Employee Handbooks – Three Reasons Every Business Should Have One

by Margaret Catalfamo

When you first learned to drive did you just jump in the car and go or did you learn the rules of the road first? When you bake a cake, do you follow a recipe or just throw random ingredients in a bowl and hope for the best? If you have a small business it's no different for your employees; when they come to work having a manual or handbook helps them understand expectations and be a better employee.

Here are three great reasons to develop and use an employee handbook:

  1. Provides a source of information about company policies and procedures which is good for both managers and employees. By having a well written employee handbook you provide a source for your employees and managers to use to gain information on the company's policies such as attendance, dress codes, work hours, pay and performance issues as well as procedures on requesting vacation time (if applicable), notifying the company regarding unscheduled absences, and the disciplinary process.
  2. Gives clarity and direction for your managers and supervisors on how to handle certain employment issues. By providing written policies and procedures you enable your managers and supervisors to handle all employees consistently and fairly.
  3. Sets expectations for employees and helps to avoid misunderstandings and unacceptable behavior.

Based on size, not every small business needs an employment manual. If you only have a few employees and your workforce is stable (limited turnover) you probably don't need a written employee handbook. But, if your small business is growing or you have more than one location an employee handbook will help smooth out your growing pains and keep your processes and procedures consistent. You may even want to create two manuals: one for all your employees which contains the basic information needed as well as general company information; and a more detailed policy manual for supervisors and managers which provides comprehensive information and procedures for each policy.

Most employee handbooks contain the following information:

  1. Company Overview: Provide some history on your company, include a vision statement, information about your company's culture, ethics, goals and management philosophy.
  2. Equal Opportunity Statement, Non Discrimination, Anti-Harassment Policy, Americans with Disabilities Act Policy
  3. Employment Categories: a. Full Time, b. Part Time, c. Temporary
  4. Compensation: a. Payment of salary, b. Overtime, c. Employment records d. Raises/merit increases
  5. Time Off: a. Vacation, b. Personal time/Absences due to illness c. Leave due to Family and Medical Leave Act, d. Company Holidays
  6. Employee Benefits: a. Health Insurance b. Flexible Spending Account c. Group Life Insurance d. Retirement Plan e. Workers Compensation Benefits
  7. On the Job: a. Attendance, Punctuality b. Drug and Alcohol c. Dress Code d. Expense Reimbursement e. Disciplinary Process f. Smoking g. Internet and E-mail Use h. Company Equipment and Computer Systems i. Violence in the Workplace j. Safety

This list isn't all inclusive and your company may not need or want to include everything listed above. If your company doesn't have a retirement plan, then don't include it!

If you've decided to create an employee handbook or update your handbook here are a few more suggestions:

  1. If you are starting from scratch, pull together all the memos, notices, letters and information you have previously provided to your employees. Sort this information into categories (you might want to use the above list) and decide if it is still relevant and if you want to include it.
  2. To make it easier to update your handbook list one policy per page and include an effective date as well as a revision date.
  3. Make sure you include language which protects your company. Courts have considered handbooks to be contracts. Including a statement like the below and having your employees acknowledge receipt will help protect your company against lawsuits and misunderstandings:

    I acknowledge that I have received a copy of ABC Company's Employee Handbook. I agree to read it thoroughly, including the statements in the foreword describing the purpose and effect of the Handbook. I agree that if there is any policy or provision in the Handbook that I do not understand, I will seek clarification from the Human Resources Department. I understand that ABC Company is an "at will" employer and as such employment with ABC is not for a fixed term or definite period and may be terminated at the will of either party, with or without cause, and without prior notice. No supervisor or other representative of the company (except the President) has the authority to enter into any agreement for employment for any specified period of time, or to make any agreement contrary to the above. In addition, I understand that this Handbook states ABC's policies and practices in effect on the date of publication. I understand that nothing contained in the Handbook may be construed as creating a promise of future benefits or a binding contract with ABC for benefits or for any other purpose. I also understand that these policies and procedures are continually evaluated and may be amended, modified or terminated at any time.

  4. If you have standard forms include a copy of each form with the relevant policy. If you don't have standard forms, now is a good time to create them.

Once you have completed your handbook, don't just leave it on the shelf. Make it a part of your new employee orientation. Review it with all employees at least annually and make sure your managers and supervisors thoroughly understand your policies and procedures. What's worse than not having an employee handbook? Having one and not following the policies and procedures.

Whether you develop your employee handbook yourself, hire someone to do it, or buy a canned version, it is a good idea to have your attorney review the handbook before you distribute it to your employees. Employment laws differ from state to state and having your employment attorney review the manual is just good business sense.

Copyright © Margaret Catalfamo

About the Author

M.B. Catalfamo is a small business consultant who provides practical, comprehensive advice and support in the areas of Human Resources, Business Start-Up, and Strategic Planning. For a self-audit questionnaire visit her website: or contact her at

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