Employee manuals, policy and procedure manuals, employee handbooks -- whatever you want to call them -- are often considered a necessary evil by both employees and employers. They typically generate consternation from employees, especially if they are not clear, well-written, and specific to the business and if they focus mostly on negativity -- in other words list, only what not to do. Employers, meanwhile, typically look at these manuals in terms of how to cover their…assets…in the event of any potential lawsuits.

There is, however, a better way.

Experts say that small and mid-sized businesses can craft employee manuals that both protect them from litigation and put staff members at ease by spelling out in positive terms the company's policies. In order to have an effective policy manual, the employer should take the time to identify what is important to the business, both in keeping the employees informed and happy, as well as accomplishing the business objectives of the company. "It can serve as a playbook and spell out the rules of the game for employees about what is expected of them," says Nancy Cooper, chair of the labor and employment group of Garvey Schubert Barer, a law firm based in Portland, Oregon.

"The value is that employees can understand what is expected of them and what they can expect from the company," adds Paul Rowson, managing director at World at Work, a global human resources association that focuses on compensation, benefits, work-life, and integrated total rewards. "This includes how pay decisions are arrived at, how they are rated on their performance, how the company treats things like sick leave and other benefits, how the company views work-life programs and how they will be treated in a dispute." Having all those issues spelled out in a handbook can free up an employee to do their best work, he adds, without worries that an employer will treat them unfairly.

But the devil is in the details, as they say. The success of an employee handbook hinges on what you include and how you word policies. The first rule for writing a winning playbook is that it must be written in a clear, understandable manner, and reflect the culture of the business. Certain policies need to be in the handbook by law. This means that you should take the time to learn about local and state requirements, as well as federal requirements, Cooper says. Other policies should be in the handbook to protect the employer. "No matter the reason behind the policies, all should be enforced in a consistent manner," she adds.


The following guide will outline what you must include by law, clauses that legal experts say every employee handbook should include, and then other optional provisions you may want to include in an employee handbook to make it work for you and your employees.

What to Include In an Employee Handbook: Handbook Provisions Required by Law

Before getting down to writing an employee handbook, business leaders need to understand what they need to include by law. That may also determine how you decide to set up the employee handbook.

The first step is to become familiar with federal, state, and local employment laws that you must abide by -- some are even required to be posted in the company employee handbook. The U.S. Department of Labor spells out information for employers about federal laws that impact workplace issues on its website at www.dol.gov. If your business operates in more than one state, you may have legal reasons for writing different handbooks for employees in each state. "Each state has unique employment laws," Cooper says. "Many of the laws on the state level say that you have to have it in the handbook."

Other issues may also impact how you approach the employee handbook. For example, if you have different business units, such as a manufacturing facility and a sales and research facility, you may want to have the core handbook be the same for each group of employees but you may want to include specific policies for specific business units, such as if one business unit has a union or hourly-paid employees, Cooper says.

After determining how you will approach the employee handbook, you need to determine which policies you need to include by law. Some companies offer software or templates that can be a good start to step you through the process. But policies may vary from state to state. If you are unsure which policies are required by law, you should check with human resources organizations or your employment attorney. Many state labor departments also have listings on their websites for employers about laws they must abide by when doing business in the state and these can be helpful in determining what to include in an employee handbook.

The policies you need to include in an employee handbook by law may include the following:

  • Family medical leave policies. The federal government's Family Medical Leave Act requires that employers of certain size must provide employees with up to 12 weeks unpaid leave during any 12-month period for the birth or care of a child, to care for an immediate family member with a serious health condition, or if the employee has a serious health condition. Many states have their own policies regarding unpaid family leave, as well. 
  • Equal employment and non-discrimination policies. The U.S. Department of Labor requires many businesses to post information stating that the business follows non-discrimination and equal employment opportunity laws in hiring and promotion. 
  • Worker's compensation policies. Many states require that employees be informed of worker's compensation policies in writing.

Among other laws that might require inclusion in employee handbooks are policies regarding accommodation of disabilities, policies on military leave, policies on breast-feeding accommodation, and crime victims leave policies.

Dig Deeper: How to Assemble an Employee Handbook

What to Include In an Employee Handbook: Clauses Every Employee Handbook Should Include

There are a few general disclaimers that every employee handbook should have. 

  • Not a contract. It's important to point out that the handbook is just that -- a handbook -- and does not make any promises about continued employment. Cooper recommends the following wording: "This handbook is not a contract, express or implied, nor does it guarantee employment for any specific length of time. Although we hope our employment relationship will be long term, either the Company or you can end the relationship at any time, with or without notice, with or without reason, to the extent allowed by law."
  • Handbook trumps previous policy documents. The handbook should make clear that it is the ultimate word on company policies. Cooper suggests you use the following language: "This Employee Handbook supersedes and replaces all previous policies and procedures including, but not limited to, all memoranda or written policies which may have been issued on the subjects covered in this handbook." 
  • The policies in the handbook may be subject to change. It's important to leave a little wiggle room because times change, new issues come up, and you may need to make revisions. This is how Cooper suggests you word this provision: "The policies included in this handbook are guidelines only and are subject to change as the Company deems appropriate and necessary. From time to time you may receive notice of new or modified policies, procedures, benefits, or programs." 
  • Employee acknowledgement page. In order to protect your business, and verify that your employees are aware that your company abides by these laws, it is important to include an acknowledgment page that the employee signs and returns. The acknowledgement should state that the employee understands it is their responsibility to read and follow the policies. "You want to have the acknowledgement page detachable from the handbook," Cooper says. "Once it is signed, it needs to go in the employee's personnel file." 

