HR Policies in India 2025: Key Labor Laws & Best Practices

Are you interested in understanding HR policies in India? You're not alone! Many US companies find it a bit challenging to keep up with India's ever-changing labor laws and workplace regulations. We've been helping global businesses navigate these complexities, and we're here to make things easier for you.

In this article, we’ll share the key points about HR policies in India so you can manage your workforce effectively and stay on top of any regulatory changes. Let’s dive in together!

What are HR policies in India?[toc=What are HR policies]

HR policies in India are a set of guidelines and rules that organizations follow to manage their workforce while ensuring compliance with local labor laws and regulations. These policies are essential for creating a structured, fair, and legally compliant work environment, covering various aspects of employee rights, responsibilities, and organizational operations.

HR policies help businesses navigate complex labor laws, ensuring legal compliance and protecting the organization from potential legal risks. They also promote a positive workplace culture by clearly defining expectations, fostering transparency, and ensuring fair treatment for all employees.

What are the four new labor codes in India?[toc=Four new labor codes]

India’s labor laws are a blend of federal and state regulations, making it challenging for new businesses to navigate. Companies previously faced the complexity of complying with over 29 central laws and more than 200 state-specific labor rules, creating a significant compliance burden.

To streamline this, the Indian government introduced the Labor Codes, a set of four unified laws designed to simplify workplace regulations. Recent amendments by the Ministry of Corporate Affairs in 2024 aim to make it even easier for businesses to comply.

The four key labor codes are:

• Code on Wages, 2019: Consolidates laws on wages, bonuses, and equal remuneration across all industries.
• Industrial Relations Code, 2020: Addresses trade unions, industrial disputes, layoffs, and employment conditions.
• Code on Social Security, 2020: Brings together laws related to provident funds, insurance, and maternity benefits.
• Occupational Safety, Health and Working Conditions Code, 2020: Establishes uniform health and safety standards and promotes employee wellbeing.

These changes strike a balance between offering employers greater flexibility while ensuring workers' rights are protected. Businesses must ensure their policies align with these new rules to remain compliant. The Ministry of Labor and Employment continues to update these regulations, helping companies stay on track.

From our experience assisting businesses with these changes, we’ve seen how this consolidation reduces compliance challenges and fosters a healthier balance between protecting workers and meeting business needs.

How Does the Code on Wages Affect Salaries and Equal Pay in India?[toc=The Code on Wages]

The Code on Wages, 2019, combines four existing laws related to wages, bonuses, and equal pay, including the Equal Remuneration Act. It simplifies compliance with wage-related rules while promoting fair pay practices across various sectors.

Core Elements

• National Floor Wage: Sets a minimum wage threshold that no state can fall below.
• Uniform Wage Definition: Defines "wages" as basic pay, dearness allowance (DA), and retaining allowance. At least 50% of total compensation must come from these components.
• Equal Pay for Equal Work: Ensures that employees performing similar work receive equal pay, regardless of gender.
• Timely Wage Payments: Requires that wages be paid on time, such as daily wages by the end of the shift and monthly wages by the 7th of the next month.

Scope and Applicability

• Applies to all employees, both in organized and unorganized sectors.
• Covers workers in supervisory or managerial roles, as well as establishments like factories, shops, and service providers.

How Does the Industrial Relations Code Make Employment Relations Easier?[toc=The Industrial Relations Code]

The Industrial Relations Code, 2020, merges three laws on trade unions, industrial disputes, and employment conditions. It simplifies industrial relations by balancing workers' rights with employers' flexibility, especially for managing layoffs and fixed-term contracts.

Core Elements

• Fixed-Term Employment: Fixed-term employees receive the same benefits as permanent employees, such as provident fund and gratuity, without the need for long-term commitments from employers.
• Layoff Flexibility: Employers with fewer than 300 workers no longer need government approval for layoffs, an increase from the previous 100-worker threshold.
• Grievance Redressal Committees: Required for establishments with more than 20 employees to address workplace issues.
• Strikes & Lockouts: Workers must notify their employer 14 days in advance before striking or locking out.

