Password Policy Guide 2026: Best Practices + Free Template

Most employees don’t spend much time thinking about password security. They just want to log in, start their day, and move on. Which is why “123456,” “qwerty,” and “password” still top the lists of most commonly used passwords worldwide.

In 2025, 88% of attacks against company platforms and logins involved the use of stolen passwords., and with over 5 billion accounts compromised globally last year, it’s clear that convenience often wins over caution.

That’s where a clear, enforceable password policy makes the difference. It gives employees simple, consistent rules to follow, while helping HR and IT protect sensitive data across every system people use. This guide explains how to build a compliant, secure password policy with help from Deel IT, and includes a free, customizable template at the end.

What is a password policy?

A password policy is a clear set of rules that tells employees how to create, use, and protect their passwords at work. It’s there to reduce mistakes that often lead to unauthorized access or security incidents.

A strong policy defines:

• How passwords are created: set a minimum length (at least 12 characters) and encourage the use of easy-to-remember phrases instead of short, complex strings.
• How passwords are stored: require employees to use an approved password manager rather than saving logins in browsers or personal notes.
• How passwords are shared: prohibit sharing logins between team members unless a shared account process exists.
• When passwords are changed: limit resets to when there’s a confirmed risk or role change, not on a fixed schedule.
• Who enforces the rules: assign clear ownership to IT or security leads and make the policy part of regular compliance checks.

A good password policy does two things well: it keeps the company secure and makes life easier for employees.

Why a password policy matters (for companies of all sizes)

Whether you’re onboarding your tenth employee or managing a team across 10 countries, a password policy helps reduce risk, save time, and create consistency across tools and systems. Here's why it's important, regardless of company size.

For small teams: it sets expectations early

When you're moving fast, it's easy to let password practices fall through the cracks, especially without a dedicated IT team. Even one reused or weak password can open up access to payroll systems, HR platforms, or sensitive internal files. A simple policy gives everyone clear guidance from day one.

For growing companies: it prevents access sprawl

As headcount increases, so does complexity. More employees, more tools, more logins. Without a shared policy, people tend to use familiar passwords, reuse old ones, or keep credentials long after switching roles. A policy helps control access before it becomes a liability.

For global organizations: it supports compliance and consistency

Companies operating across regions must meet a patchwork of data privacy and security standards. A written password policy makes it easier to align with frameworks like ISO 27001, SOC 2, and GDPR. It also helps HR and IT coordinate onboarding, offboarding, and access changes across time zones.

See also: 9 Best Software License Manager Tools for 2025

5 best practices for an effective password policy

These best practices will help you design a password policy that’s both secure and practical. The goal is to make strong password habits easy to follow and enforce across your organization.

1. Set a minimum length of at least 12 characters and allow passphrases

A good policy doesn’t just suggest complexity, it defines what qualifies as a strong password. A minimum of 12 characters is now standard, with many organizations moving to 14 or more. Rather than enforcing random character mixes, allow users to create passphrases built from unrelated words. These are easier to remember and harder to guess. Example: metal-lemon-49-blanket.

Attackers routinely run through billions of leaked passwords. According to Verizon’s 2025 Data Breach Report, most exposed passwords in 2024 were short, reused, or based on predictable patterns. Setting a length threshold helps eliminate the worst offenders without introducing unnecessary friction.

2. Block passwords that are known to be weak, leaked, or commonly used

The most dangerous passwords are the ones people don’t realize are risky. Employees often choose simple variations like Spring2024! or CompanyName123. These may meet complexity requirements but are widely used and easy to guess.

Modern authentication systems can check new passwords against real-world breach data using APIs like Have I Been Pwned. Your policy should require that passwords are checked during creation and reject those found in known leaks. This step reduces the chance of recycled credentials creating downstream security gaps.

3. Require multi-factor authentication for all key systems

Multi-factor authentication (MFA) should be mandatory for email, file storage, HR systems, payroll and any application that contains personal or financial data. Your policy should clearly list which systems require MFA and how it must be configured (for example: app-based codes rather than SMS).

