HR Policies in India 2026: 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 mandatory HR policies in India?[toc=Mandatory HR Policies in India]

Mandatory HR policies in India are policies that employers must have or formally operationalize to comply with Indian labour laws and avoid regulatory, financial, or legal risk. These policies are not optional best practices; they are driven by statutory requirements under central and state labour laws.

Based on our experience helping companies with EOR, payroll, compliance, and day-to-day HR operations in India, these are the HR policies and mechanisms that are legally mandatory or effectively required to stay compliant.

Employment contract or appointment letter

An employment contract or appointment letter documents the core terms of employment, including role, compensation, notice period, and working conditions. While not named as a single “Act,” written employment agreements are required or expected under multiple Indian labour laws and state Shops and Establishments Acts.

Most inspections, disputes, or audits begin by asking for this document.

• Job title, duties, and reporting structure
• Compensation, benefits, and pay cycle
• Notice period and termination terms

In practice, companies without written employment agreements struggle to defend employment practices during disputes.

Wages and salary policy

A wages and salary policy ensures compliance with minimum wage rules, timely wage payments, and lawful deductions under Indian labour laws, including the Code on Wages and earlier wage-related statutes.

This policy protects both employers and employees by setting clear payment rules.

• Compliance with minimum wages by state and role
• Wage payment timelines and payslip requirements
• Permissible deductions and statutory contributions

Wage violations are among the most common triggers for labour notices and penalties.

Working hours and overtime policy

Indian labour laws strictly regulate daily and weekly working hours, rest days, and overtime eligibility. A working hours and overtime policy translates these legal limits into clear company rules.

This policy is typically enforced under state Shops and Establishments laws and sector-specific regulations.

• Daily and weekly hour limits
• Overtime eligibility and rates
• Weekly off and rest period rules

Clear documentation helps avoid disputes around unpaid overtime and excessive working hours.

Statutory leave policy

A statutory leave policy outlines legally required leave entitlements such as earned leave, sick leave, public holidays, and maternity benefits, based on applicable Indian labour laws.

Leave requirements vary by state, making documentation especially important for multi-state teams.

• Earned or privilege leave rules
• Sick leave and public holidays
• Maternity leave as mandated by law

Non-compliance with statutory leave rules often surfaces during employee exits or inspections.

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

Sexual harassment policy (POSH policy)

A sexual harassment policy is mandatory under the Sexual Harassment of Women at Workplace Act for all employers. Companies with ten or more employees must also constitute an Internal Complaints Committee (ICC).

This policy protects employees and establishes a formal grievance mechanism.

• Definition and scope of sexual harassment
• Complaint process and investigation timelines
• ICC structure and confidentiality obligations

POSH compliance is actively enforced and carries reputational and legal consequences if ignored.

Grievance redressal mechanism

A grievance redressal mechanism is required for certain establishments under Indian labour laws, including the Industrial Relations framework, especially once workforce thresholds are crossed.

This policy defines how employee complaints are raised and resolved.

• Formal channels for grievances
• Escalation and resolution timelines
• Documentation and record keeping

Even when thresholds do not strictly apply, regulators expect a documented process.

Health and safety policy

A health and safety policy is mandatory for factories, hazardous workplaces, and certain establishments under safety regulations and Indian labour laws. The scope depends on the nature of operations.

The goal is to ensure a healthy working environment and employee welfare.

• Workplace safety standards
• Risk prevention and safety procedures
• Employee welfare measures

Safety obligations are closely scrutinized during inspections and accidents.

We’ve covered the HR policies and mechanisms that are legally mandatory in India. These policies help companies meet regulatory requirements and avoid compliance risk. Next, let’s look at the essential HR policies that, while not always mandated by law, are critical for running effective and scalable organizations.

What are the essential HR policies for organizations in India?[toc=Essential HR Policies in India]

Essential HR policies in India are policies that may not be explicitly mandated by law but are necessary to manage people effectively, reduce disputes, and maintain consistent employment practices. These policies shape employee expectations and daily HR operations.

Through our experience supporting companies with HR operations, compliance, payroll, and EOR services in India, we’ve seen that these policies become unavoidable as teams grow.

