Crafting an effective employee handbook: A guide for small business owners

Do your employees understand the rules of the road?

As a small business owner, it’s always helpful to have your staff on the same page regarding company policies and procedures. This can ensure that your team members know what you expect of them and what they can expect from you. When these expectations are well-communicated in advance, you can avoid misunderstandings, which could include legal liability.

The best way to codify business policies and expectations is to create an employee handbook that documents your company’s procedures, policies, and expectations. Keep reading to learn how to write an employee handbook, and snag our free template to help you get started.

What should be included in an employee handbook

A great employee handbook should not only effectively outline company policies but should also make the experience of using the handbook as easy and engaging as possible for the employee. If heavy blocks of text or disorganization make reading or understanding the handbook difficult, employees may set your handbook aside unread. 

To make your handbook as digestible as possible, here are some employee handbook guidelines: 

• Use a table of contents to make navigating to important information easy
• Break up text-heavy sections with designed elements 
• Use language that’s easy to understand and accessible 
• Clearly state legal requirements in your area 
• Ask for employee feedback and be open to improvements  

To make sure you cover all the necessary information, here’s what you should include in an employee handbook.

Introduction to the company

Begin by offering a welcome message and introducing your company to employees. You should also mention your company’s mission statement and any company values. 

Your mission statement describes where you’re headed as a company. If your staff understands your mission statement, they may feel a stronger bond with your company and be more passionate about the work. Company values can help you create and establish a strong company culture. 

In your introduction, include legal information on employment, such as an equal opportunity statement and an at-will employment statement. 

Employment classification

The Fair Labor Standards Act (FLSA) guarantees employees certain rights, like overtime, depending on their classification status. Outline what classifies an employee as full-time, part-time, or contracted, and what benefits you’ll offer at each classification status. 

Policies and procedures

The handbook is your opportunity to set expectations, and you should include all relevant policies. For example, what’s your policy regarding cell phone use during work hours? Where should employees take their lunch break? State all policies in writing.

In addition to policies unique to your company, be sure to include policies on basic employee rights and privileges, such as:  

• Americans with Disabilities Act (ADA): Employers with 15 or more employees are required to abide by the ADA. Under this law, you must provide reasonable accommodations to employees with a disability, such as reserved parking, interpreters, and workplace accessibility. 
• Sexual harassment: Sexual harassment laws are federally protected by Title VII of the Civil Rights Act of 1964, which makes it illegal for employers to allow sexual harassment in the workplace. So, if your company is aware of any sexual harassment, you are legally accountable to put an end to it. 
• Attendance: Maintaining a streamlined workplace depends largely on employee attendance. In your attendance policy, set expectations around working hours, tardiness, and how you will handle absences. 
• Employee code of conduct: Include all details around how you expect employees to conduct themselves in the workplace. This includes information like dress code, cell phone policies, social media usage by encouraging employees to be respectful, equipment usage, and internet usage. 
• Overtime: Under the Fair Labor Standards Act (FLSA), you must pay overtime to all nonexempt employees who work over 40 hours in a workweek. Overtime must be at least one and a half times their regular pay. 
• Timekeeping: Include information on whether employees have to clock in and out of work and how they should do so. Even if your employees are salaried, you may still want to track employee time through apps or other software to track billable work.
• Paydays: Your payday policy section should include all information on how you will pay employees. This includes the business’ payroll schedule, offered pay advances, pay deductions, salary vs. hourly policies, and travel or business expense policies. 

Clearly outlining the policies and regulations ensures employees know what you expect from them and their rights as an employee at your business. 

Benefits and compensation

The handbook should also explain your employee benefits, which can be a powerful incentive to retain workers over time. Don’t forget to include benefits such as the following: 

• Observed holidays: If your company offers any holiday pay, this is a great benefit to mention in your employee handbook. Keeping all paid holidays in a central location makes it easy for employees to find this information when they need it. 
• Time off: If your company offers additional time off, don’t forget to mention that. This can include policies around sick days, paid time off, and sabbaticals.  
• Leave: Outline your company policies around leaves of absence, such as bereavement, disability, jury duty, and maternity. If your company has 50 or more employees, you may be legally required to offer a leave of absence under the Family and Medical Leave Act (FMLA). 
• Health and life insurance: Offer general information about health and life insurance policies. This includes what plans you offer employees, who qualifies, and which provider plans are offered through. 
• Retirement or pension plans: Be sure to note any retirement or pension plans offered to employees and what qualifications they must meet to participate. If your company offers a 401(k) match, include what percentage you will match. 

You can also include any additional benefits you offer employees, such as reimbursement budgets, app subscriptions, travel stipends, or more. Include any stipulations around using these benefits, like saving receipts or maintaining a certain number of work hours. 

Workplace policies and safety

Worker safety is a top priority, so make sure your handbook contains a section on safety explaining how your firm will deal with an employee injury, a crime (such as robbery), or a natural disaster (such as flood or fire). Each of these events is stressful, and your workers should understand how your company would address these issues.

If your company uses any personal protective equipment, outline any standards around using it. For example, restaurant owners may want to include information about knife safety by using chain mail gloves. 

Don’t forget to look up any laws that may apply to you set forth by the Occupational Safety and Health Administration (OSHA). OSHA maintains standards to guarantee workplace safety, which vary across industries. For example, one OSHA requirement states salons must maintain updated Material Safety Data Sheets (MSDS) for every product used. 

