UNIT 4 HRM, MM201

HR Policies: Meaning, Steps, Formulation, Implementation and Procedure

HR Policies – Introduction

A policy is a guide for repetitive action in major areas of business. It is a statement of

commonly accepted understanding of decision-making criteria. Policies are set up to achieve
several benefits. By taking policy decisions on frequently recurring problems, the top
management provides the guidelines to lower level managers.

It will permit decisions to be made in similar situations without repeating the reasons and
expensive analysis required initially to state the policy. Policies help managers at various
levels to act with confidence without the need of consulting the superiors every time. This will
also ensure promptness of action.

The starting point in all managerial relationships with employees is the managerial policies. It
incorporates the philosophy of the top management. The human resource philosophy of DLF, for
instance, is stated as the manage ment of people begins with ideas, implicit or explicit, as to
the purpose, goals, and intentions in their employ ment. On the basis of such objectives, policies
outline the courses to be followed.

On the basis of such policies, programmes are developed by the management to pur sue the
objectives. Carrying out the programmes result in certain practices. Policies declare what is
intended; they describe what is proposed. Practices describe how policies are being implemented.

A company may have adopted a policy of providing training for all employees as a means of
preparing them for promotion. To imple ment this policy, it may have developed an extensive
training programme. The programme may include job training for new employees, supervisory
training for foreman and supervisors, and management development for members of the
management group. In the supervisory training programme, it may include role playing as one
of the many training practices.

Human resource policies are not something that can be considered in isolation. It is an integral
part of the whole policy structure of the enterprise. There is an organic unity in policies. Such a
unity pre vents unnecessary duplication and promotes unity of action. Weakness in any one of
the major policies tends to weaken the effectiveness of other policies. Similarly, a weakness in
human resource policies may weaken effectiveness of all other organizational policies.

Efficient utilization of resources depends a great deal upon:

(1) The efficiency of personnel operating and handing the resources,

(2) The image of the management in the minds of employees, and

(3) The relations between the management and the workers.

These are dependent on the management policies bearing on the human relations. A statement
of the management’s intention concerning people or formulation of a policy on HR is, thus,
needed in every organization. HR policies provide guidelines for a wide variety of employment
relations in the organiza tion.

These guidelines identify the organizations intention in matters of recruitment, selection,

promotion, development, compensation, motivation, and otherwise leading and directing
employees in the working organization. HR policies serve as a road map for the manager.

HR policies are also defined as that body of principles and rules of conduct which govern the
enterprise in its relationship with employees. Such a policy statement provides guidelines for a
wide variety of employ ment relationships in the organization.

These constitute guides to action, and serve as a roadmap for the management in decision-
making. It represents the HR philosophy of the management, which in turn reflects the
fundamental beliefs, ideals, and views held by the management with respect to the treatment of
individuals at work. The policies are subject to change as organizational and human values
changes.

The purpose and significance of the HR policies hardly need any elaboration. Every organization
needs policies to ensure consistency in action and equity in its relation with employees. Policies
serve the purpose of achieving organizational goals in an effective manner. HR policies
constitute the basis for sound HRM practices. Moreover, policies are the yardstick by which
accomplishment of programmes can be measured.

Policies are also regarded as ‘setting governing regulations or norms’. It is the basis of control.
The emphasis in it is on the regulatory aspect. Policies as a guide to managerial control work in
a cyclical fashion.

Appraisal of HR programmes as regards recruitment, selection, training and development,

com pensation, collective bargaining, and other human resource activities must rely largely on
policies as a measuring stick.

The conceptualization of HR policies as an aid to management requires formulation of overall

and subsidiary policies, that is, organization-wide policies such as general company policies,
administrative policies for top executives, operational policies for the guidance of low-level
managers who execute plans and programmes, on the one hand, and subsidiary policies relating
to the overall policies, on the other. A written declaration of such policies is considered to be of
great importance in promoting uniformity and consistency in the management approach.

HR Policies – Meaning

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. These policies, when organised and
disseminated in an easily used form, can serve to anticipate many misunderstandings between
employees and employers about their rights and obligations in the organisation.

