Employee handbooks are a vital communication tool for small business owners. While they’re helpful for getting new employees up to speed on everything from dress codes to company culture, they’re also an important piece of protection.
Some states view the employee handbook as an employment contract, so when it’s written with precise language and effective disclaimers, it can be your legal shield in the event of future conflict and keep you out of court. A good handbook strikes a balance between clear and concise, and legal and thorough, and covers all of your compliance and legal obligations as an employer.
Read on for an overview of the key sections and what to include. Throughout the sections you’ll find links to the NFIB Small Business Legal Center’s Model Employee Handbook, which has policies your small business can adapt and use.
At the very least, your employee handbook should contain these items:
- Employment at-will disclaimer and statement on equal employment opportunity
- Policy prohibiting unlawful discrimination and harassment
- A section describing your policy for use of company property, privacy rules, and social media
- A section on employment classification and overtime rules
- A policy on family and medical leave (if you have 50 or more employees)
- A section on safety
- Disciplinary guidelines
Key Sections of an Employee Handbook
1. Introduction & Welcome
Welcome new employees and write briefly about how the company began and who’s in charge. Describe the company’s goals, philosophy, and core principles. Avoid describing the company like a family, as that could imply indefinite employment.
Outline the actual purpose of the handbook, and how it’s meant to inform new employees of your policies and procedures, and to establish expectations. The handbook isn’t an all-inclusive document, but it offers a good overview of the work environment.
You could be vulnerable to lawsuits if you don’t provide statements regarding the non-contractual nature of the handbook or at-will employment. State that employment at your company is at-will. An at-will employment relationship can be terminated at any time, with or without reason or notice by either the employer or the employee.
Related: NFIB Guide to the Employee Handbook
2. Workplace Commitments
Include statements about equal employment opportunity and outline your company’s policy prohibiting unlawful discrimination and harassment.
Several laws enforced by the U.S. Equal Opportunity Employment Commission prohibit workplace discrimination. For example, the Americans with Disabilities Act requires employers to provide (among other things) reasonable accommodations to qualified individuals with disabilities unless to do so would cause an undue hardship to the company.
Outline that your company won’t tolerate discrimination or harassment based on race, color, religion, creed, sex, national origin, age, disability, marital status, veteran status, or any other status protected by applicable law. This policy should also apply to all terms, conditions, and privileges of employment, including recruitment, hiring, placement, compensation, promotion, discipline, and termination.
You should be aware of and abide by state and/or local laws, which provide greater protection than the federal discrimination laws, and note your company’s compliance with immigration laws.
3. Company Policies and Procedures
This section describes your policies for use of company property, privacy rules, drug use, and social media, among others. It should also include clear statements about disciplinary action that results if any parts of these policies are violated.
Outline explicitly what employees can and cannot do with company property, like equipment, tools, vehicles, telephones, computers, and software. Other commitments and statements in this section could include a drug/alcohol-free environment policy, and an open-door policy (where employees are free to bring forward any concerns or problems they might have).
Remind employees about any ethical or legal requirements your company has, especially if your industry is regulated by government.
You might also want to include policies or agreements on some of the following, depending on the nature of your business, industry, and workforce:
- Dress Code
- Conflict of Interest
- Intellectual Property Ownership
- Outside Employment
- Additional Benefits, such as Training or Education Reimbursement
- Expense Reporting
Related: 6 Social Media Policy Tips
4. Employment Classification
A section on employment classification and overtime rules is necessary. The Fair Labor Standards Act (FLSA) provides narrow rules for which employees qualify for overtime exempt status.
Outline that your company assigns positions, determines wages, and compensates employees for overtime in accordance with state and local laws and the FLSA. Here you’ll also need to include details on your company’s part-time, full-time, or temporary status employees, and clearly outline the requirements for each classification and the benefits afforded.
Exempt employees must meet a certain salary threshold and perform certain job duties, which are specified in the FLSA regulations. Misclassification of employees (as exempt versus non-exempt) can result in a company paying a significant amount in damages. Consult the Department of Labor website or an attorney for more information on properly classifying employees.
5. Attendance Policies
Include clear details on your company’s work hours and schedule, expectations and requirements for attendance, and outline any polices and information about locations, punctuality, and absenteeism.
Be sure to include what’s required to miss time at work, who employees need to communicate with (and when they need to do so) regarding scheduling time off, and the disciplinary action that might happen for unauthorized or chronic absenteeism.
Remember that laws regarding break and meal periods differ by state, so consult with your state’s agency or an employment attorney to ensure you provide required meal and break times.
Related: Detailed Attendance Policy Wording
6. Leave Policies
Carefully describe policies about leave, vacations, and anything involving time off work for employees (including eligibility details), especially those required by law.
Generally, states do not require vacation benefits for employees, but most employers offer this benefit. If you have a set vacation accrual for your company, be sure to include it in this section. States are also increasingly requiring employers to provide a minimum number of paid sick leave days to employees, so if your business provides paid time off, or sick leave, include those details here.
