CHAPTER

2
HR Policies

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Chapter Coverage
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2.1 Concept and Nature of HR Policies 2°.2'. Need and Importance ~f HR PoHcie·s •
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2.3 Fonnulatlon of HR Policies 2.4 Policies in Various HR Areas • I

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A policy is a predetermined and accepted course of thought and action to serve as a guide
towards certain accepted objectives. Human resource policies lay down the ef,ecision making
creteria in line with the overall purpose of the organisation in the area of Human Resource
1vlanagemcnt. They are developed by the HR Manager in consultation with the top management
to assist the managers at various levels to deal with the people at work Thus HR policies
can be interpreted as the recognised intentions of top management with respect to effective ,,
'
management of workforce. This chapter is devoted to explain the nature and importance and
lormulation of HR policies and also illustrating policies in various HR areas.

2.1 CONCEPT AND NATURE OF HR POLICIES

2.1.1 Meaning of Policy .I

Poljcies a re broad guidelines as to how the objective of a business are to be achieved.
While objective provide the ends which a manager sh ould try to achieve, policies provide the
guidelines which he s hould keep in view while achieving the ends. A policy is, designed to
guied t h e organisational members to dea l with a particular s itu ation ina particular member.
It delimits the area within which a decision is to be made and assures that the decision·
will be consistent with and contributive to business objectives.
A policy is a predetermin ed and accepted course of _thought. q.ction to serve as a guide
towards certain accepted qbjectives. In· other words, we can ·say that policies are related
to the organisation's overill purpose and its objective in the various areas with which its
operations are concerned. ijuman resource policies lay down the decision making criteria in
line with the overall purpose of the organisation in the area of Human Resource Management.
They are developed by the HR Manager in consultation with the top management to assist
the managers at various levels to deal with the people at wor k. Thus, personnel or HR
policies can be interpreted as the recognised intentions of top management with respect
 G
HR POLIC IES _ ~ '
1 . • I• l
dcci~io n
lfi!:f
I . gers ll will pcrnicit anulv
'and ex cm1iv
lOp manug e mcm provid es the
guidcJ _rness LO JOW~'. eve man~ s . p .. 'th ,:
to be made in simi lar situca
ions witho ut rcpca ung tho_ reason S Jevels to .::act wi
- HR POLICIES . Polici es help mana gers at VlUJOU
requir ed initial ly to state the policy Th.is wiU al.so cnsu r o
s are given below: lting th e super iors every time.
rce. Some mmmple of person nel policie confi dence witho ut the need of consu
t.o officiant manng cment of workfo for tokun gi fts of ~
any gift from nny suppli e r exce pt promp tness of action .
L The employees will not nccept ing udvnn tages:
Policie s help in achiev ing th~ follow s levels t~ act with ~ -
purely nominl or advert ising value. g. Policy helps mana gers at variou
ntlens t on week vocati on ench yeur. (i) Facil itates decis io n-m akin I t b'lves the m
2. Ench employeos will proceed on lting the superi orB every time.
c~nfid encc .w ithout tho need of consu
nccepet any outsid e assign ment.
3. Tho employess will not the den lings ,of the · . al te rnative.S to choOse from. ons, policy will ensure
o.nd rules ~r condu ct govern ing 1··,· situat ions arise that coll for decisi
- HR policios cover the princp les su·ntio n of person nel ' (ii) Pro mp tness of ac tion. When (;
a nd set the tone for the ndmm the organ isatio n .
ll fram ew ork of the objoc tivos of
-- .·
orngn nisatio n with its emplo yees, of the organi sation . · promp t actil;m within the overa
to the attain ment of the object ives tent.t reatm ent of
progra ms in u manne r condu cive in or der to achieve t he tive policies ensur e unifor m and consis
policies stems from the fnct chat und (iii) Consi stenc y of act ion. Effec theref orem an
'{'he need for sound person nedl hos to be c r OlllCd in which opti mum sation . Sound person nel policies are,
an atmos phere all empolyces throug hout the organi for mana geme nt
overaU oobjectivc of the enterp rise,
sponta neous co-operation of the emplo
yees can be achieved. essent ia l base for sound person nel
practi ces. Policies provid e the base
manag em en t by ex.pendiency .