MFA is one of the most effective safeguards against account compromise. According to Microsoft, more than 99.9 % of compromised accounts lack MFA. Organizations that enforce MFA see risk of credential-based attacks drop by around 99 %.

If MFA is not enabled, a leaked or weak password often suffices for an attacker.

See also: Authentication Methods: Types, Factors, and Protocols Explained

4. Do not enforce routine password resets (use triggers instead)

Forced resets every 30 or 90 days often result in weaker passwords. People fall into habits like January2025! or end up writing passwords down. Instead, your policy should define when a password must be changed: after a suspected breach, during role changes, or when accounts are inactive for a set period.

This approach aligns with NIST SP 800-63B, which explicitly recommends eliminating arbitrary expiration schedules in favor of risk-based criteria.

5. Make use of a company-approved password manager mandatory

Employees working across multiple systems are likely to reuse passwords unless there’s a simpler alternative. A password manager removes that friction. It stores complex, unique passwords for every system, autofills logins, and reduces the need for people to memorize or write down credentials.

Your policy should require a specific password manager, clarify that work passwords must be stored there (not saved in browsers or personal notes), and explain how shared logins (if allowed) are managed securely within team vaults.

4 password policy compliance standards

If you've ever been through a security audit or worked toward a compliance certification, you know one of the first things auditors ask for is your password policy. It's not just a box-ticking exercise. Most major security frameworks have specific expectations about how you handle passwords, especially when employee credentials are involved.

Here's what four of the most common frameworks actually require when it comes to password security.

NIST SP 800-63B (US government, public and private sector)

The National Institute of Standards and Technology (NIST) provides one of the most influential password and authentication guidelines. It's widely used in both public and private sectors, especially in finance, healthcare, and technology.

To align with NIST recommendations, your password policy should include:

• A minimum password length of 8 characters, with support for longer passphrases up to 64 characters
• No required complexity rules (such as symbols or uppercase letters), which are considered ineffective
• A process to screen passwords against breach databases before allowing them
• Password resets triggered only by security events or role changes, not routine expiration
• Multi-factor authentication (MFA) enabled for sensitive systems

This standard supports more user-friendly practices backed by evidence and is increasingly expected for US-based contracts and regulated industries.

ISO/IEC 27001 (international standard for information security)

ISO 27001 is a global standard for managing information security. It's often required when working with enterprise clients or operating in regulated sectors.

To meet ISO expectations, your policy should include:

• Password complexity, storage, and reset guidelines, even if specific character rules are not mandated
• Clear procedures for onboarding and offboarding user access
• Role-based access controls tied to job functions
• Regular reviews of access permissions, typically every 6 to O12 months
• A formally documented and communicated password policy

Auditors will expect evidence that your policy is not only written but also enforced consistently across the organization.

SOC 2 (common for SaaS and B2B platforms in the US)

SOC 2 focuses on the security of customer data, especially through access management. It’s a common framework for SaaS providers and B2B platforms.

A compliant password policy for SOC 2 should include:

• Minimum length and complexity requirements, along with account lockout thresholds
• Secure password storage using hashing and salting
• MFA for admin-level, remote, or sensitive access
• A defined offboarding process to remove or rotate credentials
• Regular reviews and documentation of the policy itself

SOC 2 reviewers will look for both documentation and proof that access controls are being actively enforced.

GDPR (EU data protection regulation)

GDPR requires organizations to apply “appropriate technical and organizational measures” to protect personal data. Password security is a core part of that expectation, even though the regulation does not specify technical requirements.

To support GDPR compliance, your password policy should:

• Require strong, unique passwords for systems handling personal data
• Limit access to named individuals only, not shared credentials
• Require MFA for systems that contain employee, customer, or candidate data
• Store passwords securely, avoiding plaintext or informal methods like spreadsheets
• Ensure that access is regularly reviewed and revoked when no longer needed

A clearly defined and enforced password policy demonstrates accountability, which is a key requirement under GDPR.

