Whether your small business has two employees or 20, you will have certainly created workplace policies, procedures or expectations, either formally or informally. It’s essential that your employees know and understand these policies — because you’ll run a more effective organization if they do and because you don’t want to risk having your company break federal or state laws.
Why Do You Need an Employee Handbook?
An employee handbook is a compilation of all your company’s policies and protocols, as well as employees’ legal rights and obligations. Having an employee handbook makes it easy for you to communicate rules and responsibilities to employees, so there’s no question about what’s expected from them — or from you, as the small business owner.
Moreover, a comprehensive employee handbook helps protect your small business legally if anyone ever questions whether you’ve clearly communicated your policies, since they’re spelled out in a formal document.
You might be tempted to put off creating such a handbook in order to focus on revenue-generating business activities, but don’t: Your employee handbook should be a priority, as it ultimately establishes and protects your workplace practices and culture, while saving you valuable time and strife.
Consider, for example, an employee who shows up to work wearing an outfit that clearly violates your employee dress code. Instead of having to repeatedly explain or debate what’s appropriate work attire, you can refer that employee to the handbook. Plus, it shows that you’re not singling out any individual employee — the policy is clearly laid out and applies to all.
Another example: If an employee sues you, claiming they were harassed by a coworker, you can point to the employee handbook as evidence that you have clearly spelled out anti-harassment policies in place. (Keep in mind that having small business insurance is also important to protecting your business in case an employee or customer sues.)
In other words, once you have employees — even just a couple — you need an employee handbook. This guide will walk you through everything you need to know to create an employee handbook that will serve your business today and into the future.
What Goes Into an Employee Handbook?
Like every company, every employee handbook is different. You can’t simply photocopy another company’s handbook and distribute it to your employees. A good employee handbook defines your unique workplace rules and practices, and should be written in a voice that reflects your vision and the culture you’ve built — or want to build.
That said, most employee handbooks include similar topics and types of information. Not every topic is important or relevant for every business, but it’s good to review all the sections and consider which make sense to include in your handbook.
Below is a look at eight common sections in employee handbooks. Keep in mind that these can be organized and parsed in many different ways. What’s important is that you cover all the bases that are essential to your workforce.
1. Company Values and Mission Statement
In order to be successful, your employees have to be in alignment with your company’s values, missions, and goals. That’s why you need to lay out those aims at the beginning of your employee handbook. It doesn’t need to be pages long. Provide a statement that encompasses what matters most to you as a company. For example, successful online shoe retailer Zappos names 10 Zappos Family Core Values that it expects employees to aspire to, including “Embrace and Drive Change” and “Be Passionate and Determined.”
2. General Employment Information
A critical component of your employee handbook is the general information about being employed with your company. This will include topics employees care about, such as:
- Hiring policies
- Payment schedule (and payment methods available)
- Full-time vs. part-time hours
- Overtime pay
- Meal and rest breaks
- Leaves of absence
- Performance review procedures
- Safety and security procedures
- Resignation and termination procedures
Think through all the types of information your employees would want to know and consider putting it in this section — especially if it doesn’t fit easily into another section.
Keep in mind that some of this material, such as overtime pay rules and workers’ compensation coverage, are at least somewhat dictated by federal and state or even local laws. If you don’t know the laws in your area, you should consult an employment law expert or HR consultant to help you frame and describe those policies correctly.
3. Anti-Discrimination and Anti-Harassment Laws
It’s important to list all of the current federal, state, and local laws that are pertinent to your workforce. These can include equal employment opportunity, anti-harassment, and anti-discrimination laws.
4. Standards of Conduct
Beyond the requirements of law, you probably have your own expectations for how employees will conduct themselves on the job and so you’ll need policies geared to specific on-the-job conduct. Such policies may include:
- Dress code
- Drug and alcohol usage policy
- Ethics policies
- Personal technology use
- Social media policy
- Data and customer privacy
- Rules around accepting gifts from clients
- Conflict resolution policy
Depending on which policies are most important to your business, you may choose to feature some of these rules in their own section. For example, some businesses have entire sections of their employee handbook that focus on attendance rules or their dress code, while those sections may not be as important in a company where many employees work remotely or that allow flexible hours. How much space you devote to each section will depend on how important it is to your particular employees and work environment.