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by princi ple as contra sted with tho compo.ny's
r
2.1.2 Char acter istics of a Polle y n policies are a mcruts of transm itting
struct ure (iv) Co n tinu ity n nd s t a b ility. Writte be stabil ity in .·
repent ed nnnlysis, nnd gi\'e a unified execu tives to anoth er. '!'here would
Policies tent to predecide issues, avoid herit age from one gener ation of or lcuve th o
have certai n purpos e n even if some key cxecti ves rct.l.l"C ~ - -'
s ore not simple s tawme nts, they decisio n makm g m the organ isatio
to other types of plans. Thus, policie m order to be nccepted
have the following· charac teri stics orgn nisatio n.
behind them. A statem en t should of achiev ing re s ults
n ration al and con tin uous system ·
.,;,··.
as n policy. (v) Be t te conti· o l. Policy provid es
ons of top manag ement . It should
presen t the principle
(i) Policy ist'a" cxperssion of inlen,i ents reflect ll which facilit ates bette1· contro l.
action s. Most of the policy statem libera tes decis io n•
that will guide the organ isation al and b ius. Clearl y laid down policy •
society. (vi) E limi n nt~s perso n a l hu nch self-in terest .
faith ln the ethica l values of the mukin g form his person al bins and
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is to serve as a ons, policy ensur es
The purpo se of a pohcy statem ent ing mome ntary and hasty decisi
(ii) Policy is stated in broad terms. est possi ble (vi i) We lfare of peopl e. By remov
; so it should be stated in the broad ed in tho organ isa tion al nct1vi tes.
guide to prntic e now and in future lone-t erm welfar e of people involv ~
of where they stand
~ - -- - --<e rms.- - lntcd after rnking Policy makes t he emplo yees aware
is endur ing in nature ns it is formu (viii) Confi d ence in emp loyee s. will create co nfid ence in the m
.
(iii) Policy is long lasting . A policy in rclucion to the o rgani sation . This
and needs of the organi sation . t,;
into accou nt the long-r ange plaps formu lation
partic ipatio n of all cxccutiucs . Policy 2.2.1 L imita tions of HR Polic ies
(iv) Policy is deueloped with the actiue long-er tbon
pRtion of all execuo ves. Policy live limita tions which arc as follows:
calls for serious thinki ng and partici a munag er HR policies muy ~uffer from some
sation al policie s are frame d in s uch in opera tions a.s they I).
people who frame them. Basic organi bottom . The plans. 'they bring about rigidi ty
the organi sation alike from top to (i) PolicieR a rc repeat ~d.1~ u_sed
that they app ly to all memb ers of snt1on . subor dinate s.
of the highes t author ity in the orgnni leave no room for m1t1at1ve by the
policies should a lso get app roval into writin g. eseen situat ions ari s e
consre te shape when they are put (i i) Pol.1c1cs may not cover all
the proble ms. Some times , unfor e
(v) Policy is in wiriting. Policies take lower levels. ng policie s .
ation. ln case of disagr eemen t at which are not covere d by the existi
This will ensure unifor mity in applic e contin uitv delim it the areas withi n
refren ces point. Writte n policie s ensur · for huma n judge ment. Polici es only
writte n pol icy serves as the final (iii) Pol~c1e s ar.e ~o substi tute ,
r confor mity.
and greate which dec1s1ons arc to be m ade .
objective and it. the chan.g cs in the
►
(vi) Policy is linked with objecti
ucs. A policy is derived form s pecific g as they lose their utility with
· (iv) ~oli~1e s may not be ever ~astin t of the busin ess.
facilit ates their achiev ement . , mie1nal and e::,4tcrnal enviro nmen ~
OF HR POLI CIES
2.2 NEED AND IMPORTANCE
ss. Ii is, a sta temen t i,"
action s in major area.s of bw;tn~
A policiy is a· guide for repeti ve ·s a re set \1p to
g of decisi on•m.o.king criteri a. Police
of comm only accepe ted under stadin ir~g proble ms, the
polic~ ,de~isions bn freque ntly recu~r
achiev e severa l beoefi ts. By to.king
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~ HRPOUCIES -

- - HR POLICIES market ing, finance. humon resource.