Scope and Applicability

• Applies to industries and establishments with formal contracts or agreements.
• Covers both fixed-term and permanent contract workers, as well as establishments with more than 20 employees.

How Does the Code on Social Security Support Gig Workers and Employees?[toc=The Code on Social Security]

The Code on Social Security, 2020, merges nine existing laws related to provident funds, insurance, maternity benefits, gratuity, and employee compensation into one simplified framework. It extends social security benefits to gig workers and platform workers while enhancing protections for traditional employees.

Core Elements

• Universal Social Security Coverage: Expands social security benefits, including provident fund, maternity leave, insurance, and gratuity, to gig workers and migrants.
• Maternity Benefits: Women employees are entitled to up to 26 weeks of paid maternity leave (for the first two children), along with medical bonuses in case of miscarriage or complications.
• Gig Worker Contributions: Aggregators like Uber or Zomato must contribute 1–2% of their revenue to social security funds for gig workers.

Scope and Applicability

• Applies to both traditional employees in organized sectors and gig workers in unorganized sectors.
• Covers companies employing formal staff or engaging gig/platform workers.

How Does the OSH Code Enhance Workplace Safety Standards?[toc=The OSH Code]

The Occupational Safety, Health, and Working Conditions (OSH) Code merges 13 existing laws related to workplace safety into one clear framework. It aims to ensure safe working conditions and standardize working hours and welfare provisions across industries.

Core Elements

• Workplace Safety Standards: Employers must conduct regular safety audits and provide necessary safety equipment (e.g., PPE) to ensure hazard-free workplaces.
• Working Hours & Overtime Rules: Limits working hours to eight per day, with overtime paid at twice the regular rate (capped at 125 hours per quarter).
• Crèche Facilities & Welfare Measures: Establishments with over 50 employees must provide crèche facilities for children of working parents. Other welfare provisions include sanitation, drinking water, and canteens (for larger workplaces).

Scope and Applicability

• Applies across industries such as factories, mines, construction sites, and IT firms, and to any establishments employing 10 or more workers.
• Covers both workers in hazardous industries or those with formal contracts, as well as businesses employing 10+ workers across sectors.

What Are the Key Labor Laws That Are Still Relevant Today?[toc=Relevant Key labor laws]

Understanding key labor laws in India is crucial for businesses to stay compliant and ensure fair treatment for employees. From our experience helping global companies navigate hiring, payroll, and compliance in India, we’ve seen how these laws protect both employees and employers.

Here are some of the essential labor laws to be aware of:

Maternity Benefit Act, 1961:

• Female employees are entitled to 26 weeks of paid maternity leave (this applies to the first two children).
• Organizations with 50 or more employees must provide crèche facilities for the children of working parents.
• The Act also includes provisions for additional leave in case of miscarriage, complications, or medical conditions.

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act):

• All companies with 10 or more employees must establish an Internal Complaints Committee (ICC) to handle complaints of sexual harassment.
• The law mandates that complaints must be addressed promptly and that a safe and respectful workplace be maintained.
• It also requires training and awareness programs to prevent sexual harassment in the workplace.

Shops and Establishments Acts:

• These laws vary by state and regulate the working hours, conditions, and leave policies of employees working in commercial establishments like shops, restaurants, and offices.
• The law ensures that employees are granted weekly off-days and fair working hours, and that proper hygiene and safety measures are in place.
• It also includes provisions for the payment of overtime for employees who work beyond the regular working hours.

What Are the Essential HR Policies for Organizations in India?[toc=Essential HR policies]

From our experience helping global businesses navigate Indian employment laws, we understand that HR policies in India must be well-crafted to stay compliant with evolving regulations. India's workplace culture and legal requirements are unique, so policies, contracts, and processes should reflect this to build trust, ensure compliance, and run an efficient team.

Here are the essential HR policies that businesses in India should have in place:

Employment and Recruitment Policies:

Employment contracts are crucial in India, even if they are not always legally required at the federal level. Establishing clear, well-documented agreements helps in setting expectations for both the employer and the employee.

