The Ultimate Guide to Creating an Employee Handbook

By Felicia Sullivan and Kelly Spors
The Hartford Small Biz Ahead | Originally published March 29, 2019; Updated May 31, 2022

So, you’ve just crossed the finish line in the hiring process and now you’re ready to welcome your new employee into your small business. There are critical steps you need to take both to onboard and retain employees. A key link between these two is your employee handbook.

Your manual not only sets the stage for your company’s culture, vision, vibe, and rules of the road, but it also establishes your intention to communicate clearly. Also, certain elements within the handbook—such as perks, compensation, benefits, and a safe work environment—are essential for the retention of employees.

We’ll explore why you need an employee handbook as a small business owner (and the heartache and dollars you’ll inevitably save), what to include, how to create one, and how to make sure your employees make it one of the first documents they read on day one.

The Purpose of an Employee Handbook

An employee handbook is the operating playbook and communication tool you and your team need to codify the rules of the road for working at your small business. A well-written handbook offers a breakdown of the standards, expectations, and processes you expect your employees to follow, while also signaling to them how you’ll manage situations that arise.

Great handbooks are documents that will excite and empower your employees, while reinforcing your culture and values. The employee handbook provides clarity and context—should any problems arise—so employees know precisely where to turn. New hires are given a copy of the employee manual with a form to sign, confirming they’ve read through it and understand its contents.

While the manual doesn’t guarantee compliance (and it’s not a formal employment contract), it does give all parties clarity on how to operate, and it can protect small business owners from legal action or even be used as evidence in an anti-discrimination lawsuit, for example.

Why You Need an Employee Handbook

Here are two staggering stats: First, according to a Gusto survey of small business owners, only 26% of small businesses with fewer than 10 employees had employee handbooks. Second, looking at the cost of possible employment litigation, according to a Court Statistics Project study, the median cost of an employment case that goes to trial is $88,000.

Consider that it only takes one lawsuit to deliver a crushing blow to your company, and the effects of litigation could go far beyond financial losses. A lawsuit can harm your business’s reputation, especially if it paints your business in a negative light and is publicized by local or national media. It also can put stress on you and your employees. You might have been able to prevent the lawsuit had you created an employee handbook.

It’s essential to have a playbook in place, because it not only articulates that all employees are treated equally and fairly, but also helps promote a positive, welcoming, productive, and safe working environment.

You may be wondering if having an employee handbook is mandatory for your business. While the Federal Department of Labor doesn’t require the actual creation of the document, you are required to inform employees of their rights in the workplace—whether that’s through visible workplace signage or a formal manual. Smart small business owners opt for both, to have all their bases covered.

You want first to review the Department of Labor’s mandatory workplace posters. and then search for any state requirements on your State Labor Office’s website.

If you operate business locations in different states, you may have to write and produce different manuals; contact your attorney for more information. For example, the Connecticut Department of Labor requirements may not be the same as the California Department of Industrial Relations requirements.

Remember, when you’re creating an employee handbook, you want to go beyond the bare minimum to also focus on policies—legal or otherwise—that have a direct impact on your small business…[MORE]

+

To read the entire article by Felicia Sullivan and Kelly Spors at The Hartford Small Biz Ahead, visit: The Ultimate Guide to Creating an Employee Handbook