,n funmonul a reas of busines s, namely, production ,
the area, the process of poljcy formulation is the sa me. The benefit
etc. Whatever may be
1?J _2.3 FORMULATION OF HR POLICIES of s pecifyin g area needing policies 1s that it will help
in collecting right type of inform ation.
specify clea rly the nreas needing' I d from compan y's manua ls end other publications, key
In formul ating personnel policies , the first step is to The informntion may be collecte
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human resourc es manngement such nssociations, trade unions and other
policies . The policies are needed in v1U1ous areas of executives ond the publiceti~ns of govern ment, trade
plnccm cnt. transfe r and promotion, compensation,
as recruit ment employment, training , sources .
al. welfare , etc. In order to formula te policies is these areas, a commi ttee in policy formul ation deals with
perfomance apprais 4. Analys is of Alte rnativ e Policie s. This stofe
o the following steps to formul ate personn el policies : contirb ution to the orgllnis ational
may be set up. The commitee will underg
~ The ·s teps involved in the formulation of policies include
the following :
examin ation of alterna tive policies in the light of their
goals. That policy alterna tive should be selecte d which is likely to yield the best possibl e
ations. The policy must be tested before it is given a final shape.
l. Prelim inary Investigation results fo r the organis
the person nel at the lower levels.
Comments and suggestions should be received Crom
2. Enviro nment Scanning of the policy should be made
5. Partic ipatio n of Lower Levels . This ultima te choice
3. lndetifi cation of Policy Areas with the result it gives. Those who
with the active particip ation of those who use and live
4. Analysis of Alterna tive Policies sugges tion and fact finding statge will feel commi tted
have put m their contrib ution at the
~ be given to employees to respond
5. P aritcipa tion of Lower Levels ~ it. Opport unity for upward commu nicatio n should
an opport unity to gauge their thinking. The
6. Approvnl of Top Management constructively to the policy. This will offer
reasona bly expect that those who have not testifie d agains t the propos ed
management can
7. Implem entatio n of Policy of employ ees is not convinc ed, the manag ement should
policy will abide by it. If a group
8. Policy Apprai sal in detail.
usually delegated to a specialist who examin e their views
1. Prelim inary Invest igation . Fact finding is at the lower levels in policy
1.,;; the organis ation through questionnaires, interviews There are two major benefit s of partici pation of people
collects data from inside and outside are realisti c becaus e they possess the fint
s. The facts or data should be adequa te, dependable and qualitatively formulation. Firstly, it will ensure that policies
and other methqd ational culture and climate . Second ly, since policies are to be
is over, the policy committee should have a sound hand knowledge of organis
_:, superb . When the data collection stage pation in t he formul ation process would
proceed further in this matter. The commi ttee should also be aware about the used by the people at the lower levels, their partici
ground -to
I encourage ready accepta nce by them.
following factors : commi ttee shou.ld report to the
in general and labour legislat ion in particular 6. Appro val of Top Manag ement . Policy formul ation
(a) labour legislation. The laws of the land membe r's judgem ent und finding!.
everal _al!P.e~s of personn el matters . Policies should be in conformity top manag ement its conside red opinion integrating the
. govern the s_ key role to play in this matter. He may be the principle
The human resour ce manag er has a
•with the laws ' of the country. te precau tion to ensur e correct ti ming
ed codes of behnvious of a ny spokesman of the commit tee; he should take adequa
~ (b) Socia.I values and custom s. These are the accepet top manag ement finds it accepta ble.
should take into accoun t. and present ation of the report so that the
com munity which a policy d to adopt and launch a policy
intentions of the top management 7. Implem entatio n of Policy . The author ity require
(c) · Empolyee's aspirations. Personnel policies reflect the Top manag ement alone can decide whethe r the
a es. These intent ions should definitely rests with the top manag ement.
of the compan y as regrads manage ment of human resourc the organis ational objectiv es or not. Many manag ements hesitat e
ion of the people who work in the organisarion. policy adequa tely represe nts
aim at satisfying the hopes and aspirat commi tments. Releas e of polic~·
should careful ly analyse the to release the policy accepted by them for fear of making
2. Enviro nment Scann ing. The policy commi ttee mean what it preten ds to mean . Failure to
tion may be divided into interna l environment is essenti al unless the manag ement does not
irLformation available with it. The whole informa would create not only confusi on but also lack of confide nce in
ment deals with physica l resources, human release a policy statem ent
and extern al environ ment. Interna l environ
ees and man agemen t relation s, organisational manag ement's pronounced commi tments.
~ resources, organis ational structu re, employ ement who are guided by
and beliefs , etc. Extern al environ ment relates to social, political, economic and 8. Policy Appra is al. The repres entativ es of manag
values employ ess affecte d by a given policy can develop the experience
prediciting the environmental changes organisation's policy and other
tech noiogical conditions in the country. Monitoring and Any serious difficul ty with a new or
;j identifying alterna tive policies . needed to apprais e its approp riatene ss and usefuln ess.
are import ant for policy formulation. This will help in t he top manag ement alongw ith constru tive sugges t1ong
policies, it is essenti al to specify revised policy should be reporte d to
3. Identi ficatio n of Policy Areas. In formulating ees have learnt that t hey can recei\'C
We can classify policies into two broad groups. The first The upward communication will take place if employ ·
clear ly the areas needin g policies. ement by partici pat ing in this way.
~ rial functions, namely , planning, attentio n and get action from top manag
group deals with policy for mulatio n in various manage
ling. The second groups involves policy formulation
organis ing, staffing, directin g and control
3
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- HRPCciC:S