6 steps for effective password policy implementation

A password policy only works if people follow it. That means writing it is just step one. The real work is making sure it’s enforced, communicated clearly, and embedded in your workflows across HR and IT.

1. Assign clear ownership across HR and IT

Start by defining who owns the policy. In most companies:

• IT or InfoSec is responsible for defining technical requirements
• HR or People Ops handles communication and employee rollout
• Legal or compliance may review the policy for regulatory alignment

You should also assign a policy owner or process owner. This person or team will be responsible for keeping the document updated, coordinating with stakeholders, and driving adoption. Make this a formal part of your security or compliance governance, not an optional task.

2. Make it part of onboarding, not a standalone document

The password policy should be introduced as part of every employee’s IT onboarding process. This means:

• Including it in new hire checklists and IT handover docs
• Presenting it alongside system access, device setup, and MFA setup
• Explaining what is required, what tools are provided, and how credentials should be managed

You can support this with a short training module, FAQ, or one-pager that shows examples of strong passwords and common mistakes to avoid. Make sure the policy is accessible from wherever your onboarding resources live, whether that’s your HRIS, helpdesk, or intranet.

3. Enforce the policy through technical controls

Relying on employees to remember or follow password guidance on their own is not enough. Enforcement needs to be embedded in your systems. This includes:

• Setting minimum password length and complexity via SSO, IAM, or device policies
• Integrating breach password checks through tools like Have I Been Pwned or built-in enterprise SSO features
• Enforcing MFA across critical systems like HR software, payroll, finance tools, source code, and admin dashboards
• Limiting password reuse by blocking previously used passwords or enforcing history rules where applicable

Standardize this across your environments. If your contractors or EOR employees access the same tools, make sure enforcement applies globally.

4. Provide a password manager and make it a requirement

Most password-related risk comes from human error. A password manager reduces the cognitive load on employees and enforces good hygiene at scale.

Your policy should include:

• A company-approved password manager (such as 1Password, or Keeper)
• Required use for all work-related credentials
• A clear policy on how shared passwords or team logins are stored and rotated
• Guidance on setting up recovery options in case someone loses access

Provision this tool as part of onboarding, and include usage in your IT asset tracking. Without it, employees will fall back on insecure methods like spreadsheets or browser autofill.

5. Apply the same enforcement during offboarding

If you are not revoking access and resetting shared credentials when someone leaves, the policy fails. Your offboarding workflow should include:

• Disabling all system accounts and login credentials
• Revoking MFA access, including mobile app codes and hardware keys
• Resetting shared or team-based passwords the departing user had access to
• Documenting and logging all access revocation steps in your ITSM or HRIS
• Confirming that any personally stored passwords (such as in a shared vault) have been rotated

Assign clear responsibility for this, usually a collaboration between IT and HR. Delays or missed steps in offboarding are a major source of lingering risk, especially for remote or global teams.

6. Schedule regular reviews of the policy and its enforcement

A password policy is not a one-time document. You should review and revise it at least once a year, or whenever a significant change occurs in your systems, compliance scope, or organizational structure.

During the review, consider:

• Whether your tools have changed or new systems require additional coverage
• If employees are struggling with compliance or requesting frequent resets
• What your audit logs say about failed logins or compromised credentials
• Whether external standards like NIST, ISO 27001, or SOC 2 have updated their guidance
• If contractors, subsidiaries, or remote teams are being held to the same standard

Any changes to the policy should be documented, redistributed, and reintroduced during onboarding and security training.

Manage password security and IT needs with Deel

Deel IT gives you a single platform to manage onboarding, device access, and security tooling across borders. You can make trusted password managers like 1Password or Keeper available to employees during onboarding, as part of a unified global setup.

With Deel IT, you can:

• Make security tools like password managers available to new hires from day one
• Order, configure, and ship equipment to employees and contractors in 130+ countries
• Centrally manage software licensing across countries and entities
• Standardize device setup and access policies without local IT
• Track usage and maintain compliance through the employee lifecycle

Book a demo to see how Deel IT helps you simplify and scale global IT management.