In a business with three or four people, there are no HR policies. There's the owner, who decides case by case. Someone needs a day off, the owner says yes. Someone is late again, the owner has a word. It works because everyone knows each other and the owner is in every conversation.
As the business grows, that same approach starts to produce problems. Two people ask for the same thing and get different answers, and both notice. A manager handles lateness one way and the owner another. Someone leaves and there's a dispute about what they're owed. Nobody needs to be acting unfairly for this to happen: decisions made case by case, by different people, inevitably diverge, and people read the differences as unfairness.
Policies are simply decisions made once, in advance, and written down, so that the same situation gets the same answer whoever handles it.
So what I want to do here is go from the ground up: what the law already decides for you, the handful of policies a growing business needs on top of that, and how to write them so people use them.
Imagine two employees who both ask for three days off in December. One is told yes by the owner. The other, a week later, is told no by a supervisor who didn't know about the first request. Both answers may have been reasonable. Together, they look like favouritism, and the second employee will remember it. A leave policy turns those two separate decisions into one decision, made once, that everyone can see.
Start with what the law already decides
Some things aren't yours to decide, and a policy should start from them. This guide gives an overview to help you plan; for anything specific to your business, check the current rules with the Department of Labour or an employment lawyer, because entitlements can depend on the sector, the type of worker and recent amendments.
EPF and ETF. Private-sector employers contribute 12% of an employee's gross earnings to the Employees' Provident Fund and 3% to the Employees' Trust Fund. Employees contribute 8% to the EPF, deducted from their pay. So every LKR 100,000 of salary costs the business LKR 115,000. Budget for the full amount.
Gratuity. Under the Payment of Gratuity Act, an employer with fifteen or more workers must pay a gratuity to a worker who leaves after at least five completed years of service, whether they resign or are let go, apart from narrow exceptions. For monthly-paid staff it's commonly calculated as half a month's final salary for each completed year. So an employee on LKR 80,000 a month who leaves after six years would be owed about LKR 240,000. Because it builds up with every year of service, it's worth setting money aside for it, and recognising it as a real cost of long-serving staff.
Leave. For employees covered by the Shop and Office Employees Act, the Act provides for annual leave and casual leave, commonly cited as 14 days of annual leave and 7 days of casual leave a year after the first year, with rules for the first year of employment. There are also statutory public holidays, and rules on maternity leave. Confirm the details that apply to your staff before you write your leave policy.
Working hours and overtime. The law sets normal working hours and rules on overtime pay for covered employees. Your policy should state your normal hours and how overtime is approved and paid, in line with them.
Your policies can be more generous than the law. They can't be less.
Does that make sense? Think of the rules of a cricket match. Nobody enjoys a game where the umpire makes up the rules as it goes along, even if each decision seems fair at the time. Clear rules, known in advance, are what let everyone play without arguing.
The policies a growing business needs
Beyond the legal minimums, a small business usually needs a handful of written policies. Keep each one short and plain.
Letters of appointment. Every employee should have a written letter stating their role, start date, salary, working hours, probation period, leave and notice. It prevents most later disputes, because the terms were clear from the start.
Working hours, attendance and lateness. Start and finish times, breaks, how attendance is recorded, what happens when someone is late or absent, and how to notify the business.
Leave. How much of each type, how to request it, how far in advance, who approves it, and how busy periods are handled. If leave can't all be taken in festival seasons, say so in advance.
Overtime. When it's needed, who approves it, how it's recorded and how it's paid.
Expenses and advances. What the business pays for, how to claim, what receipts are needed, and whether salary advances are allowed and how they're repaid.
Conduct and discipline. What's expected, what isn't acceptable, and the steps the business follows when there's a problem: a conversation, a written warning, a final warning, and dismissal for serious misconduct. A fair, consistent process protects both the business and the employee, and it matters a great deal if a dismissal is ever challenged.
Performance and pay reviews. When reviews happen, what they're based on, and how pay increases and bonuses are decided. Festival bonuses, if you pay them, should have a clear basis so people know what to expect.
Leaving. Notice periods, returning business property, the final settlement of salary, leave and gratuity.
There's a chain behind many workplace disputes in small businesses. A dispute is usually the result of someone feeling treated unfairly. Feeling treated unfairly is often the result of two people getting different answers to the same question. And different answers are the result of decisions made case by case, with nothing written down. A written policy breaks the chain at its first link.
How to write them so they get used
Write them in plain language. A policy nobody understands doesn't work, however correct it is. Sinhala, Tamil and English versions, if your team needs them.
Keep them short. A page for each is plenty for most.
Base them on what you already do, where that's working. Policies should mostly write down good existing practice, and change it only where it's causing problems.
Apply them consistently, including to the people you like best. A policy that's applied to some people and not others is worse than no policy, because it makes the unfairness official.
Review them once a year, and whenever the law changes.
Three attitudes to policies
The first says we're like a family here, we don't need rules. It works while the family is small. The second, often after a dispute, swings to a thick rulebook written to protect the business against its own staff, which nobody reads. The third treats policies as fairness made visible: short, plain decisions that tell everyone where they stand, applied the same way to everyone.
Policies as part of scaling
There's a reason HR policies belong in a guide about growing a business. Every decision that has to come to the owner is a limit on how big the business can get. Clear policies let managers handle routine people decisions confidently and fairly, and let the owner spend time on the decisions that really need them.
How Gridwerk helps
Writing HR policies that fit your business and the law, alongside role clarity and capacity planning, is part of our Process Optimization service. If people decisions are taking too much of your time, start with the free diagnostic. It's eighteen questions, about seven minutes, and then we call you to go through the rest.
Gridwerk diagnostic