1
,' , A POLICIES -

Box 1 : T EST S OF " SCUNO PERS;)\N EL Poucy l-.ll P.1 rt1 i.: 1p.H1 011 :!~ µol:..: J .ur mu lu;.:or. ,ends LO bound polic y. It he lps tn com munic.nt 1on
J illi c n -,url:':- a .. .:icct:pt u:1 n by thu mem bers ·
• pt.rtor n \ ceo ulln• o
( 1) lt I::, nccc::,::, ary to r1:v1tnv tht' polli.:y afte r u ccr Luin poriod of t1mo to kno\~'. it s
• ,yht: 1hcr d pu h ~) b gtJI •l 1r
cffec t1vcnc si:; [f tht: circu ms rnn ces chnns~. the polu.:y muy become obso lete . I hu;
ma y requi re t he fo r muluuon of H new poli cy.

2.4 POLICIES IN VARIOUS HR AREAS

Personnel pohc 1e3 must cover all areas of human re so urces ma nage ment. Usua lly policies
~ 411/fh; lfl)ei 1lf ac~pu:!ul,Q e h< urganisa iion !
flhmber, u/ & .irt! fra med wi th rega rd t0 a ll fun cuon s of bumon resource management. as stated b~ow:
/laving a .ow,d baAe ii. upprQprrat< :h,00 Fo r e.tampl,, ,wges may be I. Ac qubiti o n Po li ces
on. :Qt(,;f.rq/t1. It ma:.r 11<' Ju•ufi<d un the ba.,i, oi wage; thoor:, . (I) .\lm1mum hinng qu nlificuuo n trninmg und experi ence.
fr(SLUilllJ./y re~ u:u.,;d wµi ,·wluai.:J .
(it) Preferred so urces of rccru 1Lmcnt.
'fh~ po,;i1,1v1> alll<w~r-to tha abovo,.q~e,llans would mean t.hot the personnel policy (i11) Rese rvatio n fo r diffe re nt groups.
f11 iood
(1v) Em pl<?ymc m of relation s of ex is tin g perso n nel.
(v) Reh:rnce on various se lectio n devices such as Les ta. reference cheks ond inte rv iews.
2.3.1 Essentials of a Sound HR Policy
(vi) Pl ace ment of new employees.
lf policies are to ach.ieve their objectives, due rega rd should be gwen to lhe foll owrn g (vii ) Orientatio n of new e mployees.
gwdelmes:
2. Trans fer and Promotion Policies
(I) A policy a'iust be preceded by a brief description of the s1tuanon that has necess 1rnted
(1) Ra u onale of tru.nsfe r.
formulation of policy. This will help in understanding the policy m ns proper co ntext.
(ii) Periodici ty of tra nsfer.
(i1) A policy s hould be consistent wi.th the overall ph1osophy a nd on1ect1vcs of the
organisution as well as with the labour laws and public. (iii) Promolion of exis ti ng s taff.
(iv) Length of service requ ired fo r porm oti on.
_0-1) A policy should gwe due regard to interests of all th e pa rn es-t he em pl oyers. the
e mployees nnd the gcne.ral publlc. (v) Quali ficnt k>n s and mer its req uired fo r pormotion.