Human Resource practices imply the customary way of operations and behaviour, translating
idea into action, and knowledge of how something is usually done. In simple terms, it is to apply
principles or policies.Some methods utilised by human resources department staff are called
“best practices,” meaning the way an employment action is handled is the recommended way
according to human resources experts. For example, a human resources best practice is
conducting an HR audit each year to determine if human resources processes are helpful to the
company.

Another best practice is providing new employees with a formal orientation session where they
are fully aware of the company, its philosophy and mission. A company known for its human
resources best practices is most likely the leader among its competition and typically has a high
level of employee satisfaction.

Best practices in human resources are shared with other human resources practitioners as an
industry-accepted way of doing business from the HR perspective.

Human Resources policies are generalised guidelines on employee management, adopted by

consensus in an organisation to regulate the behaviour of employees and their managers or
supervisors. As for the dichotomy between an HR policy and a procedure, they can be compared
to a human being and the shadow. Both are inseparable and as shadows set the outlines of a
human being, so do procedures set the outlines of an HR policy.

“HR policies may be defined as guidelines, procedures, codes and regulations adopted by
management to guide workplace activities within acceptable limits, which are communicated
through a summarised statement called policy statement and implemented through instructions
referred to as policy directives.”

The human resources department develops the introduction to the set of policies and guidelines
and explains the importance of the policies. Policies about performance appraisals, fair
employment practices, appearance and behaviour are just a few of the several policies
contained in an employee handbook.The handbook is distributed to new employees on the first
day of work and is typically discussed during informal or formal orientation sessions. Employers
expect employees to fully understand the policies; a signed form to acknowledge the employee
has received and understands the employment policies is contained in the employee’s personnel
file.

From the above definitions and explanations, it is quite clear that HR policies outline what and
how HR professionals undertake their day to day activities in the workplace. Because every HR
action and activity in the workplace today is highly regulated and has legal, human rights and
discriminatory implications, it is important that such actions be regulated and directed strictly.
This is what makes HR policies very important and necessary in every business environment
today.

Another reason why HR policies are extremely important in the workplace today is that it sets
the direction an organisation wants to take in the management of its employees. Business
management practice requires that an organisation adopts a distinct approach towards
managing employees and getting the best out of them. So surely, a solid HR policy is a must for
every business today.

Unfortunately, most HR practitioners pass off their Conditions of Service or Employee Manuals
or Handbooks as HR Policies. These documents should or are rather, derivatives of the
comprehensive collection of all HR Policies (HR Policy Manual). Contracts of Employment,
Conditions of Service, Employee Handbooks are all or should all come from the HR Policy.

In HR Operations, policies are developed to cover areas of the HR function which are considered
strategic to the achievement of specific HR and organisational objectives. These may include HR
Planning and Outsourcing, Recruitment, Training and Development, employment Contracts
Negotiations and Administration, Employee Performance and Exit/Termination Process
Management.

In HR Administration, the services functions of HR become the focus of policy making. HR

Services such as employee welfare (Health and Safety) including annual leave administration,
Employee Attendance, Pensions fund Management, Logistics Administration, Cleaning and
Sanitation. Sometimes, the function also covers transportation administration, rest house
management and protocol services.

In HR Governance, policies are developed to focus on compliance and enforcement of the various
policies developed. Policies are also put in place under HR Governance to evaluate performance
in accordance with agreed objectives and set targets for the HR function as a strategic business
unit as well as the business as a whole. It is based on this information that HR audit systems
are developed.

HR Policies – Major Outlines of the HR Policy of a Medium-Sized Organisation

An HR department primarily deals with recruitment and selection, training and development,
job evalu ation, wages and incentives, and labour welfare policy. Hence, an HR policy should
have brief but com plete statements on all the points referred to earlier.
The major outlines of the HR policy of a medium-sized organisation may be as follows:

i. Recruitment and selection policy – To procure suitably educated and efficient personnel by
offering those tempting wages, good working conditions, safety and security, and better future
prospects.

ii. Training and development policy – To make available all possible facilities for the training
and development of employees to enable them to do their job efficiently and to prepare
them selves for future promotions; to take effective steps including training and development
pro grammes to equip the employees in the latest techniques of production, management and so
on; to get the performance appraisal done; and to provide adequate opportunities and facilities
for the development of employees.

