Some executives prefer to make policy decisions on the basis of personal hunches, likes and dislikes, or just plain delight in running the show. They don't want to delegate authority in hiring and firing, or rewarding and punishing employees.

But that's a risky and time-consuming way of managing personnel. Eventually every executive finds that his life would be a lot easier -- and his employees a lot happier -- if the policies he is constantly being called on to make were written down.

Any company with more than 20 employees, and some with as few as half a dozen, should issue a policy handbook. It should answer some of the most important questions employees ask -- questions about salary review, holidays, benefit programs, leaves of absence, and other critical policies that often affect morale and whose absence can create legal problems. The handbook should have two goals: It should keep all employees informed about company regulations and changing policies, and it should give supervisors the support they need when they have to enforce those regulations and policies.

Your lawyer, or a legal expert in the field of labor relations, is the best person to consult before you issue a policy statement to employees. (Remember, a policy handbook may be considered legally binding in the event of a dispute or an unfair employment practice claim.) On the following pages we've outlined some of the major items that should be included in a personnel policy handbook along with some dos and don'ts to consider when you're drafting or revising yours.

Policy item What it should say Problems to avoid

Equal opportunity State that an Don't include the

employee's religion, Affirmative Action

age, sex, national Plan, if you're

statement origin, race, or required to have

color will have nothing one, in this section.

to do with hiring, Refer instead to a

promotion, pay, separate handbook.

or benefits.

Physical Establish your Be sure your

right to conduct both decisions to conduct

pre- and post- a physical are

examinations employment physical nondiscriminatory --

exams, at i.e., don't just

company expense. examine older

people or minorities.

Probationary period Define the period Avoid a great

(usually 30, 60, or discrepancy between

90 days) during the probationary

which a new period and the

employee can be period before an

dismissed without a employee qualifies for

hearing on the group insurance.

cause; also indicate

when benefits start

to accrue.

Hiring of relatives State whether you Too strict policies

will allow a married -- e.g., requiring two

couple or close employees who

relatives to work get married to

together in the same choose which will

department. remain with the

company -- are

bad for morale.

Work hours Define the workweek Provide yourself

and time allotted with the option of

for lunch and rescheduling

breaks. Indicate individual hours of

the cut-off time for work in any given

each pay period. week at the

discretion of the


Employee status Define the nature Be specific to

of each type of avoid any chance

employee -- full time, of misconception.

part time, temporary,

and "exempt" and


Make clear

what benefits

each is eligible for.

Overtime pay Establish clearly Don't say that you

whether overtime is are bound to assign

paid for work over overtime on the

40 hours a week basis of seniority.

or over 8 hours in

a given day, and

how much is paid

for work on a holiday.

Make it clear

that pay for

overtime must be

approved by a


Pay reduction for The usual policy Using too large a

is to go by the clock, unit, such as a quarter

i.e., to dock an of an hour,

lateness employee's pay in may cause problems.

units of six minutes It may be illegal

or tenths of an to dock an

hour. employee's pay by

that much if he or

she is only a few

minutes late.

Severance pay Determine this on Unless state law

the basis of seniority, requires it, you don't

e.g., a week's have to pay for

pay for less than accrued vacation

three years tenure, time.

two weeks for up

to six years, etc.

Exclude employees

who are released

for "cause." You

may also exclude

those who leave


Performance Review wages either This policy is essential

on the anniversary -- some employees

of would rather

review and merit employment or quit than ask for a

during a set annual raise. Don't commit

or semiannual yourself to


increases period. increases

unless required by

a union contract.

Make all raises

based on merit.

Time clock or sign-in Rules should prohibit You must keep

employees from some sort of record of

recording hours worked by

systems another's time, "nonexempt" employees.

causing another Early sign-ins

employee to record or late sign-outs

for him or her, or will make you

failing to record his liable for overtime

or her time. They pay in case of a

should also forbid conflict or dispute.

signing in too soon

or out too late

without authorization.

Emergency shutdowns Consider whether Don't lock yourself

you will pay some in too tightly, but

minimum "call-in" be sure you treat

wage in case you everyone the same.

have to close down If you pay the

because of bad regular wage to

weather, a power those who don't

failure, or some other show up, those who

unforeseen do come in

problem. What should be paid more.

advance notice will

you provide, if

possible, in the event

of such a shutdown?

Group insurance State coverage Don't be too specific,

generally and briefly, but simply refer

indicating what to the separate

benefits portion of premium booklet the insurance

costs the company company provides.

pays for, how

long a new employee

has to wait for

coverage, and

mentioning the

conversion privilege.

Holidays List all holidays, Leave some room

and state how long to reschedule a

an employee has holiday depending

to work to qualify on business

for a paid holiday. conditions. You

Also indicate that don't have to pay

employees have overtime in a week

the right to take with a holiday

religious holidays unless more than 40

without pay. What hours are worked.

happens if the

holiday occurs during

an employee's vacation?

What pay is

given for work on

a holiday?

Vacations Policies should Don't let vacation

conform with local scheduling supersede

practices (consult the needs of

Bureau of Labor any individual

Statistics surveys department. Check

and other published state laws regarding

information). How payment of accrued

does a new employee vacation time at

qualify for severance.

vacation? May a

person choose to

work instead of

taking a vacation?

May one take off

more than two

weeks at a time?

As little as a day

at a time? Are

permanent part-timers

given any

vacation? Will

accrued vacation

pay be given at

severance? Will a

person on leave of

absence accrue

vacation time?