Delineate policies that address all issues in creating a safe and secure work environment. Ensure you are in compliance with laws set forth by the Occupational Safety and Health Administration.

Communication and technology usage

Communication and technology policies will vary from workplace to workplace, but most should have several components. Set expectations for how employees should interact online and what content they can view at work, such as prohibiting visiting websites with questionable content. 

You should also address the area of social media, such as forbidding posting personal company information on sites like Twitter and Facebook. Encourage proper cell phone etiquette, including turning the devices off during meetings and minimizing their use while on the job. 

Performance and professional conduct

In this section, clearly outline what work you expect from employees. This includes job duties, promotions, and terminations. Clearly outlining job expectations not only helps employees meet productivity standards but can also provide them with a road map for promotions or other growth opportunities. You can also note whether you’ll have employee performance reviews and outline when they’ll take place. 

If your company maintains grounds for termination based on poor performance, including that information here is especially important. While you don’t need to explain the entire review process, let employees know how long it usually takes and where they can find more information. 

Summary and acknowledgment

At the end of your employee handbook, include a summary and acknowledgment page. Once signed and returned, this page will become a record that your employee read and understood the information outlined in your handbook. 

It’s important to keep a record of this signed document in your employee records. This way, if a disciplinary issue arises, you have proof that your employee agreed to workplace standards in your handbook. 

How to write an employee handbook

When starting out, writing your employee handbook may feel like an overwhelming process. Handbooks are often dozens of pages long and steeped in legal ramifications. To make the process more manageable, break it down into simple steps. 

Here’s how to create an employee handbook from start to finish.

1. Review company policies and procedures

Before writing your handbook, ensure you have the most up-to-date information. Review your company policies and procedures to ensure no recent changes affect your writing and creation process.  

Most business owners create company policies as they run the business. You may, for example, have a process workers use to request time off. You’ve emailed a memo that explains the policy, but the information is not in a formal employee handbook. As a result, you’re not starting the writing process at zero because you’ve already created some policies.

2. Outline the handbook’s content

Once you’ve reviewed your policies and procedures, create an outline of everything you will include in your employee handbook. This includes any federal, state, or local requirements. Outlining your handbook first ensures you won’t miss any important information that can delay your process later on. 

For example, a restaurant owner must manage many workers and deal with employee turnover, so the employee handbook can focus on hiring and termination policies.

3. Write clear and concise content

After you outline the handbook and start writing, use clear and simple language. Avoid jargon so your staff can understand your policies and provide links to more complex topics, such as laws and regulations. While a clearly written handbook will reduce questions, encourage your employees to ask if a policy is unclear to them. 

4. Review the handbook

Send your handbook through an internal editing process to ensure your company voice and tone are present and consistent. Check for any errors or typos that can make your handbook look unprofessional.  

5. Ensure accuracy and compliance

Your handbook must address a variety of employment and legal policies, including overtime pay, workplace harassment policies, and other issues. An employment attorney should review your manual to ensure you’re in compliance with federal, state, and local laws and regulations.

6. Format and design

Once your internal team and an attorney review your text, you can send your copy to be formatted and designed. This helps ensure your handbook is readable and allows you the chance to include company branding elements.  

7. Publish and distribute

Many companies publish and distribute their employee handbooks electronically. While this is a great option to keep costs low, you should make physical copies of the handbook available to employees upon request.

8. Keep it up-to-date

Your employee handbook is only useful if it remains current. Should any company policies change, update your handbook to stay consistent. It’s also a good idea to recheck federal, state and local laws yearly to ensure your handbook is always legally sound. 

Need help starting your own handbook? Our employee handbook template outlines important sections to consider and provides advice on how to fill in the blanks with your company’s info. Whether you need to know how to write an employee handbook for a small business or enterprise-size operation, this template can help you get started.

Benefits of creating an employee handbook

Creating an employee handbook can be time-consuming—and you may think it’s not necessary. However, operating your business with a handbook can bring many benefits.

Here are some of the benefits you’ll gain by writing an employee handbook:

• Vision and mission: Your handbook should include your firm’s mission statement, and if your team understands your mission statement, they may feel a stronger bond with your company, and be more passionate about the work.
• Supervision: The handbook makes employee supervision more transparent because the handbook explains the rights and responsibilities of both the worker and the employer. Everyone in the organization can refer to the handbook to make informed decisions about workplace behavior.
• Productivity: If you discuss the employee handbook with each new hire, you’ll speed up the onboarding process and help new employees to work productively. When you provide clear guidelines using a handbook, your new employees will start work with more confidence.
• Discipline: Many business owners dread confronting an employee who makes a serious mistake. Disciplining a worker is stressful, but implementing the procedures stated in the manual will make the process less difficult for both parties.
• Legal compliance: Operating with an employee handbook may reduce your legal liability. If you consistently follow the policies and procedures stated in the manual, each employee will be managed using the same set of rules. This can reduce your legal exposure if a worker takes legal action against you. 

The handbook should also explain the benefits you offer employees, which can be a powerful incentive to retain workers over time. A handbook helps your business comply with federal, state, and local laws and should provide a confidential system that workers can access if they believe a policy or law has been violated.

Keeping your employees happy and productive

Creating your employee handbook is an important step toward running a successful business. Not only will your handbook reduce your potential legal liability, but it will also make it easier to manage your staff and stay organized. 

Your handbook serves as a road map for employees. It should tell them how to meet current job expectations and provide information about growing within the company. Commit to create your employee handbook sooner rather than later.

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