How to Make HR Policies: A Step-by-Step Guide for Indian Businesses

HR policies form the backbone of any organisation – they ensure compliance, consistency, and clarity in how people are managed. If you’re wondering how to make HR policies for your business in India, this guide is for you.

Whether you’re running a startup or a growing company, creating well-defined HR policies helps you manage employees effectively, avoid legal troubles, and build trust. In this blog, we’ll break down the process step-by-step, explain common types of HR policies, and show you how to align them with Indian labour laws and organisational values.

Why You Need HR Policies

Before diving into how to make HR policies, it’s important to understand why they’re essential:

• Ensure legal compliance with labor laws in India
• Standardize processes and decision-making
• Reduce workplace conflicts and ambiguity
• Support onboarding, retention, and productivity
• Communicate employee rights and responsibilities clearly

What to Include in an HR Policy?

Creating an HR policy is not just about writing rules—it’s about establishing a fair and transparent work culture. A well-structured policy helps prevent misunderstandings, ensures compliance with laws, and aligns employee behaviour with business values. Here are the essential elements you must include in an HR policy:

1. Objective – Why the Policy Exists

This section explains the purpose of the HR policy. It sets the tone and helps employees understand why this policy was created. For example:

• Is it to maintain workplace discipline?
• Ensure safety and equality?
• Comply with labour laws?

Example:
Objective: This HR policy aims to promote a respectful and inclusive work environment while ensuring compliance with relevant employment laws.

2. Scope – Who the Policy Applies To

Define the reach of the HR policy. This section clearly identifies the individuals or departments to which the policy is intended. Some policies may apply to:

• Full-time employees only
• Contractual workers and freelancers
• Remote and hybrid teams
• Interns and trainees

Tip: Be specific to avoid ambiguity. Mention the location if your company operates in multiple regions.

3. Responsibilities – Employer and Employee Obligations

Clearly define the duties of both employees and management under this HR policy.

• Employer Responsibilities: Providing a safe workplace, ensuring compliance, and regular training.
• Employee Responsibilities: Following protocols, reporting misconduct, and maintaining confidentiality.

This dual perspective builds accountability and mutual respect within the team.

4. Procedures – Step-by-Step Actions

Explain how employees should follow the policy. This section serves as a manual for implementation, helping to reduce miscommunication. It usually includes:

• Reporting structure (e.g., how to report harassment or leave application)
• Forms or systems to be used (e.g., the clan’s attendance or leave management module)
• Timelines (e.g., submit leave 3 days in advance)

Example:
For a leave HR policy, you may outline:

1. Submit leave via the HRMS portal
2. Get approval from the reporting manager
3. Receive a confirmation email

5. Consequences – What Happens if Not Followed

Every HR policy must include the consequences of non-compliance to ensure it’s taken seriously. This includes:

• Verbal and written warnings
• Suspension
• Termination of employment
• Legal action (in serious violations)

Be fair, but firm. Include a clear disciplinary process to ensure consistency.

6. Review Clause – When and How Policies Will Be Updated

HR policies must evolve with time. Clearly mention:

• How often will the policy be reviewed (e.g., annually or biannually)
• Who is responsible for the review
• How updates will be communicated to employees

Example: This HR policy will be reviewed every 12 months by the HR department in consultation with department heads. Any changes will be communicated via email and employee handbook updates.”

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How to Make HR Policies for Your Company in India

Follow these structured steps when drafting HR policies:

1. Understand Legal Requirements

Use Indian labour laws as the foundation. Review:

• Shops and Establishments Act
• Factories Act (if applicable)
• Payment of Wages Act
• Minimum Wages Act
• Employees’ Provident Fund and Miscellaneous Provisions Act
• Maternity Benefit Act
• Payment of Gratuity Act

👉 Ministry of Labour & Employment, India

2. Identify Your Organizational Needs

Every company is different. Ask:

• What policies are needed based on company size and industry?
• What are recurring employee queries or issues?
• Are there any compliance gaps?

