HR Policy Design: A Practical Handbook for Indian Employers
Does your organization need an HR policy design review?
Answer each question honestly with a yes or a no. Count your “no” answers, then read your score below.
- Have all policies been reviewed since the Labour Codes took effect in November 2025?
- Does your salary structure keep “wages” (basic pay, dearness allowance, retaining allowance) at or above half of total pay, as the new uniform definition requires?
- Does every employee, including contract and fixed-term staff, receive a written appointment letter?
- Do fixed-term employees know they now qualify for proportionate gratuity after one year of service?
- If women work night shifts, is there a written policy covering consent, transport and safety?
- Do you have a functioning Internal Committee and a written POSH policy?
- Is there a written grievance process with named owners and response timelines?
- Does each policy name an owner and a next review date?
- Would two different managers apply the same policy to the same case and reach the same answer?
- Can employees find every current policy in one place, in a language they read comfortably?
The sharpest lessons, stated plainly
Do
- Start from the law and your business reality, not from a downloaded template
- Write for the manager who has to apply the policy on a busy Monday
- Give every policy one owner and a review date
- Test each draft against three real past cases before approving it
- Communicate changes and record employee acknowledgement
Don’t
- Copy another company’s handbook and change the logo
- Promise benefits in a policy that the business cannot sustain
- Leave “at management’s discretion” as the answer to every hard question
- Let policies contradict appointment letters or standing orders
- Treat policy design as a one-time project; laws and state rules keep moving
Why the Labour Codes force a policy rewrite
The four Codes — the Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code — replaced 29 central labour laws. Central rules under all four Codes were notified in May 2026, and several states have notified their own rules, so compliance obligations are now concrete rather than theoretical. Because labour is a concurrent subject, your state’s rules still matter for the final detail. That is why HR policy design in 2026 has to start with the law, not with a template.
| Area | What changed | Policy affected |
|---|---|---|
| Definition of wages | A uniform definition: basic pay, dearness allowance and retaining allowance; excluded allowances above 50% of pay are added back | Compensation and salary structure, PF and gratuity calculations |
| Fixed-term employment | Proportionate gratuity after one year of service instead of five | Fixed-term hiring, separation and gratuity |
| Standing orders | Mandatory for industrial establishments with 300+ workers (previously 100); model standing orders apply otherwise | Conduct, discipline, classification of workers |
| Women at work | Night shifts and all job categories permitted with consent and safety arrangements | Working hours, shift and transport policies |
| Appointment letters | Required for all workers | Onboarding and documentation |
This is a summary for policy-planning purposes, not legal advice. Read the PRS Legislative Research summary of the Industrial Relations Code and the Ministry of Labour & Employment’s Labour Codes page, and confirm details with your legal counsel and your state’s notified rules.
HR policy design in six steps
Inventory what exists
List every policy, circular, email rule and unwritten practice. Unwritten practices are often the real policy, and they create the most disputes.
Check against the law
Map each policy to the relevant Code, the POSH Act and your state’s rules. Flag anything that relies on repealed Acts or old thresholds.
Decide your intent
For every non-statutory policy, agree with leadership what behaviour the policy should encourage. A leave policy built for flexibility reads very differently from one built for cost control.
Draft with the one-page template
Use the same structure for every policy (see the template below) so employees learn where to find answers.
Test, then approve
Run each draft against real past cases, get legal review, and take sign-off from the named owner and leadership.
Launch and maintain
Brief managers first, publish in one place, collect acknowledgements, and set review dates. Revisit immediately when a state notifies new rules. HR policy design never really ends; it moves into maintenance.
Policy inventory and gap audit
Copy this table into a spreadsheet and fill in one row per policy. The last column becomes your HR policy design work plan.
| Policy | Written? (Y/N) | Last reviewed | Law it depends on | Owner | Action needed |
|---|---|---|---|---|---|
| Code of conduct and discipline | IR Code / standing orders | ||||
| Compensation and wage structure | Code on Wages | ||||
| Working hours, overtime and shifts | OSH Code, state rules | ||||
| Leave and holidays | OSH Code, state rules | ||||
| Prevention of sexual harassment (POSH) | POSH Act, 2013 | ||||
| Grievance redressal | IR Code | ||||
| Fixed-term and contract staff | IR Code, Social Security Code | ||||
| Separation, notice and gratuity | Social Security Code | ||||
| Employee data and privacy | DPDP Act, 2023 | ||||
| Remote and hybrid work | Company policy |
The one-page HR policy template
Policy name:
1. Purpose — One or two sentences on why this policy exists.
2. Scope — Who it covers (employees, fixed-term, contract, interns) and which locations.
3. Policy statement — The rule itself, in plain language.
4. Eligibility and entitlements — Numbers, limits and conditions.
5. Procedure — Who does what, in what order, by when.
6. Exceptions — Who can approve an exception, and how it is recorded.
7. Legal reference — The Code, Act or state rule this policy relies on.
8. Owner: Approved on: Next review:
Worked example: A 400-person manufacturing unit with fixed-term contracts discovers in its audit that its separation policy still says gratuity is payable after five years. Under the one-page template, the redesigned policy states the one-year proportionate entitlement for fixed-term staff, cites the Code on Social Security, names the HR head as owner, and sets a review date six months out to absorb any state rule changes.
The same audit shows the unit crossed 300 workers last year, so its HR audit adds certified standing orders to the action plan.
HR policy design — FAQs
What is HR policy design?
HR policy design is the process of deciding, drafting, testing and maintaining the written rules that govern employment in an organization, so that they are legally current, consistent and usable by managers.
Do small companies need formal HR policies?
Yes. Some obligations, such as a POSH policy and Internal Committee for workplaces with 10 or more employees, apply well below large-company size. A short, accurate set of policies protects a small firm more than a long, outdated one, and HR policy design for a small firm can usually be completed in a few weeks.
How often should HR policies be reviewed?
At least once a year, and immediately when the law changes. Good HR policy design builds the review date into every policy from day one. With states still notifying Labour Code rules, 2026 is a year for closer monitoring than usual.
Should we use model standing orders or write our own?
Establishments with 300 or more workers must have certified standing orders. Smaller establishments are covered by the government’s model standing orders, which your policies must not contradict.
Need help with HR policy design for the Labour Codes?
HRAI’s HR Consulting practice supports HR policy design end to end: auditing existing policies, redesigning them for the new Codes, and training managers to apply them consistently.