Dig Deeper: Tools: Acknowledgement of an Employee Handbook Receipt

What to Include in an Employee Handbook

Before you write your employee handbook, you also should take the time to determine what is important to you as a business. Do you care about how your employees appear when they are at work? Do you want them to refrain from text messaging while on the job? Do you care if they blog about the company? If the issue is important to you, and you have expectations for employees' behavior, you should address it in a policy.

"Important issues can be things like the employee's ability to use cell phones at work or while driving; dealing with the appropriate way (or inappropriate way) that employees discuss the employer in chat rooms or on blogs after hours; or even the ability of the employer to address issues created by the ways the employees use their computers, e-mail, and voice mail," Cooper says. "One of the most important things to remember is that your handbook needs to reflect the way you do business. If you write a policy, be prepared to enforce the policy -- whether it is a policy setting limits or a policy supporting goals. You need to have your handbook be a true reflection of your business."

You also need to decide what tone you want your handbook to take. Many handbooks are written from the negative "shall not" perspective. Some of the most effective manuals, however, are those written from a positive perspective. "Sure employees need to know what kind of behavior will cause problems, such as excessive absences, but the policy doesn't have to be written focusing on the punishment," Cooper says.

Here is a guideline for what sections you may want to include in an employee handbook:

1. Company History. While not required, a brief section discussing the company's history and its mission can help set the tone for an employee handbook. Rowson says this section can include discussions of a company mission statement, what is its reason for being, who are its customers, what is its position in the marketplace, etc. "You might talk about the founder to get a sense of the company history or culture," Rowson says. "You might add a discussion about the leadership team so that people feel as though they know who they're ultimately working for." Cooper cautions not to make any promises in this section, such as promising to pay employees the top dollar in your field, which might be hard to sustain if the company falls on economic hard times.

2. Paid Time-Off Policy. This section spells out the company's vacation policy, such as how vacation time is earned, and how to schedule time off. It should also spell out which holidays the company observes, including which holidays the company closes for and, if the company is a restaurant or other business that stays open on holidays, how employees will be compensated for working the holiday. You may also want to address sick leave, family medical leave, and other types of leave, such as military spousal leave.

3. Employee Behavior. Under this heading, you can discuss the attendance policy, meal breaks and rest periods, and general expectations of employee conduct. This can include stating a policy against employee harassment discrimination, bans on smoking, a substance abuse policy, how employees may use the Internet or e-mail, and a dress code -- if you have the latter. You may want to address how employees should handle conflict resolution. Make this section very general in nature. "Don't get into too much detail," Cooper says. "It's human nature to want a laundry list of all the acceptable things but it's human nature that you're going to forget something too."

4. Pay and Promotions. Spell out your methods of payment and let employees know whether they will be paid every week or every two weeks or whatever. This is where you state your overtime policy, define work hours, and discuss your pay grade structure so that people know where they fit in the hierarchy, Rowson says. "The last thing you want to do when you hire someone is to surprise them about when their paycheck is going to arrive," Rowson says. "You want to let people know how often they will get paid and how they will get paid, do you offer direct deposit, and how many pay periods there are in a year." You can also talk about what types of compensation packages you offer, including whether employees are eligible for bonuses or stock options and how the performance appraisal process works. Cooper cautions that if you spell out a company policy for advancement that you need to remember that the company and its managers all need to buy into that policy. "That's where most companies make mistakes," she says. "They promise too much and they don't follow their own policies."

5. Benefits. In this section, provide employees with a general overview of the benefits you offer in terms of health care, dental, vision, life insurance, etc., but don't discuss specific policies with specific companies. "Your benefits may change frequently -- probably more often than the handbook does," Cooper points out. Do talk about who is eligible, whether only full-time employees or if part-time employees are offered a pro-rated benefits package, address that, as well. List the criteria for eligibility, when you can enroll in benefits, and what the critical life events are during which you can change benefits -- such as a marriage or birth of a child.

After all the information is assembled into an employee handbook, make sure to vet the document before distributing it to employees. If at all possible, an attorney should be involved in preparing the handbook. "If an employer is trying to save money," Cooper says, "the minimum they should do is have it reviewed by an attorney once it's put together." That review, she adds, just might help your business avoid future lawsuits involving employee behavior that is -- or is not -- defined in the employee handbook.

Dig Deeper: Do You Need a Social Media Policy?

What to Include In an Employee Handbook: Recommended Links

The Society for Human Resource Management
SHRM is the world's largest association devoted to human resource management, representing more than 250,000 members in more than 140 countries.

The U.S. Department of Labor
Guides to federal labor laws on the department of labor website can help you make sure you're covering the basics in your employee handbook.

Small Business Handbook
The Department of Labor's Occupational Safety and Health Administration's handbook for small businesses can help employers provide a safe and healthful workplace for their employees.

Free Model Handbook
Smallbusinessnotes.com offers a free model handbook. The Alexander Hamilton Institute's Complete Policy Handbook ($100) is a CD-ROM with editable policies with state-by-state guidelines. And Policies Now is a deluxe program (hrtools.com; $199) that uses a Q&A wizard to help you customize a manual

World at Work
This global human resources association focuses on compensation, benefits, work-life, and integrated total rewards to help organizations attract, motivate, and retain a talented workforce.


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