Code of conduct and workplace ethics policy

A code of conduct policy defines acceptable workplace behavior, ethical standards, and professional expectations. While not always mandated, it is expected in mature HR departments.

This policy helps prevent misconduct and ambiguity.

• Professional behavior and integrity standards
• Conflict of interest guidelines
• Disciplinary expectations

Clear conduct rules reduce employee disputes and disciplinary confusion. Need expert insights on workplace compliance? Explore our "Complete Guide on Workplace Compliance Tips".

Equal employment opportunity policy

An equal employment opportunity policy outlines the company’s commitment to fair employment practices and non-discrimination, including protection against bias based on gender, caste, religion, sexual orientation, or disability.

This policy aligns company practices with Indian labour laws and global expectations.

• Non-discrimination principles
• Fair hiring and promotion practices
• Inclusive workplace standards

Many regulators and global partners expect this policy even when not explicitly mandated.

Attendance and time tracking policy

An attendance policy clarifies working schedules, employee attendance rules, late arrivals, and loss-of-pay scenarios. It supports payroll accuracy and employee accountability.

This policy is essential for consistent workforce management.

• Attendance expectations
• Late marks and absenteeism rules
• Time tracking procedures

Without this policy, payroll disputes and inconsistencies increase quickly.

Recruitment & Hiring Policy

A recruitment & hiring policy typically outlines how hiring decisions are made and formalized.

• Standard hiring process and approvals
• Issuance of employment contracts or appointment letters
• Probation terms, role confirmation, and onboarding steps

In practice, a clear Recruitment and Hiring policy reduces the risk of misclassification, inconsistent offers, and disputes during probation or early exits.

Companies without documented hiring processes often face challenges defending hiring decisions, probation outcomes, or termination actions. A structured policy ensures transparency, fairness, and compliance from the first interaction with a candidate.

Compensation structure and benefits policy

A compensation structure policy explains how salaries, incentives, bonuses, and benefits are designed and reviewed. It supports transparency and trust.

While wage compliance is mandatory, structuring compensation is an operational necessity.

• Fixed and variable pay components
• Bonus and incentive eligibility
• Health insurance and benefits overview

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

Data security and confidentiality policy

A data security and confidentiality policy governs how employee data, company information, and intellectual property are handled.

This policy is critical as data protection expectations increase.

• Employee data handling
• Confidential information and IP protection
• Access control and security practices

Data-related disputes often arise during exits or audits.

Performance management and employee development policy

A performance management policy sets expectations around feedback, reviews, and employee development. It helps align employee growth with business goals.

This policy supports long-term workforce stability.

• Performance review cycles
• Feedback and improvement plans
• Employee development initiatives

Companies without clear performance policies face higher attrition and disengagement.

Remote or hybrid work policy

A remote or hybrid work policy defines eligibility, work expectations, data security, and employee attendance for flexible work arrangements.

As remote work grows, this policy becomes essential.

• Work-from-home guidelines
• Data security and device usage
• Performance and availability expectations

Clear rules prevent confusion and compliance gaps.

Termination and Resignation Policy

An exit and offboarding policy outlines resignation procedures, notice periods, final settlements, and asset returns.

This policy protects both the employer and the employee.

• Resignation and notice process
• Full and final settlement timelines
• Asset and access recovery

Well-defined exits reduce disputes and operational risk. Looking to streamline your offboarding process? Check out our article on "Offboarding Process and Best Practices for HR in 2026".

Mandatory HR policies in India keep companies legally compliant, while essential HR policies keep organizations functional, predictable, and scalable. Together, they form the foundation of strong employment practices and a resilient HR framework.

As per the Ministry of Labour and Employment, India implemented the four new Labour Codes on 21 November 2025, consolidating 29 existing labour laws into a unified framework covering wages, industrial relations, social security, and occupational safety.

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 address this, the Indian government introduced four Labour Codes to consolidate and modernize employment regulations. These codes are designed to simplify compliance by creating a unified legal framework. While nationwide implementation depends on state-level rule notifications, the Ministry of Labour and Employment continues to issue guidance and clarifications to support adoption.

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.

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!