iii. Job evaluation, wage and incentive policies – To determine reasonably good wage rates and
dearness allowance, and to work out incentive plans for workers after undertaking job
evalu ation and other necessary steps and also keeping in view the prevalent wage rates for
similar jobs in other industries.

iv. Labour welfare policy – To improve industrial relations by evolving a suitable machinery for
the settlement of disputes; to encourage mutual negotiations; to prepare and execute labour
welfare programmes; and to arrange all possible facilities for the health, education and other
welfare programmes.

HR Policies – Steps in Designing HR Policy

In developing HR Policies, there should be clear and consistent statements of the organization’s
policies regarding to all conditions of employment and procedures for their equal and fair
implementation.

In order to fulfill this objective, policies and procedures should be made on following guidelines
or steps:

1. Clear and specific, yet flexible enough to meet the changing conditions.

2. Compliance with all appropriate law and regulation.

3. Agreement with one another and reflection of an overall true and fair view approach to all
employees.

4. Identify the purpose and objectives which the organization wish to attain regarding to its
Human Resources department.

5. Analyse all the factors under which the organization’s HR policy will be operating.

6. Examining the possible alternatives in each area which the HR policy statement is necessary.
7. Implementation of the policy through the development of a procedure to support the policy.

8. Communication of the policy and procedures adapted to the entire organization.

9. Auditing the policy so as to reveal the necessary areas requiring change.

10. Continuous revaluation and revision of policy to meet the current needs of the organization.

11. Gain understanding of the corporate culture and its shared values.

12. Analyse existing policies: both written and unwritten existing policies.

13. Analyse external influences as HR policies are subject to the influence of many legislation,
regulations and authorities, thus the codes of practice issued by the professional institutions,
should also be consulted.

14. Assess any areas where new policies are needed or existing policies are inadequate.

15. Check with managers, preferably starting at the top, on their views about HR policies and
where they think could be improved.

16. Seek the view of employees about the HR policies, especially to the extend for which they are
inherently fair and equitable and are implemented fairly and consistently.

17. Seek the view of the union’s representatives.

18. Analyse the information retained in the previous steps and prepare the draft policies.

To be more effective, the HR Head must consult, discuss and agree policies with management
and union representatives.

Some Other Steps in Formulation of HR Policies:

1. Identify the Areas:

The areas where HR policies are needed are to be identified. Important areas of HR like
recruitment, selection, training, compensations must have specific policies clearly spelt out. If
need arises, additional policies may have to be formulated for dealing with newer HR issues.

2. Collecting Data:

After selecting the areas, relevant information should be collected for facilitating policy
formulation. The company’s records, past practices, industry practices and top management
policies should be studied. The organizational culture and employee aspirations should also be
taken into account while formulating policies.

3. Evaluating Alternatives:
Once data have been collected, various alternative policies can be designed. Each alternative
has to be evaluated in terms of their contribution towards the desired objectives. The policies
should be for the betterment of the existing HR system and formulated in congruence with other
organizational policies. The policies should be finalised after discussion with those people who
are directly affected by its implementation.

4. Communicating the Policy:

The policy details should be conveyed to all the workers throughout the organization. Policy
manual, in-house journals, notice boards, intranet, etc., can be used to create awareness among
employees at various levels. Special communi cation programmes can be conducted to inform
all the concerned people about the new policy.

5. Evaluation of the Policy:

Policies should be evaluated regularly at periodic intervals to ascertain their effectiveness.

The actual policy results should be compared with predetermined standards to check if the
policy was successful in achieving its objectives. Policies may be reviewed at the organizational
level, or outside experts may be invited to review it.

Assessment of existing policies is especially important during crises like labour strikes, lock
outs, mass employee grievances, labour union unrest, etc. It is also necessary when company
plans to bring about large scale changes like expansion, diversification, adoption of new
technology, etc.

HR policies should be designed to promote common interest, create safe and healthy working
conditions, give proper recognition for work and accomplishment, recognize impact of change on
people, encourage employees’ participation and recognize the functions and responsibilities of
the trade unions.