5. Employee Benefits
As should not be a surprise to you, the employee benefits section is one of the most popular — and most frequently referenced — sections of your employee handbook.
Your handbook likely won’t describe all the specifics of, say, your health insurance plan, as those can be quite detailed (and that information can be provided separately). But you probably want to give the basics: When is an employee eligible to enroll in the company health plan and how many options do you offer: types of plans, family coverage? When is the annual open enrollment period?
Similarly, you’ll want to briefly lay out the other benefits you offer, such as:
- Vacation or paid time off (PTO)
- Any retirement plans you offer and who’s eligible
- Insurance coverage you offer, including life insurance and short- and/or long-term disability
- Training benefits, including tuition reimbursement
- Any “soft” benefits you may provide, whether that’s flexible scheduling, on-site yoga classes, or free lunches on Friday
Because your employees will often reference this section — who doesn’t like to find out about on-the-job perks? — use it to your advantage and help them fully understand all they get as part of working for your company.
6. Confidentiality / Non-Disclosure Agreement / Conflict of Interest
Not every company includes this section, but companies that work in highly competitive industries with trade secrets and concern about employees jumping ship for a competitor may want to have employees sign a non-disclosure agreement or at least include a conflict of interest policy in the employee handbook.
This is a section worth running by an employment lawyer who can guide you on what’s appropriate and usual, based on your particular industry and business.
7. Disciplinary Policies
It’s important that your employees understand the risks of not following the policies, laws, and procedures that you lay out in the employee handbook.
Consider having a section that explains that they will be held accountable for their actions and behavior. You don’t have to describe every stage of disciplinary action in minute detail, but you should make it clear that there’s an established disciplinary process in place, so that employees will see that they are receiving fair treatment and that all employees are subject to the same disciplinary process.
It’s important that your employees don’t treat your employee handbook like a contractual agreement between you and them — which would mean they could sue you if the policies and procedures within the handbook aren’t upheld. Thus, be sure to include a disclaimer that states the employee handbook is not a contract, to protect you against such concerns.
And Then: Make It Engaging!
Beyond the obligatory rules and policies, consider adding more engaging elements to your handbook, such as interviews with executives and current employees, photos of employees and company events, and links to YouTube videos (in the case of online-based employee handbooks).
Zingerman’s, an Ann Arbor, Michigan-based food company that’s been recognized for its employee handbook, includes short profiles of department managers, a full-page feature on the company’s self-study program for employees that allows them to become “certified tasters” of Zingerman’s coffee brews, and a word-search game.
In other words, think creatively about creating an employee handbook that will not only inform your employees—but also entice them to read the handbook and help them feel good about choosing you as their employer.
Also, try to keep the sections of your employee handbook as short and readable as possible. There’s no need overwhelm (read: scare) employees with copious pages of information on policies, penalties, and rules. If you want them to read it, focus on the positive aspects of working for your company, while weaving in vital information they’ll need.
Pulling It Together
As you start thinking about and planning out your employee handbook, you might realize that you haven’t formalized many of your policies or that you still need to consider more thoughtfully what some of your policies should be.
Don’t worry — this is completely natural. Many small companies don’t think concretely about their policies until they have to explain them in writing. Consider that this a perfect opportunity to fully contemplate and flesh out policies that probably needed to be formalized anyway.
Here are four steps you can take to begin the process of creating your employee handbook.
1. Start With Your Culture and Values
A good place to start when thinking about your employee policies — whether specific to your attendance rules, your dress code, or your performance review process — is to think about your company’s culture and values. If you haven’t documented those yet, now is the time!
As the small business owner, think about your personal values and what you want to emphasize, and also — perhaps more importantly — how can you create a value system and culture that will motivate your employees to do their best work and stay with your company long-term.
The culture you want to create should guide your policies and procedures — so it makes sense to at least draft a basic mission statement before designing your company’s employee policies and procedures. (You can always circle back and refine your mission statement as you think more deeply about your company practices.)
