05/ 19/ 2006
by Conn Carroll, NFIB Legal Foundation
Are you unsure about how to handle problem employees? Have you written more than one internal policy memo this past year? Do your employees constantly ask about sick leave, dress codes or promotions? If you answer yes to any of these questions, it may be time to create an employee handbook.
Reasons for writing a handbook
Improve existing company policy
Perhaps the best reason for writing an employee handbook is the process itself. Small-business owners spend so much time running their businesses that they may not have thought through employee policies coherently. Setting aside time to review your policies will give your business the opportunity to better manage employees, select the best benefits for your business and recognize and address potential disruptive issues before they steal time and valuable resources from your bottom line.
Stay out of court
Because some states regard an employee handbook as an employment contract, handbooks can sometimes be a detriment to employers who find themselves in court. You can minimize these in-court dangers, however, with precise language and effective disclaimers. The main legal advantage of having an employee handbook is avoiding court altogether. A readily available written policy offers managers and employees a better opportunity to avoid misunderstandings that can lead to contentious and possibly litigious situations. When everybody knows exactly what the rules are and sees them followed every day, disputes are much less likely to occur.
Motivate your employees
Employees are best motivated when they know exactly what you expect of them, and how they can improve their position in the company. Along with sections on sick leave, vacation, dress codes and work hours, an employee handbook offers employers the opportunity to resell the business to employees. Sections on promotions and raises can show employees how their investment of hard work with the company will pay off down the road.
Writing your employee handbook
Getting started
The first step in creating your employee handbook is to gather all of your existing personnel policies. These items may include descriptions of your current insurance policies, any previously written internal policy memos and all of your existing unwritten rules. Next, you should take advantage of the free resources available. The NFIB Legal Foundation recently released a Model Employee Handbook for Small Business that you can attain by mail or download (704 KB, PDF) from its Web site.
Topics to cover
- Company overview: Provide a short statement on the history, goals and culture of your business.
- Workplace commitments: Emphasize your company's commitment to equal opportunity employment, non-harassment/non-discrimination and a drug-free workplace.
- Benefits: Explain rules for vacation, sick leave and health insurance.
- Pay: Let employees know when, and how you will pay them as well as how they are classified (full-time, part-time, on call).
- Work performance: Include information on how your company reviews worker performance.
- Discipline and termination: Outline the grounds for disciplinary action, the procedures for pursuing such action and termination procedures.
- Acknowledgment of receipt: This section is an absolute must and should contain important disclaimers including: a section acknowledging that the handbook doesn't represent an employment contract, and that employees recognizes that they are in an at-will relationship; a section acknowledging the company's right to revise or terminate any of the policies in the handbook at any time, for any reason.
Following through
Every year, many small businesses get by without using an employee handbook. For some businesses, not having an employee handbook makes sense. As your business grows, however, an employee handbook might help your business' bottom line. These advantages will only materialize if you consistently follow through with policies outlined in the handbook. There is no quicker ticket inside a courtroom than putting one policy in writing while practicing another. This is extremely important to keep in mind as you draft your handbook so that you don't include policies that look good on paper, but are impossible or difficult to enforce in real life. Courts will look at both your handbook and your actions. If your actions don't follow your handbook, you'll find yourself on the wrong end of a court judgment.