(w) A policy must be b road, general a nd flexi ble. To be a gmde rn ac t10~s or dcc1s1ons,· (vi) Weightage to se niority ond mer it in promotio n.
ge ne.rality 1s necessary :J . Tran sfe r -an d Promotion Policies
(v) A pohcy must. be put in wntmg. Two reasons may be advanced fo r th1 ~ Finnly, a (i) Frequ ency of t r ai nin g and develo pme nt progra ms.
policy \vill be vagu e unless 1t 1s wntten down.. S eco ndly, 1f a policy 1s tn wrmng , 1t (11 ) Basis fo r tra101ng.
\ViU revea l the rntentions of the to p -m anagen1 ent clea r ly. Special skill 1s rcqm red
(ai ) Types of t rammg, \'IZ ., on-the-tob or off-the-job.
tO sc.lect and ndherc UJ policy language which will state a nd syn thesize the gcn ern l
(iv) Programs of execu t ive deve lopment
pnnciple nnd sco pe of discretion . ·
(v) Ca reer Advance ment.
(u,) A policy s hould be rlcxible so as to take care of 1nd1V1dual diffe rences and snuat10nul
realities . Therefor e. a policy should be stated m broad terms and 1t should be r eVJewcd 4. Compensation Polici es
and revised periodically. (1) :Xlimmum wages and salaries.
(ci1) A policy should be just, fair and equitable LO internal as well as ex,ernal groups I, (i1) .\fothods of wage payments.
should be based on co nsiste ncy in treatment to all em ployees without any favouritism (111} In dividual incentive plans.
o r discriminati on. However. a good human resou rce p0licy should recogruse in1d1vidial (Iv) Group incentive plans.
differences a nd res pec t human d1gnny . ( </ Emplo) ••e SLOck Opuon Plan (ESOP).
(u zii) A policy should be rcn~o nabl e and ca pable of hem e l!Xecuted h .:;hould al so r ec o1.,rn1.:: e
(v1) Profi L s ha r ing
indiVldual dt.ffe.rences a mo ng people.
{n 1) 1\""on-monctary reward s
 ~ . '\, .. --..
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ilU, . .
~ HR POLICIES -
· - HR POLICIES ........ ,
-... 5. Maintenance and Welfare Policies
Area of HR Policies
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&.. A big industrial enterprise cun have the fo \lowio~· types of policies;
i (i) Kinds ond standards of workings condit ions.
(i) Acquisition policies.
(ii) :-lumber and duration of rest intervals.
~- (ii) Transfer and promotion policies;
! (iii) Overtime.
: (iii) Trainihg and developmen t policies,
(iv) Types of leaves.
~ (iv) Conip~nsotion policies, . ·
(v) Safety program. , I . • - •~ • f 'I

(v) 'Mninc.n ance nnil ,\relfurc !policies.