Personal time/sick Six to ten days per The advantage of

year is the typical calling it "personal

number allowed. time" rather than

leave Give employees the "sick leave" is that

option of employees will

accumulating a take sick leave

reasonable number without giving

of days (20 or 30) advance notice.

for the future, or Require "proof of

create a payback illness" if you pay

system for those for time off only in

who don't abuse the case of illness.

the privilege. Don't let personal

time accrue during

an extended

leave of absence.

Disability leave of Federal law requires You do not have to

leave time for have a leave policy

disability due to at all if you

absence pregnancy to be don't want it, but

equal to that allowed some states have laws

for disabilities requiring a

that affect only minimum leave time

males. You must set for pregnant women.

some reasonable

time limit during

which you will

guarantee job

protection for a

disabled worker. A

60 to 90 day period

is typical. You may

require pregnant

women to sign

statements of intent

to return to work

provided you

require male workers

disabled for other

reasons to do

the same. You may

also reserve the right

to require a

physical examination by

a company-appointed


if required of both

males and females.

Military leave of Required under Employees may not

federal law for be compelled to use

National Guard or up vacation

absence Reserve service. or personal time

during military leave,

and the job must

be held open for the

employee. He or

she must not be

discriminated against

in pay, promotion,

or job


Personal leave of If you decide to Smaller firms may

grant such leaves, want to omit this

you may want to item, and play it by

absence specify that they ear. If you plan to

may not exceed 30 grant only

(or 60) days, and discretionary leaves,


that they may not the item.

be taken to look

for or perform

another job, or to

start another


Jury service Required by law, Don't require that

and some local employees sign

statutes also require over to the company

you to pay all or the checks they

a portion of wages. receive from the

Depending on court for serving on a

local laws, you may jury. This may

want to set limits cause tax problems.

on how many Just pay them the

days of jury duty difference between

you will pay for, the amount of

and set a qualifying the check and the

period of employment pay they would

before you will have received.

pay for jury


Bereavement pay Employees expect Absence of a policy

the company to of some sort is

be very lenient in bad for morale, but

this matter. Typical it's important to

policy allows three be consistent in

to five workdays granting this benefit.

off with pay in the

event of a death

in the immediate


Pension or profit- Mention that you Don't go into great

have a plan, when detail; refer instead

and how the to a separate

sharing plans employee becomes description of

qualified for it, the plan.

whether an

employee contribution

is permitted or

required, and

when an employee

becomes vested.

Suggestion system State that the Small firms should

company encourages avoid a formal

employees to system. Committing

submit ideas and yourself to a specific

suggestions to system of reward

improve operations for ideas is also

and reduce costs, unwise.

and that an employee

who submits

ideas is considered

to be a highly

conscientious one.

Suggestions should

be addressed in

writing to a

member of top

management, not the



Tuition assistance Set a length of A good policy because

tenure requirement it substantiates

before the your desire to

assistance is provide equal

available. Require advancement

proof of course opportunities, but


completion and commit yourself

consider awarding a to paying all costs

larger percentage or fees.

of costs for a

high grade.

Bulletin boards State that this is Though you may

an official means of think this item

communication unimportant, the

with employees, and bulletin board is

that only authorized looked upon legally

people may as an official

put up, take down, "business practice"

or alter items on for keeping

the board. employees informed.

Don't let items on

the board get

outdated; otherwise

people will stop

reading the


Confidentiality Make employees Certain government

aware that they are representatives

not to divulge (OSHA, EEOC)

company or are privileged to

customer information speak privately with

to outsiders, employees, with

including the media advance notice to

and government employers.


without approval

from management.

Causes for Some industries, Legally, a list is

most often those deemed to be

employing unskilled complete, and

once it's

discipline or semiskilled published, anything

workers, believe that not on the list

a list of shop rules would not be

is essential. These considered legally

must be as limiting on the

comprehensive as employee. So don't

possible. commit yourself to

publishing a list

unless you feel you

must, and don't

make any violation

of a rule an

absolute cause for

dismissal -- or you

may have to fire

a good employee

for a one-time

infringement of the

rules. Be sure rules

are nondiscriminatory.

Discussing There should be Don't have an

some basis for appeal "open door" policy

in the event an allowing employees

complaints and employee feels a to bypass

supervisor's policies supervisors. Encourage

are unjust. All them to talk things

grievances union contracts over with

cover this procedure. supervisors first.

Solicitation or If you don't want Don't impose this

employees selling rule after a union

merchandise or has won the right

distribution of circulating petitions to an election.

during working

hours, specify that

literature you will not allow

the distribution of

any literature,

petitions, or surveys

or the sale of any


raffle tickets, etc.

Additional Reporting Hiring of Athletic Change of

items for absence ex-felons, activities address,

handicapped phone, etc.

your Annual bonus Retirement Bonding of

employee employees

handbook Purchase of Wages during First aid Role of the

company a transfer personnel

merchandise dept.

Fines and Preemployment Polygraph


credit examinations


Dress code Accepting Attending

gifts seminars/


Safety rules Annual party Confidentiality Conflict of

or outing agreement interest

Aptitude and Use of Repayment Access to

ability tests company of loans personnel

equipment file

Service Good Expense Proof of

awards housekeeping reimbursement citizenship

Relocation Rehiring Referring Security

expense former applicants checks


Outside Use of Coffee Overtime

employment telephones breaks pay for


Exit How pay Parking Bond

interviews is computed lot rules purchases

Noncompetition Employee Fire drills Check

agreement gift fund cashing