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The Crucial Role of Employee Handbooks in Small Businesses

In the dynamic landscape of small businesses, where every decision can make a significant impact, the importance of a well-crafted employee handbook cannot be overstated. It serves as the cornerstone of communication between employers and employees, and it has the ability to have a significant impact on your organization. Small business owners who prioritize the development of handbooks are laying the groundwork for long-term success and employee satisfaction.

Why are employee handbooks necessary?

Employee handbooks, sometimes called policy books, do three main things for your organization. They:

  1. Create a level playing field around team members’ expectations. It provides a clear and consistent reference point for company policies and procedures, so they’re not open to interpretation. This clarity is essential in fostering a positive work environment, reducing misunderstandings, and promoting fair treatment.
  2. Provide legal protection. By clearly outlining policies related to workplace conduct, discrimination, harassment, and other legal matters, you create a foundation for compliance and protect your business from potential legal disputes.
  3. Set the tone for your company’s culture. An employee handbook is an opportunity to articulate your company’s values and culture. This alignment fosters a sense of belonging and contributes to a more engaged and motivated workforce.

How do I create an employee handbook?

A good place to start is the Internet. There are many resources available, like employee handbook examples and online templates. You can also utilize AI. If you want to outsource it, there are local vendors who can help you write it, or you can hire an attorney. The handbook can be a physical document or a folder on a shared intranet. It just has to be accessible to all.

What should be included in an employee handbook?

What your handbook looks like is up to you. Every company is different. When you’re writing your handbook, keep it clear and concise, and make sure it reflects your individual company and industry. Consider engaging other leaders in your company as well. Solicit feedback and insights from multiple people to ensure it fully reflects your workplace.

In general, here is what I recommend including in your employee handbook:

  1. An introduction to your company, its mission, values, and culture. It can be written as a letter to feel more personal. This is one of the first documents that new employees read. How do you want to welcome them?
  2. Employment policies and procedures, including work hours, what defines part time, FMLA, breaks, remote work, dress code, paid time off, and so on. Be sure to research your state’s legal policies or consult an attorney to ensure compliance with state and federal laws.
  3. Codes of conduct/ethics, such as anti-harassment, anti-discrimination, diversity, equity, and inclusion (DEI) policies, confidentiality, social media, IT security, and alcohol/drug use policies. Defining acceptable and unacceptable behavior in the workplace is key to maintaining a respectful and inclusive environment.
  4. Health and safety policies, including how to report incidents or unsafe conditions, location of first aid, when to stay home if you’re sick, etc. These will vary greatly depending on the industry.
  5. Compensation and benefits. Outline who is eligible to receive benefits and bonuses, and summarize the benefits package for full time employees.

What’s comes next?

After you’ve finished your handbook, it’s a good idea to have an attorney review it to make sure all your bases are covered. Then comes one of the most important steps:

Request that every employee read it and submit written acknowledgement of their understanding and agreement. Either with a hand-written or digital signature, this important document needs to be saved and kept in their employee file.

An employee handbook is a living document. It is very important for you to review your company policies and update your handbook annually. Businesses grow and change. Industries and laws change. We mature and change as people and organizations. Think about what is and is not working for your company and employees. Are any of your policies outdated? Once a year, take a good look at your handbook and make sure that it still accurately reflects your business.

The creation of a well-crafted employee handbook is an investment that pays off in numerous ways. It not only provides a roadmap for smooth operations; it helps shape your culture, shape the respect that employees are expected to show each other and the relationships that they foster, and it protects you as an employer. Develop your handbook with care, and watch it become an invaluable asset in your journey toward a thriving business.


Originally published in  Small Business Monthly's March issue of 2024 by Julie Tuggle-Nguyen, EVP of Human Resources