• Employment Contracts: While not federally mandated, providing a written contract or appointment letter is standard practice. The contract should include essential details like the job role, compensation, probation period, and termination clauses.
• Equal Opportunity and Non-Discrimination: This policy prohibits discrimination based on caste, religion, gender, or disability. It ensures that the workplace is fair, promoting equal opportunities for all employees.

Compensation and Benefits:

In India, compensation and benefits policies must align with local statutory requirements, including minimum wage laws that vary by state and industry. A transparent compensation policy helps avoid disputes and ensures compliance.

• Salary and Bonus Structure: Clear guidelines must outline fixed and variable salary components, with compliance to minimum wage laws.
• Provident Fund (PF) and Gratuity: Employers must make mandatory contributions to the Employee Provident Fund (EPF), and gratuity must be paid to employees with five or more years of continuous service.

Want to learn more about compensation and employee benefits? Check out our detailed articles on "Compensation Management" and "Employee Benefits in India".

Leave and Attendance Policies:

Leave and attendance policies must comply with statutory and non-statutory leave regulations, such as public holidays, earned leave, and maternity leave. The policy should also include clear rules for working hours, breaks, and overtime.

• Types of Leave: A comprehensive policy should include public holidays, earned leave, casual leave, sick leave, and maternity/paternity leave.
• Working Hours: Policies must specify working hours, including breaks, and rules for overtime, adhering to legal limits (48 hours per week).

Curious about leave policies and holidays in India? Check out our in-depth article on "Leave Policy Laws: Explained".

Workplace Conduct and Ethics:

A clear Code of Conduct helps maintain a professional environment. Ethical standards, guidelines on confidentiality, social media usage, and anti-harassment policies all contribute to a well-ordered, respectful workplace.

• Code of Conduct: Sets standards for behavior, outlining professional conduct, confidentiality, and social media use.
• Sexual Harassment Prevention (POSH Policy): Legally required policy that outlines steps to prevent, prohibit, and address sexual harassment in the workplace.

Need expert insights on workplace compliance? Explore our "Complete Guide on Workplace Compliance Tips".

Employee Relations and Grievance Redressal:

Employee relations policies should provide clear, confidential channels for employees to voice concerns. A grievance redressal mechanism is necessary to ensure fair and timely resolution of complaints, promoting trust in the workplace.

• Grievance Redressal Mechanism: Organizations must have a formal, confidential process for employees to raise concerns or complaints. This mechanism should ensure timely and impartial resolution of grievances.
• Performance Management: A clear policy on performance reviews, goal setting, and feedback helps manage employee performance effectively and encourages growth.

Termination and Exit Policies:

In India, where "at-will" employment doesn’t exist, termination and exit policies must be clear and fair, specifying the grounds for dismissal and the required notice period.

• Termination Clauses: Policies must define valid reasons for termination, such as misconduct or policy violations, along with the required notice period or pay in lieu.
• Full and Final Settlement: Clear procedures must be in place for settling dues such as salary, leave encashment, and gratuity when an employee exits the company.

Looking to streamline your offboarding process? Check out our article on "Offboarding Process and Best Practices for HR in 2025".

Modern and Evolving Policies:

With evolving work dynamics, such as remote or hybrid work, HR policies must adapt to the changing workplace. Additionally, as data privacy regulations become more stringent, ensuring the protection of employee data is crucial.

• Remote Work/Hybrid Work Policy: As more companies embrace flexible work arrangements, a clear policy should outline eligibility, performance expectations, and support mechanisms.
• Data Privacy: With India’s evolving data privacy regulations, HR policies must ensure the protection and confidential handling of employee data.

How can businesses implement HR policies in India effectively?[toc=Implementation]

Implementing HR policies goes beyond writing documents. Practical communication and enforcement are key.