HR Policies – Essentials of an HR Policy Statement

HR policies facilitate in achieving the organizational objectives, and also ensure a consistent
treatment of employees, thereby minimizing the scope of favoritism and discrimination. This
ensures efficient utilization of human resources within an enterprise.

The National Industrial Conference Board, USA, has defined HR policies as a ‘written statement
of an organizational goal and intent concern ing matters that affect people in the
organization’. According to this view, policies are stated in broad and long-range terms that
express or stem from the philosophy or belief of the organizations top authority.

(1) HR policies must be an expression of belief or intent and reflect the philosophy of the top
man agement. It should be stated in a clear and understandable manner leaving no scope for
any ambiguity. The policy statement should ensure an alignment of HR objectives with the
corporate objectives.
(2) It must have long-range implications, and also meet the requirements of today and tomorrow.

(3) It should be developed with an active participation of the top management.

(4) The development of policies should be steered by a committee of senior executives headed by
the chief executive.

(5) The primary function of the HR executive is to serve in a ‘staff’ capacity, feeding in ideas
and pushing the project along. Due care should be given to its (policies) formulation.

(6) The HR policies must be approved by the highest authority in the organization, i.e., the Board
of Directors.

(7) The policy statement should cover all the functional areas of HRM.

(8) It must be in writing; otherwise it is not likely to be taken seriously. Writing ensures
uniformity of application, provides something concrete to base on, and should appeal if there is
any disagree ment as to what the policies are. It also serves as a valuable means of
instructing new employees and supervisors. The written policy statement should contain three
basic parts, namely, objective, procedure, and definite assignments of specific responsibility to
individuals.

Appley has stated ‘readiness to commit oneself to a written policy indicates bigness. Readiness
to alter policy with changing conditions in favour of a wise course of action is indicative of
greatness’. Readiness to alter policies with changing conditions in favour of a wise course of
action implies making the policies more flexible and dynamic. The element of flexibility must be
built into the policy statement. Hence, the policies must be stated in a broad sense with a long-
term perspective.

HR Policies – 6 Important Policies in Various HR Areas

Personnel policies must cover all areas of human resource management.

Usually policies are framed with regard to all functions of human resource management as
stated below:

1. Employment Policies:

(i) Minimum hiring qualifications and experience.

(ii) Preferred sources of recruitment.

(iii) Reservation for different groups.

(iv) Employment of relations of existing personnel.

(v) Reliance on various selection devices such as tests, reference checks, and interviews.

(vi) Placement of new employees, and

(vii) Orientation of new employees.

2. Transfer and Promotion Policies:

(i) Rationale of transfer.

(ii) Periodicity of transfer.

(iii) Promotion of existing staff.

(iv) Length of service required for promotion.

(v) Qualifications and merits required for promotion.

(vi) Weightage to seniority and merit in promotion.

3. Training and Development Policies:

(i) Frequency of training and development programs.

{ii) Basis for training.

(iii) Types of training, viz., on-the-job or off-the-job.

(iv) Programs of executive development.

(v) Career advancement.

4. Compensation Policies:

(i) Minimum wages and salaries.

(ii) Methods of wage payments.

(iii) Individual incentive plans.

(iv) Group incentive plans.

(v) Employee Stock Option Plan (ESOP).

(vi) Profit sharing.

(vii) Non-monetary rewards.

5. Integration and Human Relations Policies:

(i) Employee discipline.

(ii) Handling of grievances.

(iii) Recognition of employees’ unions.

(iv) Employees’ participation in management.

(v) Suggestion scheme.

6. Working Conditions and Welfare Policies:

(i) Kinds and standards of working conditions.

(ii) Number and duration of rest intervals.

(iii) Overtime.

(iv) Types of leaves.

(v) Safety program.

(vi) Types of welfare services.

(vii) Financing of employee services.

There may be so many other personnel policies in addition to the above cited examples. The top
management while designing personnel policies must take the human resource or personnel
manager into confidence because he is the person who is mainly concerned with performing the
human resource functions and implementation of human resource programs and policies.