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Creating an Effective Employee Handbook for Your Business

While this document should be unique to each business, these key elements are commonly found in effective employee handbooks.
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A comprehensive employee handbook can be a highly effective way to inform your employees about key workplace issues and company policies. Employees who understand your policies are less likely to waste time looking for answers because they know what's expected of them and what the company has committed to.

While it's generally not required by law for employers to create and distribute employee handbooks, such a document can serve as a communication tool and a strong line of defense against legal actions brought against your business by an employee or a former employee. Creating an employee handbook that reflects applicable local, state, and federal laws and regulations can also help you focus on productivity and worry less about issues that could negatively impact business operations.

Key elements to consider including in an employee handbook

While legal guidelines may differ from state to state, most every business in the U.S. must adhere to certain federal laws. Consider outlining your company's commitment to these in your employee handbook. These include:

  • The Fair Labor Standards Act (FLSA) is a federal law that sets standards for minimum wage, overtime pay, child labor, and recordkeeping requirements. The employee handbook should include policies that comply with these standards (and applicable state wage and hour standards), as well as provide information for employees based on classification as either exempt or non-exempt, pay frequency, performance reviews, salary increases, and bonuses (if offered).
  • Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment by covered employers based on sex, race, national origin, religion, or color. Sexual harassment is also considered a form of unlawful discrimination. An employee handbook should clearly state your business's commitment to fairness in hiring practices, and a workplace free of discrimination.
  • Americans with Disabilities Act (ADA) protects qualified individuals with disabilities from discrimination in employment. In addition, the law requires covered employers to provide a "reasonable accommodation" to an otherwise qualified employee or applicant, unless to do so would cause an undue hardship for the employer.
  • The Occupational Safety and Health Administration (OSHA) requires employers to provide a workplace free of recognized hazards. It is a best practice to include policies on the safe use of equipment and vehicles, handling of materials, or wearing of safety apparel in your employee handbook.

Your employee handbook should be written in compliance with these federal workplace laws, as well as applicable state and local laws to help mitigate exposure to future legal action.

Your business should be aware of these applicable state and local laws for inclusion of related policies in your handbook, including topics like offering leave under a paid sick leave law or a family and medical leave program. For example, if there is a rise in employee absenteeism during a particularly bad flu season, understanding what types of leave you offer and documenting them in your handbook would be helpful for your business and its employees. 

Disclaimer information

You may consider having employees sign and date a receipt document (or receipt page included in the employee handbook), acknowledging that they have read and understood the policies included. This signed document can be referenced in the case of future disciplinary issues related to an employee's violation of a company policy. However, keep in mind that the handbook does not create a legal contract.

Employee handbook best practices

While an employee handbook is unique to the business, there are some general best practices that can help as you develop this document. For instance, Paychex HR professional Janelle Rodriguez says to keep in mind the following:

  • Understand that developing a handbook requires hard work and due diligence.
  • Be sure to have your employee handbook legally reviewed at least once a year.
  • Don't include policies that aren't applicable to the business structure or culture. Also, if you're not sure you can implement certain policies, don't include them.
  • You expect employees to know and follow the policies in the handbook; therefore, managers and supervisors should be expected to read it and implement the policies consistently as written.

As with any business practice, complacency can be an issue. For example, failing to refer employees to the handbook for answers to their questions and to utilize it as a resource can undermine the potential benefits of your handbook.

Paychex HR professionals have offered some additional considerations:

  • The process of creating an employee handbook deserves time and attention. Don't rush through it. Understand what you are creating prior to giving it to your employees.
  • If you are creating an employee handbook, or updating an old copy, bring management into the picture. Include them in the process as they can offer valuable insight as to what policies may need to be added, or those no longer in practice.

Other less obvious elements to consider incorporating into your handbook include:

  • Severe weather or natural disasters: It's best to proactively address what could possibly happen in the event of severe weather or natural disaster that would either prevent the office from opening, or an employee from reporting to work.
  • Infectious disease outbreaks and flu season: During infection disease outbreaks (such as the coronavirus in 2020) quarantines and self-isolation could balloon employee absenteeism and threaten your business operations. Employers should stay up-to-date on paid leave laws at the federal, state, and local levels and review how these laws may affect their policies and employees.
  • Bereavement leave: Be proactive and include a policy on bereavement to ensure consistent treatment of employees and mitigate uncertainty regarding time off during what will likely be a difficult time for the employee.
  • Personal touches: A handbook isn't exactly "warm and fuzzy," but it's a tangible item that an employer can add personal touches to help show pride in the company and encourage your employees to be proud to work for the company. Consider including a company logo, a vision statement, or a welcome letter with a signature.

What to avoid when creating an employee handbook

A poorly worded, inconsistently implemented, or inaccurate handbook can invite problems with human resources management and might be an easy target for a plaintiff's attorney, if and when the business faces employment-related litigation.

Here are some common mistakes businesses make when drafting their own employee handbook:

Choosing a "one-size-fits-all' template

All businesses are not alike. Simply copying the contents of another company's employee handbook — or downloading a generic version found online — are unlikely to satisfy the HR needs of your workforce.

Failure to include at-will disclaimers 

Where permitted by law, a handbook should state in clear language that the employment relationship is at-will, and that the handbook itself doesn't represent any sort of binding employment contract. A handbook lacking an explicit at-will employment statement — outlining the employer's right to terminate an employee at any time, with or without cause — may prove problematic if faced with a wrongful discharge suit or breach of contract allegation.

Including policies that are either too specific or too broad 

One of the objectives of an employee handbook is to include policies that address most workplace situations. Rigid policies may be counterproductive, however, because they can eliminate your flexibility in certain circumstances. Overly broad policies, on the other hand, can make employee accountability difficult to identify and enforce.

Not explaining policies in reader-friendly language 

Wording that's too technical can cause confusion and make enforcement of your policies a source of employee discontent. It’s important that policies are stated in simple, clear language.

Failing to include an anti-harassment policy

Regardless of your company's size, be proactive in this area by developing a policy against harassment in the workplace. Be sure to include reporting procedures and a commitment to timely investigation of any reports of harassment in the workplace.

Overlooking a policy on company rules regarding the use of computers and social media 

If you want employees to know you have the right to monitor their email communications and social media activity at work, prominently set those expectations of privacy in the employee handbook.

Not engaging a labor and employment attorney to review the handbook

An attorney well-versed in employment law is an invaluable resource for assessing the language and policies stated in the handbook. It's important to know your document is current in regard to applicable employment laws, accurate with regard to your policies, and comprehensive where necessary.

There are other common mistakes, such as failing to incorporate changes in relevant local, state, and federal employment laws, and neglecting to review the handbook's contents at least once a year. Rather than risk committing such errors, many businesses opt to join forces with a professional employer organization (PEO) to outsource a full gamut of HR functions, including the creation of a customized employee handbook with clearly stated and legally reviewed policies.

HR professionals at Paychex recommend not cramming the employee handbook full of procedures and copies of forms as examples of what to use because this can lead to omissions of critical content that should be included.  Instead, they suggest making it a policy-related manual.

Once an employee handbook is in place, upholding the policies outlined in it is crucial. Learn more about the importance of enforcing workplace policies and helping employees understand what's expected of them.

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