Even Small Businesses Need An Employee Handbook

Human resources professionals often advise companies about the importance of an employee handbook. But why are they so important? 

Employee handbooks serve as a valuable communication resource for company-specific and legally-mandated policies. These policies inform employees of their rights, responsibilities and benefits, and cover a wide range of topics important to the workplace.

An employee handbook:

  • establishes the company’s policies, guidelines and expectations for employees to follow
  • helps define company culture
  • provides legal notice of required laws and regulations
  • helps define and explain company benefits, eligibility, etc.
  • shows the company’s commitment against unlawful and unacceptable practices such as harassment, sexual harassment, discrimination and retaliation
  • meets compliance requirements of some Employment Practices Liability Insurance (EPLI) carriers

We strongly recommend developing a custom handbook for your company versus using an online template or “borrowing” a handbook from another company. Far too often we review the handbooks of small companies that have fewer than 50 employees and find that they obligate the company to Family Medical Leave and demographic reporting under the Equal Employment Opportunity Act. These are significant and burdensome obligations that do not apply to companies of their size. So why do they have them in their handbooks? Because they used a template or borrowed a handbook from another company. Don’t make that mistake. When it comes to legal compliance, tailor-made is always best.  

Once developed, be sure to roll the handbook out to employees, train supervisors to properly enforce these policies, and enforce the policies consistently and fairly which means walking the fine line of treating everyone the same and looking at each situation on a case-by-case basis.  Also, be sure to have your handbook reviewed and updated every one to two years to remain in compliance with the latest laws and best practices. 

A compliant employee handbook consists of required federal and state laws as well as certain local regulations your company is required to follow. If the company has employees working in multiple states—such as remote employees working out of their homes or satellite offices in multiple states—make sure your policies comply with the laws in each state. This may involve revising policies to encompass all states’ regulations or creating a state-specific section or addendum if not offering the same benefits to all. When drafting a handbook, certain policies should be included if they apply to your company (list is not all-inclusive):

Company information:

General information about the company and its way of doing business as well as how it complies with federal, state and local law

  • Introduction, history, values, etc.
  • Equal Employment Opportunity
  • Employment At Will (if applicable)
  • Purpose of the handbook

Expected conduct:

What the company expects from the employee

  • Standards of Conduct
  • Progressive discipline
  • Personal appearance / Uniforms
  • Safety
  • Timekeeping
  • Work schedule / Attendance / Breaks
  • Telephone use
  • Care of company property
  • Driving for the company
  • Working from home
  • Leaving the company

Employee Rights:

What the employee can expect from the company

  • Pay procedures – payday, pay cycle, methods of pay and established seven-day work week
  • Employee classification
  • Overtime
  • Workers’ Compensation

Employee Benefits:

Wide-ranging policies of company-designed and legally-required perks

Time off: Paid and unpaid time off employees are allowed to take and the specific requirements for eligibility, making requests, tracking, pay-in-lieu-of and carryover (as determined by the company or by applicable law)

Time off usually dictated by the company but may be impacted in part by regulations:

  • Vacation and/or PTO (combination of vacation and sick)
  • Holidays
  • Bereavement

Time off that may be dictated by the company or may be required by state or local law:

  • Sick
  • Jury duty
  • Voting
  • Victim of a crime / Victim of domestic violence, stalking or sexual assault
  • Voluntary emergency responder / disaster responder

Leaves of absence – Extended time off (paid or unpaid) that may be required or recommended for compliance under federal or state law:

  • Medical
  • Maternity / Parental
  • FMLA and/or state-mandated
  • Military

Insurance benefits – Include general descriptions of offerings referring to summary plan description for details

  • Medical / Dental / Vision
  • Life
  • Short-term and long-term disability
  • Retirement plans

Finally, while planning and developing your employee handbook, there are certain things to consider.

Include employment policies:

Employee handbooks should contain policies that outline general expectations, responsibilities, guidelines and benefits. Use language to incorporate most situations while allowing you to have options to determine action on a case-by-case basis (i.e., “Failure to follow may result in disciplinary action, up to and including termination”).

Do not include procedures:

Procedure manuals should contain step-by-step instructions as to how to perform a task or handle a situation. For example, a discipline policy explains the general types of discipline while a discipline procedure will include what form to use, how to complete that form, how and where to hold conversations, what to do if an employee reacts negatively, etc.

Include an acknowledgment form:

Make sure the employee signs off on a document acknowledging:

  • his/her receipt of the handbook and understanding he/she is to follow the policies
  • that the handbook does not create an employment contract
  • that policies are guidelines and are not all-inclusive
  • all policies (except employment at will, if applicable) can be changed, amended, or removed at any time and that the employee is expected to follow those amended policies
  • File the original signed acknowledgement form in the employee’s file and give the employee a copy to keep. 

Do not include other acknowledgment forms or agreements:

Keep other agreements (such as arbitration, confidentiality and non-solicitation agreements) out of the handbook. Instead, include general language regarding these areas of conduct expectations and possible repercussions in the handbook.

Include policies covering important conditions of employment:

Employee handbooks should include the expectations of the company for the employee and vice versa. Company requirements usually include attendance, behavior, conduct, personal appearance and safety. Employee expectations usually include pay procedures, time off, leaves of absence and insurance benefits.

Do not include policies for and/or give to independent contractors:

While certain policies may also apply to independent contractors (such as non-harassment/sexual harassment, non-discrimination, and non-retaliation), most policies are not applicable to contractors. Policies such as benefits, time off, work schedules and time tracking are parameters that companies, by definition, cannot dictate for independent contractors.

Since an employee handbook is a legally binding document, it should be developed and/or reviewed by an HR professional or employment attorney. If you have had problems in the past such as an EEOC or harassment charge or decision, it is highly recommended to have it reviewed by legal counsel.

Paige McAllister is a contributor for Affinity HR Group, Inc., PPAI’s affiliated human resources partner. Affinity HR Group specializes in providing human resources assistance to associations such as PPAI and its member companies. www.affinityHRgroup.com.


Q&A With Claudia St. John

Send your human resources-related questions for Claudia St. John to ppb@ppai.org. Select questions will be answered in future issues.

Q:  We have a valued and cherished employee who has suddenly developed a serious medical condition. We are a small company with 17 employees. We would like to extend time off with pay to her, but it’s not our standard policy to do so. Can we do this for her?

A: As a business owner, you can certainly do as you wish, and she would benefit from the consideration you are giving her. One word of caution: in granting her this benefit, you are setting a precedent. Should other employees face a similar situation, would you treat them similarly? Treating one “special” employee uniquely does leave you open to potential claims of preferential treatment and discrimination going forward. Just be sure to consider the precedent you are setting when making accommodations for your “special” employees.

Q: I am new at my company. I have learned that our interview process is very loose—there is very little structure to what we ask and how we ask it. Do you have any recommendations?

A: The interview is a critical piece of the recruiting process and, if handled correctly, it can be effective. If not, it can be worthless or, worse yet, illegal. Here’s what we recommend:

  • Use a panel interview where multiple people are interviewing the candidate at the same time.
  • Know in advance who will be on the interview team and what questions will be asked.
  • Ask the same or similar questions of all candidates.
  • Stick to the script; try not to get off track or be influenced by non-work-related questions or conversations.
  • Most importantly, avoid prohibited interview questions. You can find a list of them at http://www.affinityhrgroup.com/content/you-asked-what-questions-in-the-candidate-interview.


Claudia St. John, SPHR, SHRM-SCP, is president of Affinity HR Group, LLC.

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