2. Develop Your Policies
With your values clearly identified, then think about creating policies that your employees will embrace. For example, companies looking to attract younger workers often don’t want to give the impression of being too strict or overbearing — as it may turn off the millennial workers seeking workplaces that promote flexibility and openness. If your company will rely heavily on recruiting young workers, consider designing policies that will appeal to them.
That said, you might — out of necessity — have to be strict about certain policies. For example, if you run a business such as a retail store where showing up to work on time is of utmost importance, you’ll of course need to specify — and enforce — your attendance rules and perhaps your dress code.
You then may be able to be more accommodating or generous in other parts of your workplace practices, such as by providing your employees with more vacation time than they would likely receive at other jobs with similar pay. Designing comprehensive policies and procedures can be a puzzle where you weigh the pros and cons of every policy you create until the pieces fit just right.
3. Know the Applicable Laws
While the employee handbook is not a contract with your employees, it does set their expectations, so you must follow federal, state, and local laws when preparing certain parts of your employee handbook.
For example, many states have passed “leave laws” that govern how employers must handle certain types of leave, whether that’s sick leave, jury duty, or bereavement leave. They may even have boilerplate language that companies can (and should) use to describe those laws to their employees.
You should be able to find detailed descriptions of your state’s laws on your state government’s website. The Employment Law Handbook by The Lunt Group also provides links to a wide variety of both federal and state legal resources, including a state-by-state breakdown of employment and labor laws.
4. Look at Other Companies’ Employee Handbooks
While you shouldn’t copy other companies’ policies and employee handbooks word-for-word, it’s well worth your time to look through some of them for inspiration or ideas.
You may already have access to other company’s handbooks through friends or relatives. Take advantage of opportunities to check out at least a few other handbooks as you’re planning out your policies and procedures and deciding how to organize and position them to employees most effectively. You can also find sample employee handbooks through a basic Google search.
Consider the language they use: Is it uplifting or does it sound strict and mistrustful of employees? The tone of your employee handbook will suggest your management style, so be careful about how you phrase policies and procedures.
Look at how other employee handbooks are organized. Does the flow of topics and breakdown of sections make sense? If you find a handbook you really like, you can at least use it as a basic template for designing your own.
Resources to Help You Create an Effective Handbook
Compiling your employee handbook can be a time-consuming and detailed process. You don’t want to miss any essential topics and you need to make sure the information is presented clearly and effectively — and in a way that will engage your employees.
A small business has numerous resources available to help them put together a comprehensive employee handbook. Keep in mind that you don’t want your employee handbook to come off as too boilerplate or too filled with technical legal terms — as people may avoid reading it.
You want your voice, spirit, and intent to come through. That said, these three sources can help you organize your thoughts and gather some of the information you need:
1. Customizable Templates and Tools
You can find many free and relatively low-cost employee handbook templates and “handbook builder” tools online. Some online-based companies charge a few hundred dollars to guide you through the process of creating a detailed employee handbook by asking you questions about your policies and what you want to include in the handbook. They may also provide you a breakdown of workplace policies in your state, so you can easily add those to your handbook.
While these programs may greatly streamline the handbook-writing process, some offer more customization than others. If you choose to go this route, you want to make sure you’re not creating a handbook that will ultimately feel too generic.
Here are just a few of the many online programs to check out:
Society of Human Resource Management (SHRM). For a $350 one-year subscription, the SHRM Employee Handbook Builder walks you through all the key steps of creating an employee handbook. State-specific filters allow you to drop in current federal and state policies that “reflect the latest federal and state workplace compliance guidance, as vetted by the platform’s legal partner, Jackson Lewis,” SHRM’s website says. “As a subscriber to the EHB, you receive regular alerts for any state or federal law changes that occur during the one-year subscription term.” (Active SHRM members also can download a free employee handbook template.)
Rocket Lawyer. Rocket Lawyer is an online-based legal document template and legal services company tailored for small businesses, which pay a monthly or annual subscription fee. Subscribers have access to a wide range of templates — including an employee handbook tool that walks them through a questionnaire to create a customized handbook. It also provides federal and state-specific policies.