• Draft Employee Handbooks: Handbooks consolidate all policies, making them accessible and transparent for all employees.
• Communicate Policies Clearly and Regularly: Frequent training sessions and onboarding discussions ensure understanding and reduce confusion.
• Train Managers and Teams: Managers should be empowered to uphold policies fairly and respond to queries confidently.
• Obtain Written Acknowledgement: Get employees to acknowledge policy receipt and understanding by signature or digital confirmation to prevent future disputes.

One insight from our clients: evolving workplace models and legal changes often necessitate yearly policy reviews. Proactive companies stay ahead and maintain trust.

What Are the Best Practices for Developing and Implementing HR Policies?[toc=Best Practices]

Having guided numerous companies in developing and implementing HR policies, we’ve listed the following best practices to help create effective and compliant HR systems:

• Clear Objectives: Start by defining the goals of your HR policies, such as legal compliance, fostering a positive workplace culture, or enhancing employee performance.
• Consulting Experts: Collaborate with legal experts and HR professionals to ensure your policies are up to date with local labor laws and industry standards.
• Inclusive Development: Involve key stakeholders, such as department heads and employee representatives, to ensure the policies address diverse needs and are accepted across the organization.
• Regular Updates: Continuously review and update policies to stay in line with evolving labor laws and business objectives.
• Transparent Communication: Ensure that all employees understand the policies by clearly communicating them through handbooks, training sessions, and the company intranet.
• Feedback Mechanism: Set up systems to gather employee feedback on policies and make adjustments where necessary to improve effectiveness.
• Legal Compliance: Ensure that your policies comply with all statutory requirements like labor laws, tax regulations, and industry-specific norms.
• Scalable Systems: As your company grows, make sure your HR policies can scale. Streamlining processes and using technology can support large-scale implementation.

By following these best practices, companies can ensure that their HR policies not only meet legal requirements but also foster a positive and efficient work environment.

What Are the Common Challenges in Implementing HR Policies?[toc=Common Challenges]

Having worked with various companies on HR policy implementation, we've identified the following common challenges businesses face:

• Resistance to Change: Employees may resist new policies, especially if they perceive them as burdensome or restrictive. Clear communication and leadership support can help mitigate this challenge.
• Lack of Awareness or Training: Employees may not fully understand the policies if there’s insufficient training or if policies are not communicated effectively.
• Inconsistent Enforcement: Ensuring consistent application of policies across all levels and departments can be challenging. It's crucial that all managers are trained to enforce policies fairly and equally.
• Cultural and Organizational Barriers: Company culture or specific regional practices may conflict with formal policies. Striking the right balance between maintaining compliance and respecting cultural norms is key.
• Updating Policies to Meet Legal Changes: Keeping policies up to date with changing labor laws and regulations can be a moving target. Failure to stay current may lead to legal risks and compliance issues.
• Resource Constraints: Developing and implementing comprehensive HR policies requires time, effort, and financial resources. Smaller organizations may struggle to allocate sufficient resources.
• Lack of Employee Buy-In: Policies that are too rigid or not aligned with employee needs may lead to disengagement and low morale. Involving employees in the policy development process can address this issue.

Understanding and addressing these challenges is essential for ensuring successful HR policy implementation that supports both business goals and employee satisfaction.

How can Wisemonk help?[toc=How Wisemonk Helps]

Wisemonk is a leading Employer of Record (EOR) in India, offering expert EOR services that simplify hiring and managing employees for global companies. As your trusted Employer of Record, Wisemonk handles all statutory compliance, payroll, contracts, and taxes, ensuring your Indian workforce is managed seamlessly.

With deep expertise in Indian statutory and strategic HR professional functions, Wisemonk supports global businesses in every step of their India journey.

• End-to-End HR Setup: From designing compliant policies to onboarding talent, Wisemonk creates scalable frameworks tailored to your business.
• Payroll, Employer of Record (EOR), and Contractor Management: We handle complex statutory obligations and payroll compliance, relieving your HR burden.
• Statutory Compliance Expertise: Staying ahead of the rapidly evolving labor laws ensures your business never faces unexpected penalties.

Reach out to us today to learn how we can support your business!