Your business’ policies on family medical leave, jury duty, military leave, and time off for court cases and voting should all comply with state and local laws. In addition, explain your policies for vacation, holiday, bereavement, and sick leave. Be sure to consult with an employment attorney regarding your obligations.
If your company has 50 or more employees, you’re required to comply with the Family and Medical Leave Act. Your handbook should include an FMLA section. For more information on the FMLA, visit the Department of Labor website.
You should also consider establishing a leave of absence policy, which is a common practice for companies to consider employees’ requests for unpaid leaves of absence.
Related: What’s Your Parental Leave Policy?
7. Work Performance
In this section, detail how employee performance will be assessed and what you expect of employees for satisfactory job duties.
Companies that adhere to a performance review policy can avoid problems around handling “poor performance” terminations. If your company has a review policy, it is not necessary to include the whole policy in the handbook. Adding a simple timeline of when employees may expect a review is sufficient.
You might also want to include expectations about mutual respect, common courtesy, and consequences for insubordination.
Related: How to Conduct a Performance Review
8. Discipline Policy
Clearly communicate expectations and penalties in this section. Decide how your company will react to different levels of problems in a way that also gives employees a chance to communicate grievances. This section should spell out a progression of actions leaders can take, including speaking to employees about minor issues, written warnings for continued problems, and termination.
Include any details about what constitutes grounds for disciplinary action, and explicitly outline any procedures that will be used to communicate or carry out discipline (verbal and written warnings, probation, suspension, demotion, discharge, or removal).
If your company uses a progressive discipline system, placing that policy in a handbook can be binding. You’re guaranteeing to your employees that the company follows a set method for discipline each time. Companies could become liable for not adhering to their own policies in every situation. Progressive discipline polices can sometimes defeat the purpose of an at-will employment relationship.
When drafting this section, do not over explain the policy or include steps that you might not take every time. If you do plan to include a progressive discipline policy in your handbook, have an employment attorney review your submission.
9. Employee Health and Safety
Outline all information regarding workplace safety, security, and emergency procedures.
Many companies have separate safety and health handbooks or policies that describe the safety and health programs that must be implemented to comply with various Occupational Safety and Health Administration (OSHA) standards and regulations.
If your company must comply with certain OSHA standards, then you need separate written programs describing how you comply. Consult OSHA’s website or an attorney for additional information on safety and health programs your company may be required to have.
Include the name of your company’s accident contact and the location of safety posters or information. If you have company vehicles, include a section on accident reporting.
10. Employee Benefits
Include descriptions of employee benefits offered by your business. Outline any information about health insurance, a company retirement plan, workers’ compensation, and disability coverage.
Most companies will have separate benefit plans described in more detailed, with formal plan documents, so a detailed account of your plans and benefits is unnecessary in the handbook. Simply include a basic description of the benefits offered, the eligibility requirements, and contact information.
Be sure to include a disclaimer that in the event of any inconsistencies between your handbook or any other oral or written description of benefits and a formal plan document, the formal plan document will be official. Even with a disclaimer, it’s important to make sure your benefit plan description in the handbook aligns with your company’s formal plan documents.
Your business might be required to carry workers’ compensation insurance, and the laws vary by state. Check with your state workers’ compensation agency to determine if your business is required to carry workers’ compensation insurance.
11. Termination Policies
In this section, acknowledge that personal situations arise that will require a voluntary termination of employment. Outline that you expect an employee to provide two weeks’ advance notice in writing and that this request does not alter an employee’s at-will relationship with the company.
Clearly outline all details related to your company’s termination policies, including final paychecks (in accordance with your state’s laws), what employees have to do (like turn in all required reports, paperwork, and company property), and whether an employee is required to participate in an exit interview. Much of this information will already be outlined in the discipline policy section(s).
Include information about how all rights and privileges of employment with the company terminate upon the date of separation, that terminated employees must return all company property assigned to them, and that failure to do so may result in the withholding of their final paycheck.
Related: End-of-Employment Checklist
12. Acknowledgement of Receipt
You can’t enforce rules an employee didn’t read, so every handbook needs to include a clause, signed by the employee, stating they have received, read, and understood the handbook.
This document should come at the end of the handbook and be included in the employee’s personnel file in case there’s a disciplinary issue later. Having the signed acknowledgement of receipt prevents an employee from claiming to be unaware.
Even the most thorough small business owner might miss something, and it could be crucial. Be sure to review the five most commonly overlooked clauses.
Review with an Employment Lawyer
Remember, the guidance and participation of a good attorney is important when creating an effective employee handbook.
For more information, contact an employment attorney licensed to practice in your area. If you are unsure or unfamiliar with any part of your employee handbook, research the law, contact the proper state or federal agency, and/or consult an attorney.
Please note: This article does not provide legal advice. Employers are advised to retain counsel from a trusted attorney with experience in employment law, and all employee handbooks should be reviewed by an attorney in your state to ensure compliance with federal and state laws and regulations.