How to Create an Effective Employee Handbook

Adapted from content excerpted from the American Express® OPEN Small Business Network

As a small business owner, you can help keep yourself out of legal hot water by clearly spelling out on paper what you expect of the people who work for you. For the most part, you do not need to create a separate employment agreement for each employee on your staff. An employee handbook that details your company’s policies should suffice.

A successful employee handbook helps cut down on misunderstandings. Your staff will be clear on what your corporate policies are, and they will have a place to go to have their basic questions answered. More importantly, it can keep you from facing an expensive lawsuit should someone charge that your policies are unfair or discriminatory.

The tips below will help you create a document that will serve your company well.

What to include

Your employee handbook should clearly state your company’s policies. Among the areas it should cover:

  • general working hours
  • company rules and regulations (dress code; how people interact with customers; safety regulations; etc.)
  • how vacation time is earned
  • paid holidays and personal days
  • sick leave
  • salary and performance reviews
  • overtime/comp time policy
  • health and medical benefits
  • pension plan and other fringe benefits
  • maternity policy
  • any other rules or regulations

Be clear and concise, and most importantly consistent

The purpose of your employee handbook is to communicate your company’s policies to your employees. It is essential that it is written clearly and directly, so there is no chance for confusion. It should detail your specific human resources policies. The fact is, many lawsuits occur because companies don’t have documentable, consistent policies and therefore open up the door to charges of discrimination (genuine or not). Your handbook should rectify this.

Explain your right to terminate an employee

Part of your handbook should cover the fact that employment with your company is “at will.” This means that your company has the right to terminate the relationship with the employee at any time without cause, and your employee has the right to leave at any time. The purpose of this “at will” statement is to override an employee’s claim that you may have made an oral promise of job security. Again, this can protect you from possible legal action.

It doesn’t have to be fancy

You might think of an employee handbook as this big, thick printed manual. But many small businesses can easily make do with something much simpler — even a one- or two-page fact sheet that’s produced on your computer. It’s not the look of your handbook that’s important. It’s what’s inside that counts.

Write it yourself, but have your attorney review it

You can save on legal fees by writing your employee handbook yourself instead of turning the whole project over to your attorney. But be sure to have your attorney review it and fine-tune it if necessary. It is important that your policies are in accordance with federal, state and local laws.

Be sure to have your employees sign for it

Just handing out your employee manual won’t do. When you give your new employee your company handbook or fact sheet, be sure to have him or her sign for it. This form should state that the employee received the handbook and understands your company’s policies. Give a copy of this receipt to the employee, and place another in the employee’s file. This will help protect you from possible claims that a person was fired for rules he/she did not know about. Your attorney can help you draft this form.

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