The Small Business Guide to Creating an Employee Handbook

Are companies required to have an employee handbook?

While employers are not necessarily required by law to have an employee handbook, they are required to create and enforce certain policies with regard to their employees. Depending on where your company does business, individual states may require additional policies.

Employee handbooks are essential for small companies as they provide you with an excellent way to compile and distribute required employee policies. That said, a handbook should be more than a compilation of policies created to satisfy a legal requirement.

Creating an employee handbook allows your company to clearly communicate expectations and outline how it will respond to workplace situations. Instead of sharing policies separately, compiling them in one accessible document helps ensure both employees and management understand their rights and responsibilities.

How Employee Handbooks Protect Employers

For a small company, an employee handbook is a proactive tool for protecting your business from legal risks and operational disruptions. And creating an employee handbook helps you to establish a legally sound, structured work environment that fosters accountability and professionalism. Here’s how:

• Prevents miscommunication: A clear, written record of company policies helps avoid misunderstandings about expectations, procedures, and benefits.
• Minimizes legal liability: If workplace conflicts arise, a well-documented handbook can serve as a first line of defense in disputes involving wrongful termination, harassment claims, or regulatory compliance.
• Supports consistency: Handbooks ensure policies are applied uniformly for all employees, reducing the risk of bias or unfair treatment claims.
• Defines workplace culture: A handbook is an opportunity to reinforce your company’s mission, values, and professional standards, ensuring alignment between leadership and employees.

How Employee Handbooks Protect Employees

While an employee handbook benefits employers, it also plays a crucial role in protecting employees – giving them a better understanding of company policies and empowering them to navigate responsibilities and workplace challenges with confidence. In addition, an employee handbook benefits your workers by:

• Providing workplace guidelines: Employees gain clarity on their rights, responsibilities, and company policies regarding leave, benefits, and job expectations.
• Outlining reporting procedures: Employees know how to report workplace issues, including harassment, discrimination, or unsafe working conditions, in a structured and confidential manner.
• Ensuring fair treatment: A standardized approach to disciplinary action prevents arbitrary enforcement and ensures all employees are treated equally.

What to Include in Your Employee Handbook

Understanding how to create an employee handbook starts with outlining mandatory policies, company culture, expectations, and operational procedures. A clear, well-organized handbook reduces confusion and builds trust across your organization.

Below are core sections to include in your employee handbook:

1. Legal and Compliance Policies

This section ensures your business adheres to required employment laws and provides legal protection by informing employees of their rights and obligations. It may include these policies:

• Equal Employment Opportunity (EEO) anti-discrimination and harassment policies
• Family and Medical Leave Act (FMLA) and disability accommodation policies
• Workplace safety and Occupational Safety and Health Administration (OSHA) compliance
• At-will employment statement (if applicable)

2. Workplace Conduct and Expectations

These policies set a standard for professional behavior by outlining how employees should interact, communicate, and conduct themselves at work. They may include:

• Code of conduct, including ethical standards and anti-bullying policies
• Social media and confidentiality guidelines
• Attendance, punctuality, and working hours expectations
• Alcohol and drug policies

3. Compensation and Benefits

This section of your handbook explains how employees are paid, what benefits they receive, and how your benefits program works. This information helps to promote transparency across the organization and may include:

• Payroll procedures and pay schedule
• Paid time off (PTO), vacation, and sick leave policies
• Employee performance evaluations and promotions
• Retirement plans, health insurance, and additional perks

4. Company Culture and Values

This section introduces your company’s mission and identity, helping employees to connect with the purpose and direction of the business. It may include:

• Company mission statement and core values
• Business ethics and corporate responsibility initiatives
• Workplace diversity and inclusion policies

5. Health and Safety Policies

This section clearly communicates your commitment to the well-being of your employees by outlining safety procedures and guidelines for your workplace. You can also include safety policies tailored to specific roles based on job scope and risk exposure. Policies you may include:

• Emergency response procedures
• Workplace injury reporting protocols
• Communicable disease policies (if applicable)

6. Complaint Resolution and Reporting

In this section, outline and explain how employees can report concerns and how they’ll be addressed. Detailing the information below encourages open communication and accountability throughout the company.

• Step-by-step process for filing grievances
• Confidentiality and non-retaliation assurances
• Whistleblower protection policies

Best Practices for Creating an Employee Handbook

Even with the right content, how your handbook is written, presented, and maintained can impact its effectiveness. To create an employee handbook that works for your organization and is a useful resource for your employees, follow these best practices:

• Keep it simple and accessible: Use clear, concise language and avoid complex legal and technical jargon. If a portion of your workforce speaks another language, consider providing translations.
• Include a legal disclaimer: While your handbook should outline company policies, avoid framing it as a contract. Include a disclaimer at the beginning of the handbook stating that it’s a reference document, not a legally binding agreement.
• Update your handbook regularly: Employment laws and workplace policies are constantly evolving, so it’s essential to review and revise your handbook consistently – ideally annually. Clearly communicate to employees that the handbook is a “living” document that will be continuously updated and include a disclaimer noting that current policies supersede any previous versions to avoid confusion and ensure compliance.
• Require employee acknowledgment: Have employees provide their signature to acknowledge that they have received the handbook and understand it is their responsibility to review it and become familiar with it. This protects your business in case of disputes.

How to Keep Your Employee Handbook Updated

Your employee handbook should grow with your business. As policies, laws, and internal processes change, updating your handbook is essential to maintaining accuracy and compliance. Below are best practices for keeping your handbook relevant and legally sound:

• Monitor legal changes: Review updates to federal, state, and local employment laws regularly to incorporate necessary revisions.
• Adjust for organizational changes: If your company introduces new benefits, restructures departments, or shifts to a remote or hybrid work model, be sure to update the relevant sections. This includes small procedural changes, like how PTO is requested.
• Communicate updates to employees: Notify employees of changes and make updated copies of the policy available either via email, on paper, or on the company intranet.
• Store copies for legal reference: Maintain archived versions of past handbooks in case of legal disputes or audits that require proof of historical policies. Be sure to track when changes were made and which version was in effect during specific time periods.