How to Assemble an Employee Handbook

The case against threats Similarly, resist repeatedly reminding employees of the punishment they face for each infraction, which is a strategy employers often use to avoid paying unemployment benefits to a fired worker. "I consider a handbook a good-news document," says J. Reed Roesler, a Peoria-based employment lawyer. "You don't want to be reading about losing your job on Day One." Besides, as Galbreath points out, few employers confront the worst-case scenarios they write rules for – and when they do, the conduct tends to be so egregious that an explicit rule isn't necessary. Aim to lay out the discipline procedure in general terms; for guidelines, see "Detailing Discipline."

4. Explain the Benefits

State and federal laws require you to provide certain benefits. If you have 50 or more employees, for instance, you must comply with the federal Family and Medical Leave Act. You'll also have to allow for jury duty and workers' comp leave. Many states demand other leaves, such as for military service.

Voluntary benefits These, of course, depend on the state of the labor market and the sort of corporate culture you aim to create. Besides insurance and retirement accounts, these can include employee assistance programs (wellness programs, say, or substance abuse or other counseling) and family and bereavement leaves.

Marking time off More companies are abandoning separate vacation and sick leave policies for combined "paid time off," to discourage employees from taking unused sick days at the end of the year, notes HR consultant Jan Petersen of Employer Success in Reno, Nevada.

5. Put the Onus on Your Staff

Every company should require employees to acknowledge with a signed document that they have received and read the handbook, and that they will seek clarification about any unclear aspect. Some acknowledgements go further and seek written authorization for other legal protection measures, like annual credit checks or drug testing. "It can be a great opportunity to reduce your liability," says Galbreath.

Detailing Discipline

• The Common Mistake Many companies make the mistake of putting a formal "progressive discipline" policy in writing: A first infraction gets a verbal warning; the next one gets a written warning; the next, perhaps a brief suspension; and only then termination. The problem is that codifying that process "can obligate you to do things that you don't always want to do," says Fred Holloway, an HR consultant in Medford, Oregon. You might want to cut a trusted, longstanding employee some slack even after a flagrant infraction, for example, or immediately fire an underperformer for a relatively minor one. And formal progressive discipline policies can undercut your "at-will" status in the eyes of a court.

• The Better Option Instead, Galbreath suggests writing a policy that focuses on encouraging positive behaviors and avoids threats. Begin by articulating the expectation that employees will practice self-discipline and meet performance goals. Then explain that, in the unlikely event that an employee fails to meet those standards, the organization will provide the coaching, counseling, and, in some cases, discipline necessary to assist the employee. This sort of language, says Galbreath, "tells employees that your goal is to help them succeed, not fire them." As always, the tradeoff for this flexibility is a potentially weaker defense in the courtroom when you are contesting discrimination or wrongful termination suits. Your feel for your corporate culture will determine whether it's a tradeoff worth making.

Steal This Manual?

Commissioning an employee handbook can be expensive.

The consultants we spoke to charge $1,000 to $5,000 and up. No surprise that many entrepreneurs undertake the effort on their own. But be warned: Many start with the employee handbook of another company and substitute their own name--and end up adhering to laws that, say, wouldn't ordinarily apply to small businesses.

You can find software or downloadable forms to create your own employee manual, often for $100 to $200 (see "Resources," below). If you go this route, be prepared to rewrite. A good manual "reflects the intent and spirit of the owner," says Casey Willson, a Maryland-based retail and restaurant consultant. "When you get into boilerplate, it becomes a protective device rather than an enabling device."

And though you will definitely want an employment lawyer to review your handiwork, don't hire one to write the handbook for you. "It's like having an electrical engineer change a light switch for you," says Galbreath. "This is a practical document, not a legal document."