How to design an effective HR Policy?

What information should an ideal HR policy contain? How to formulate it? Read on to find out more…

What are HR policies? What is their function?

Human resource policies are the formal rules and guidelines that businesses put in place to hire, train, assess, and reward the members of their workforce. HR policies provide a framework for any organization, helping them to make consistent decisions through which treating people with equity can be promoted. The implementation of strong HR policies can help an organization demonstrate, both internally and externally, that it meets the requirements for diversity, ethics, and training required in today’s workplace, and meets its commitments regarding regulation and corporate governance of employees. Read this blog to find out how to design an effective HR Policy.

HR policies set out obligations, standards of behavior, and document disciplinary procedures, among many other things. Some of the very important functions of HR policies include- Providing clear communication between an organization and its employees regarding their condition of employment, Provide a basis for treating all employees fairly and equally, setting and managing employee expectations, establishing guidelines for supervisors and managers, communicating the organization’s goals and values, etc. It takes a lot of planning to design an effective HR policy.

Why is it important to have a well-defined set of HR policies?

It is important to have well-defined HR policies in the workplace, that should act as principal objectives for any Human Resource department. In a 2018 Small Business Compliance Survey conducted by Comply, it was found that while 84% of businesses offered employee handbooks and formal written policies, and 85% required its employees to acknowledge receipt of these policies, there were some essential policies not stipulated clearly within the workplace. For example, 56% of these small businesses did not have a formal weapons policy in the workplace, and 47% did not have a social media policy. Modern workplaces should not have employee manuals that only cover a handful of the key issues in the workplace. With the constantly changing and modernizing the workplace, HR policies should be able to reflect the shifts that are occurring.

An effective HR policy ensures that- every employee of an organization is looked after, complaints and grievances are addressed, protect, train, and develop employees, maintain discipline in the workplace, etc.

Essential HR policies:-

Company Description, History, and Culture

Tell your employees about the company’s philosophy and long-term goals. Also, outline the history of your company so there is a background on how it came to be and the milestones that occurred along the way. This section should describe your company culture as well. The values and mission statement your company lives by letting your employees know what’s important outside of their immediate role responsibilities.

Conduct Policy:

  • Anti-discrimination

Companies should describe the workplace as an inclusive environment and that no employee will be discriminated against based on any variable such as caste, race, religion, etc.

  • Sexual Harassment

Companies should make it clear to their employees that inappropriate behavior and unwelcome advances will not be tolerated and strict actions will be taken against them, in a gender-neutral manner.

  • Drug/Alcohol/Smoking

Companies should outline the consequences of being under the influence of any or all of the above-mentioned factors and make the company policy clear regarding the same. Mention if it could lead to short-termination of employment as well

  • Company Property

Make it clear to the employees how they should use company property, particularly if valuables such as computers, laptops, cell phones, cars, etc are issued to employees daily

  • Social Media

Companies should make it clear to employees how they are expected to behave on any social media platform, particularly if their profiles are linked with the company page.

Compensation and Benefits

The employees will always want to know when they get paid and what benefits they receive. This section should provide them with payroll frequency and payment methods and detail the primary benefits offered, like medical, dental, and retirement savings. If your company offers any secondary benefits, like education or wellness reimbursements, explain those here as well.

At-will employment

This policy reiterates that both an employer and employee can terminate the employment relationship at any time and for any reason, providing said the reason is lawful. You should aim to prominently display this statement at the beginning of your employee handbook.

Leave and Off-time

These policies should address your organization’s rules and procedures regarding holidays, vacation, sick, and all other types of time off benefits. It should also cover leave required by law, such as voting leave, family leave, and domestic violence leave. Review your regional laws to ensure all leave requirements are included in your HR policies. A clear policy on meal and break periods ensures employees are well-informed on the frequency and duration of said breaks, as well as any additional rules or restrictions relating to them.


A timekeeping policy keeps employees informed of the appropriate method for recording their time worked, as well as the importance of accurately recording their time. Policies on pay periods communicate the frequency of paydays to employees, the methods available for receiving payment, and any special procedures that may take place should a payday fall on a holiday or when the employee is absent from work.

Safety and Health

These policies describe the safety and emergency procedures of the workplace and require employees to report any work-related injuries immediately. For example, if certain chemicals are present in the workplace, a company should have a hazard communication program as part of its health and safety policy. Make such policies clear to employees before their joining.


It’s common for employees to spend their own money in the course of doing their job, especially if their position requires travel or work outside of a regular workplace. The handbook should include an expense policy that describes the costs employees can be reimbursed for and the procedures for doing so.

Employee referral program

If your company incentivizes employees to refer to personal contacts for open jobs, it’s a good idea to have a specific referral policy. It should cover how people can be referred, the reward provided in return and the duration of employment required for the new hire before the referrer receives their incentive.

Employee classifications and accommodations

It is an HR best practice to clearly define employment classifications. This can include full-time, part-time, exempt, or non-exempt. These can dictate their eligibility for benefits and overtime pay, so it should be a principle policy to stipulate all employee classifications. Describe the purpose and rules for every room included in your office, like break rooms, meeting rooms, and common areas. Also, tell your employees what personal work setups they’ll be provided and how they’re expected to care for their workspace.


Make it clear to employees under what conditions, recognized as per company policies, can their employment be terminated. There should be no misunderstandings between both the parties. To design an effective HR policy means to avoid confusions.

Exit policy

Employees eventually move on, whether it be for voluntary or involuntary reasons. Outline how an employee is expected to give their resignation and the amount of notice required. Also, cover the reasons that can result in termination and the warnings that will be provided before it occurs.

To design an effective HR policy, it needs to take into account a lot of factors and other legal considerations. A proper policy will be largely beneficial for the organization in the long run. Therefore, carefully devise a policy to avoid any complications later on!

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Suchismita Panda