ten employees must provide maternity leave benefits to women. As per the law, a pregnant worker is entitled to 26 weeks of paid leave for each of her first two children and 12 weeks of unpaid leave after that. At present, there is no law that governs paternity bills for private company employees. A proposed paternity benefits bill, 2017, is still awaiting government approval. Central government employees are entitled to 15 days of paternity leave to care for their wives and surviving children.
8. Sexual Harassment in The Workplace Policy- For women to feel safe at work, companies must adopt rules, policies and regulations designed to create a safe work environment. This is not just about obeying the law; it has to be a moral obligation. The Sexual Harassment Act of 2013 requires companies to take proper steps to protect women employees, interns, and visitors. It is also crucial for companies to have an active sexual harassment policy to handle employee complaints about harassment. An Internal Complaints Committee should be established in every company with more than ten employees in order to handle complaints of sexual harassment from women at work.
9. Probation and Confirmation Policy- As soon as an employee is onboarded, they are usually placed on probation. During this period, the company can assess an employee's performance and determine the conditions under which the employee can be confirmed. The probation period is mandatory for all employees of any organisation. As a result, the employee can better understand the company's work environment and workload. A set of terms and conditions governs an employee's probationary period. The policy should also include the employee's code of conduct, the company's performance expectations, the company's goals for him/her, and the probationary period and procedures.
10. Termination of Employment Policy- There will always be times when you must let go of an employee. Such situations carry a great deal of emotion. Therefore, having a clear departure policy will guide you throughout the termination process. As a result of federal regulations, companies are not permitted to terminate employees without notice. Human Resources is responsible for ensuring that the correct procedures are followed in compliance with federal law. A comprehensive termination policy is essential for the employee to be compliant and for the employer to create an accurate and in-depth policy.
11. Grievance Policy— Every employer in India that employs more than 20 employees must establish a grievance redressing committee in accordance with Section 9C of the Industrial Disputes Act, 1947. It is essential to hear grievances about job harassment, sexual misconduct, unfair decisions, etc., and have a policy that allows them to be resolved. In a company's HR policy, a grievance policy, for instance, plays a key role in ensuring the proper functioning and growth of the organisation.
12. Communications Policy- An organisation's communication policy is intended to promote open communication throughout the organisation, including e-mail, mobile phone usage, telephones, notice boards, memos, etc. In addition to its policies for emailing, mobile phone usage, telephones, and notice boards, a company's communication policy also includes mechanisms for regularly updating existing technologies and communication channels.
13. Non-Discrimination Policy - Employees are entitled to equal respect without discrimination, regardless of age, colour, sex, caste, creed, or other forms of discrimination. However, a variety of forms of discrimination can be employed, such as age, colour, sex, caste, and creed. According to Articles 14, 15 and 16, all citizens are guaranteed these rights. Therefore, every organisation must have a policy outlining the repercussions of discrimination in addition to a policy that prohibits discrimination in any form.
14. Work from Home Policy- Many companies have switched to a hybrid mode of working, which includes working from the office for some and remotely from home for others. The employees working from the office follow a set of instructions and rules beforehand; meanwhile, working from home is a new format that also demands a policy. Employees and employers are granted the privilege of working from home under a work-from-home policy. A clear and definitive policy will be helpful even though there are no laws regarding these. It must specify the work hours, deliverables, and procedures clearly. Employees must be able to apply for the privilege of working from home using a particular method, and it must specify who qualifies for certain privileges in detail.
A company with functioning human resource management ensures that its policies comply with the local laws of the state and country. Additionally, it is important to be familiar with the laws and procedures necessary for drafting these policies. Creating the company's policies requires the right care since India's corporate laws can be complex.
Consider using the Start-Up Checklist by OBOX HR for guidance on where to begin building your HR policies. You can also get our HR Assistance to ensure these policies are implemented.