Some core policies you might need include:

• Leave and attendance
• Code of conduct
• Remote work or hybrid work policy
• Anti-harassment policy
• Payroll and benefits
• Probation and termination
• Travel reimbursement

3. Draft Policies Using Simple Language

Policies should be easy to read, not legal jargon. Ensure clarity and tone that reflects your company’s values.

Example:
Instead of “The employee shall be liable for disciplinary proceedings in the event of tardiness…”
Use: “If an employee is late frequently, it may lead to disciplinary action.”

Use tools like Grammarly or Hemingway Editor to simplify language.

4. Involve Legal and HR Experts

After you’ve drafted your HR policy, it’s crucial to involve legal advisors and experienced HR professionals before implementation. These experts bring in-depth knowledge of Indian labour laws, industry-specific regulations, and employee rights that you might overlook during the initial draft.

Legal advisors ensure that the policies comply with current labour legislation, such as the Shops and Establishments Act, Payment of Gratuity Act, Maternity Benefit Act, and others relevant to your business location and size. This reduces the risk of future legal disputes or penalties.

Similarly, seasoned HR professionals offer practical insights based on real-world experience. They help refine the tone, ensure the policies are employee-friendly yet firm, and make sure your procedures are feasible for both management and staff.

In short, their combined input safeguards your company legally while creating a balanced and professional workplace environment. Always treat this as a non-negotiable step before finalising your HR policy.

Types of HR Policies Every Company Should Have

Here’s a quick breakdown of essential HR policies when planning how to make HR policies:

1. Leave and Holiday Policy

This policy outlines the types of leaves employees are entitled to, such as earned leave, casual leave, sick leave, as well as national holidays, festival holidays, and optional offs. It defines leave eligibility, how to apply, approval processes, and the carry-forward or Encashment rules. A clear leave policy helps prevent misuse and ensures work continuity.

2. Work Hours and Attendance Policy

This sets expectations around daily/weekly working hours, breaks, and reporting times. It should also include rules for flexible work hours, remote/hybrid work policies, and how attendance is tracked—whether through biometric systems, punch-ins, or digital tools. It helps maintain discipline while accommodating flexibility.

3. Code of Conduct

This policy establishes the standard for professional behavior expected from employees, including communication, teamwork, punctuality, dress code, and general workplace etiquette.

Importantly, it must also include provisions under the POSH Act (Prevention of Sexual Harassment) 2013.
The POSH Act mandates every company with 10 or more employees to have an Internal Complaints Committee (ICC) to handle sexual harassment complaints.
It outlines:

• What constitutes sexual harassment
• The process for filing a complaint
• The inquiry procedure
• Timelines for resolution
• Penalties for false complaints or non-compliance

POSH compliance isn’t just legal—it helps create a safe, respectful, and inclusive workplace culture.

4. Performance and Appraisal Policy

This policy explains how employee performance is measured, what metrics or KPIs are used, how often appraisals take place, and how feedback is given. It also defines the reward structure—bonuses, salary increments, promotions, or recognitions. A transparent system builds motivation and trust.

5. Grievance Redressal and Disciplinary Policy

This outlines how employees can raise concerns—whether related to colleagues, managers, or company practices—and the process for resolving them. It also defines disciplinary actions for policy violations, from verbal warnings to termination, depending on severity. It ensures fairness and protects the rights of all involved.

6. Exit and Notice Period Policy

This section details the resignation process, notice period duration, handover responsibilities, exit interview procedures, and final settlement timelines. It ensures that departures are handled respectfully and that knowledge transfer and legal formalities are completed smoothly.

Tips for Rolling Out HR Policies Successfully

Creating HR policies is only the first step—how you roll them out, communicate them, and ensure understanding across your team is what makes them effective. Here are some key tips to roll out HR policies smoothly:

1. Host Orientation or Training Sessions: Before enforcing any new policy, conduct a short training or orientation session with all employees. This ensures everyone understands the purpose, scope, and how it affects their work. For sensitive or complex policies, break them down with real-life examples or Q&A sessions.