Blissbook. Many companies have done away with their paper employee handbooks and moved to digital-only. This can offer advantages, such as making the updating of the handbook easier (no need to redistribute paper copies), as well as helping employees more easily search for the relevant information they need. Blissbook is one company that can build and manage a digital employee handbook for your company. Pricing starts at $750 (for a company with up to 150 employees) and includes e-signature capabilities and data analytics on how many employees have viewed the handbook.
Free templates. You can also find many free templates for employee handbooks online by doing a Google search for “free employee handbook template.” Just make sure that you only download templates from reputable websites.
2. An HR Consultant
If you don’t feel you have the expertise or time to write and organize your own employee handbook, you can certainly hire an HR consultant to do it for you. Look for a local consultant who stays on top of all the current federal, state, and local employment and labor laws and who has experience in helping other companies create their handbooks.
HR consultants may charge by the hour or they may charge a flat project fee. It’s a good idea to talk to at least a few before choosing which you’ll hire.
3. An Employment Lawyer
Hiring a lawyer is by the far the most expensive way to go, but you can rest assured that he or she will be very familiar with the relevant employment laws.
Even if you decide to DIY your employee handbook, using customizable templates and tools, you can always consider hiring an HR consultant or employment lawyer to review your employee handbook before you distribute it to employees. This helps ensure that you haven’t missed anything important and yet you’re not paying to outsource creating the whole employee handbook.
If you choose to pay for professional help, don’t lose sight of the need to create an employee handbook built around your culture, values, and voice. An outside expert can help you address policies and laws — but they don’t know your workplace like you do.
How to Get Employees to Actually Read It
Once you’ve created your employee handbook, the next big challenge is getting your employees to actually read it. It’s important that employees understand your workplace rules and policies, so they don’t run afoul of them, and so you won’t have to constantly enforce them. Moreover, if you know they’ve read the employee handbook, then you know they at least are aware of the rules and policies of your small business.
Thankfully, getting your employees to read the employee handbook isn’t rocket science. Here are four tips to help your employee handbook get read and referenced:
1. Call it something more intriguing than an employee handbook.
Consider finding a title that sounds less like a handbook and more like a helpful guide. (Think along the lines of “The Amazing Book That Will Make Employees’ Work Lives Even More Awesome.” Well, at least think about how to make it sound fun.)
Big Spaceship, a Brooklyn, New York, mobile app maker, has dubbed its hip employee handbook Our Manual, while financial information site The Motley Fool calls its online handbook The Fool Rules!
2. Focus the handbook on sections employees will care about most.
In other words, organize your employee handbook so that the most exciting information — such as your company values and culture and employee benefits — come first. If you start with policies or laws, employees are more likely to stop reading.
3. Deliver the employee handbook in a way they can’t miss it.
More companies are moving to online handbooks that may live on the company’s intranet system or even live on the internet. This offers many benefits: You can add more engaging elements like videos, if you want, and the handbook can be made searchable (so someone can simply type “benefits” and jump to the section they’re looking for).
Even if you don’t want to create a digital handbook, consider how to deliver it at the right time and place. Simply including it in a new employee’s welcome package may not work. Consider putting it on their desk on their first day of work and giving them time to read it during the workday.
4. Require employees to read it and show they have.
It’s a bit old school, and yet you may want to consider requiring employees to sign — either by pen or electronically — once they reach the end of the employee handbook, confirming that they have received and reviewed the information.
Keep Your Handbook Handy — and Up-To-Date
An employee handbook should be considered a living document — not a one-time project. Employment and labor laws change regularly, and your employee policies may need to change as well — as your business and staffing needs evolve.
Review your employee handbook at least once a year and look for ways to make it better and more useful to your employees. If your small business is large enough to have an HR team, have them keep track of common employee questions they receive throughout the year.
Remember, your employee handbook is a valuable resource that can help save you time, keep your employees informed, and ultimately protect your business in the event of a lawsuit. You should devote enough time to creating and refining it to help ensure you give your employees the most useful guide you can.
Creating and managing a comprehensive employee handbook is only one of your many jobs as a small business owner. At times, it may feel as if you have entirely too many responsibilities on your plate — from product design and hiring, to bookkeeping and selling, whether online or in person.
Know that you are not alone in these challenges. For more tips and advice on how to survive and thrive in your small business, subscribe to the Small Biz Ahead weekly e-newsletter.