A Handbook on Handbooks

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Do you really need an employee handbook for your small business? Or would an employee "handpage" be enough?

Many small-business owners wonder if documentation outlining company policies is really necessary to maintain an effective and growing company. Let's take a look at how and why small-business owners should incorporate useful written company policies into their working environment.

The topic of developing an employee handbook may sound like a daunting task requiring countless hours that many small-business owners just simply do not have. Yet employees may bombard you with repetitive questions that can be a pain to deal with: What is the company dress code? Does our insurance cover orthodontic procedures? Do we have work on Martin Luther King Day?

While dedicating time to making your answers consistent in a convenient form for all employees is one option, not all firms require employee handbooks.

Small businesses with fewer than 20 employees should feel comfortable skipping the employee handbook and simply distributing periodic policy memorandums -- employee "handpages" as I call them.

Small firms can get away with less formal HR documentation because their team members are exposed to more individual face-to-face time in company meetings. That accessibility facilitates the communication of widespread and consistent policies.

Don't, however, fall into the trap of only verbally defining key policies in meetings. One of the main reasons companies have employee handbooks is to document policies in written format. That way, no employee can ever come back to you with a "You never told me that."

When a small business acquires more than 20 employees I would recommend creating a simple handbook documenting your guidelines.

While that level of employment seems to be a good transition point, it's not always that cut and dry. Your mileage will vary. In other words, a firm with 30 employees may not need an employee handbook, whereas a firm with six employees might desperately need one.

To understand when and why you might need a full-blown employee handbook, it's important to understand the benefits of having one. If these benefits sound like something you really need, you may want to accelerate the employee handbook creation process.

Benefit No.1: Employee Motivation

Many employees are eager to know what is expected of them. Any thorough handbook will outline expected performance and the path for employees to get a promotion or raise. Listing expectations regarding sick or vacation days, dress code, and work hours, is also vital.

This will provide employees with a physical reminder of how they can live up to what the company demands and values.

Benefit No. 2: Organizational Efficiency

To avoid answering tedious questions from a new employee, it's easy to distribute the employee handbook with the needed information directly at their disposal.

As the head of an online payroll service, I recognize that for small-business owners time equals money, more money than it's worth at a larger firm in fact. If you can put yourself, your managers and other staff members to better use than answering typical new-hire questions, by all means use resources at your disposal to create an employee handbook and circumvent such expenditures.

Benefit No. 3: Improve Existing Policies

It is never a bad thing to take a step back to analyze your own goals and what you'd like to see in your company's policies. This will help leaders in your business acknowledge their own strategies for management improvement. What policies are beneficial and realistic for your small business? Once concrete tactics are developed, this will increase the effectiveness and cohesiveness of the leadership team. Decided policies will enable employers to better manage employees because position objectives, benefits and personnel procedures are all aligned.

Benefit No. 4: Prevent Disagreements

Maintaining a written agreement between an employee and employer makes it easier to enforce guidelines. Individuals will visually see that you pledge to treat everyone fairly. It will likewise make the issue of firing and discipline clear to both parties, as the handbook can serve as an important reference. Employees may find an excuse hard to come by when something is clearly spelled out in the company's policies.

Benefit No. 5: Gain Legal Protection

Courts often consider employee handbooks as an important reference in lawsuits, serving as an unstated contract between employers and the employed. If an employee raises a concern, your thoughtfully detailed handbook should immediately refute any claims against you. Make sure that both your verbal and written guidelines align, however.

Benefit No. 6: Get Higher-Caliber Job Applicants

If a company prides and promotes itself on maintaining their policies and abiding by guidelines for best practices, you are most likely going to see applicants whose career mission and goals support your own. What business owner doesn't want that?

Creating an Employee Handbook

If you've decided that you've outgrown your employee handpages and that an employee handbook is necessary, here are a few things to consider:

Legal CYA. For starters, it is extremely important that you review your handbook with an attorney specializing in employment law before presenting the final copy to employees. This will ensure you comply with state laws and help you avoid language or guidelines that may come back to haunt you in the courtroom.

Many small-business owners feel their employees are proponents of the company, not opponents looking for an easy outlet to sue. Of course I'm not saying employees should be your enemy, but simply that you need to protect yourself. Handbooks should encourage and promote growth and company ideals, but make sure your company takes the necessary legal precautions in defining your employment policies.

Cover the basics. The minimum essential topics to cover include your company's philosophy and goals, a statement of nondiscrimination and equal opportunity, pay periods, performance evaluation procedures, use of company property and standards of conduct, safety/accident guidelines, working hours, vacation/holiday policies, procedures for work absences and discipline, and clauses for termination.

Get to know the industry standards. One of the best starting points to create a handbook can be looking at what other companies in your industry use. Naturally, you must keep in mind that what works for them, may not always work for you. Take elements of their approach and tailor them to meet the demands of your organization.

Treat your handbook as a living document. It is important to continuously update your employee handbook so it is maintained as a constructive resource for your company. Remember, you always have the right to alter, add or terminate policies at your disposal. You must also state written and verbal expectations that new policies override previous policies so all employees are aware of any modifications.

Avoid fluff. Don't include unnecessary detailed policies that your employee can find in a separate resource, say, an insurance handout or retirement solutions pamphlet. Keep it simple and short, but make sure to keep away from restrictive words such as, "will," "in every case" or "must" that may hinder an employer's chance of winning lawsuits involving a certain clause.

Consistency is key. Make sure you are also consistent in promoting your handbook as the ultimate authority on company policy. If you put a certain guideline in print and then follow with another conflicting policy in print in, say, an email, a courtroom visit may just be around the corner if things get ugly.

Be explicit. Policy guidelines have to be clearly spelled out, as lawsuits often end out poorly for employers when the employee handbook consists of loosely defined policies that are subject to interpretation. Based on case law, vague stipulations in a handbook usually go in the employee's favor in the event that they sue.

Your employee policies should be as airtight as any legal contract you might prepare. Indeed, in many states, employee handbooks are viewed as contracts between the employer and employee.

The Bottom Line

If you ultimately don't want to create an employee handbook for your small business, developing some kind of written document of work policies is still a good idea. This will help bring all employees on board and ensure basic principles are discussed and enforced. A series of one-page documents works just fine for smaller organizations.

The best work environment promotes active communication. When it comes to HR communication, written employee guidelines help to guarantee that everyone is on the same page, sometimes literally.

Last updated: Aug 26, 2008

MICHAEL ALTER | Columnist | President of SurePayroll

Michael Alter is president of SurePayroll, America?s leading online payroll service. He received an MBA from the Harvard Business School and holds a bachelor's degree in economics from Northwestern University.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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