(vi) Type of welfare services.
(vi) Integration and hu~~[~latioo)~~cics,
(vii) Financing of employee services.
-., 6. Integration and Human Relations Policies
QUESTIONS
(i) Employee discipline
$
(ii) Handling of grievances. 1. "A policy ,s a guide 10 taking decisions". Discuss this statement and bring out the charac-terislics
· (iii) Recognition of employees' unions. of a policy.
) (iv) Employees' participation in management. 2. Why are polic,es needed 1n human resource managemeni? How are policies formulated?
(v) Suggestion scheme. 3. What are the benefits and limitations of human resource policies? Discuss.
) There may be so many other personnel policies in addition to the above cited example. 4. State and illustrate policies various personnel areas of an industrial organisation.
ln
The top- management while designing personnel policies must take the huma n resource or 5. What are the benefits and llmltatlons of HR policies 7 Briefly describe the steps In the formulation of
., personnel manager into confidence because he ,s the person who 1s mainly concerned with HR policies (Delhi, 2015)
performing the human resource fu nctions and implementation of human resource programs 6. Why are HR policies needed? What ~re the essentials of sound HR policies? (Deihl, 2016)
a nd policies.
...---~ ..... - 7. Answer the following in bnef:
-~ SUMMARY- (a) What are t11e characteristics of a policy?
Nature 0£ HR Policic~,. ,- . . (b) Why are personnel policies needed?
- • __ , • II t,• J... · '• I ,; 1J.
•'Vt , \'•••

HR-pol1cie,-!ay-down-the-decision-mnking cry):erin-U).-]ine wi~h t~e.ov~tall .purpose of (c) Why is participation of lower levels essential In policy formulation?
~ the organisation in the ar ea of Human Resource Management. '.['hey are developed (d) What are the tesis of a sound personnel policy?
by the top management to ·assist the rnanngers at various levels to deal with the B. Write short notes on the followlrw:
) people "at work. Thus, RR- policies can be interpreted as the ·rccognised intention of (a) Importance of HA Policies
top management of people n t work.
(b) Steps in formulation of HR policies.
Formulation.of HR Policies (c) Tests of a sound HR policy
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~ The steps fuvoled in the formula tion HR of policies include the follo\\~n~ :
1. Preliminary• investigation CASE INCIDENT
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...,, 2.._Environment scanning
:\sh,sh Chem,c:tls Lrd. employs ove1 700 employcs including 100 execucil'eS. Most of the mahage rial
3. Identiflcatipn of policy areas·
pcf\unnel lomed the company m rhe lower r2nks ond have risen from within. The Human Resource (HR) Dep1r.
j 4. Ane.lysi's of alternativeJpolicies is headed by the HR Managtr who is supported by an Assiaranr HR Manager and other adminis rrative staff.
&.''Participation of'!ower le'(els JIit. Raman, who was the HR Manger cill March 2013, joined the company as Assn. Opcrotions Manager
~ 6. "A.ppro;,J' of top managemenJ and later rose to the pos,tion of Product Development Manger. He w.is tranferred 25 HR Man2ger •• a
J 7. Implementation of policy· pm of c,reer de,·clopmenr plan in Jan. 2010. The Asm. HR M:inager, Mr. Suvesh, h•ndles :ill personnel
8 . .Policy appraisal.
•
.;.,!-,,,, mouers including w•gc ,nd salary adminmration and indusrri2.I rcolations. Mr. Sarvesh holds as P.G. Diplomo
.' m HR.\f 1nd has an e,penenct of about 12 year.; in the HR area out of which last five yeors a.s Asm. HR
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