2. Upload Policies on Internal HR Software (like Clan): Make your HR policies easily accessible. Upload them to your internal HRMS (Human Resource Management System) like Clan, where employees can view them anytime. A centralized digital system reduces confusion and avoids repeated queries to HR.

3. Get Employee Acknowledgment: It’s important that employees officially acknowledge they’ve read and understood the policies. This can be done via digital acknowledgment through your HRMS or with signed physical forms. It acts as a record and shows compliance during audits or disputes.

4. Review and Update Policies Annually: Laws change, workplaces evolve, and your policies should too. Set a calendar reminder to review policies once a year. Update sections based on legal changes, feedback from employees, or company growth. Always notify the team when an update is made.

5. Keep Communication Clear and Open: Encourage employees to ask questions or clarify doubts. Create a feedback channel or appoint HR reps to support policy understanding and resolve concerns.

Try Clan’s free demo to manage your HR policies and employee lifecycle with ease.

Mistakes to Avoid While Making HR Policies

Even with the best intentions, HR policies can fall short if not thoughtfully created. Here are some common mistakes to avoid:

1. Copy-Pasting Policies from Other Companies: Every company has its own culture, structure, and needs. Copying policies from another business without customization can lead to irrelevant or impractical rules. Instead, use them as a reference and adapt them to suit your company’s goals, size, and values.

2. Ignoring Regional or State-Specific Laws: Employment laws vary depending on location. If you’re operating in different states or countries, make sure your policies align with local labor laws, such as leave entitlements, working hours, and termination rules. Non-compliance can lead to legal trouble.

3. Using Overly Legal or Vague Language: Policies should be easy to understand for everyone, not just lawyers or HR professionals. Avoid jargon, complex terms, or ambiguous language. Clear, simple wording helps employees know exactly what’s expected of them.

4. Making Policies Too Strict or Too Lenient: Overly strict policies can create a fear-based culture, while too lenient ones can lead to misuse or a lack of accountability. Strive for balance—clear boundaries that still allow for flexibility when needed.

5. Not Reviewing Policies Periodically: Workplaces evolve. If your HR policies stay the same for years, they’ll become outdated. Review policies at least once a year, and update them based on legal changes, employee feedback, or business growth.

How Clan Helps You Manage HR Policies Efficiently

Creating policies is just step one—Clan helps you manage and implement them with ease.

• Digitize & Store Documents: Upload all HR policies in one place, easy to access anytime.
• Track Leaves, Attendance & Shifts: Clan automates tracking to ensure your policies are followed.
• Policy Sharing & Acknowledgment: Share policies online and collect digital signatures—no confusion, full transparency.
• Automated Onboarding & Exit: Set up smooth joining and relieving processes based on your HR rules.

Final Thoughts on How to Make HR Policies

To build a sustainable business, it’s essential to create HR policies that are legally sound, employee-friendly, and process-driven. Don’t wait for problems to arise—set the right foundation from the start.

FAQs: How to Make HR Policies in India

1. Are HR policies mandatory for small businesses in India?
While not legally mandatory for all small businesses, having clear HR policies helps avoid conflicts, ensures compliance with labor laws, and improves employee trust and management.

2. What are the most essential HR policies every company should have?
Every company should have policies related to leave, attendance, code of conduct, anti-harassment, work hours, grievance redressal, and termination.

3. Can I copy HR policies from other companies?
No, copying policies directly is not recommended. Every company has unique needs, and policies should be customized to reflect your business size, culture, and legal requirements.

4. How often should HR policies be reviewed?
Ideally, HR policies should be reviewed at least once a year or whenever there are changes in labor laws or company structure.

5. Who should be involved in drafting HR policies?
Involve HR professionals, legal advisors, and management stakeholders to ensure the policies are practical, compliant, and aligned with company goals.