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Creating an Effective Employee Handbook for Your Business

Human Resources

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 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 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 on an employee’s 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 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 enforcing these policies, 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 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.

Disclaimer information

You may consider having employees sign 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 consultant 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, adds Paychex HR consultant Jessica Hubbard-Davis. "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. Referring back to it often, wherever applicable, and updating it regularly reminds employees that the handbook is not just a 'rule' book, but a tool for them to better understand their rights and benefits as well as the company's policies."

Paychex HR consultant Jennifer Benz offers 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.
  • Pay special attention to areas that describe paid time off. Employees love to read policies about when they get paid for not working, so make sure it is compliant as well as clear and understandable.

Other less obvious elements to consider incorporating into your handbook, according to Benz:

  • 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.
  • 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 may 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 particular 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, 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) as a way to outsource a full gamut of HR functions, including the creation of a customized employee handbook with clearly stated and legally reviewed policies.

"Some employers cram the employee handbook full of procedures and copies of forms as examples of what to use instead of making it a policy-related manual," Hubbard-Davis notes. "This can lead to omissions of critical content that should be included."

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.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.