Creating an employee handbook for your business

Your business can enhance communication with its employees, help ensure compliance with the law, and possibly even avoid legal problems, by creating an employee handbook.

by Edward A. Haman, Esq.
updated February 09, 2023 ·  4min read

An employee handbook can be a useful tool to let employees know the benefits of working for your company and what is expected of them, as well as protecting your business from lawsuits and other claims relating to employees.

A book whose cover reads "Employee Handbook" sitting on a table surrounded by office supplies

Purpose of an employee handbook

The more people a business employs, the more challenges there are in communicating with its employees. A well-written employee handbook can help with this communication by ensuring that necessary comprehensive information is given to all employees in a consistent manner.

An employee handbook can outline employee benefits, let workers know what is expected of them, and facilitate better communication with managers. It also demonstrates the company's desire for good relations with its employees and provides a source for employees to quickly get answers if questions arise.

Employers and the law

One important part of running a business with employees is being aware of laws that relate to being an employer. For example, you will need to comply with laws regarding such things as tax withholding, workers compensation, unemployment compensation, minimum wage, overtime pay, nondiscrimination, sexual harassment, and accommodating employees with disabilities. State or federal law also may require that employees be given leave for such things as jury duty, court appearances, voting, and military service.

There are numerous federal and state laws that may affect the employer-employee relationship. Their applicability to your company may depend upon such factors as the nature of your business activities, and the number of employees you have. For example, the federal Family and Medical Leave Act (FMLA) applies to companies with at least 50 employees.

Such laws may require that legal notices be placed in conspicuous places in the workplace, in which case it is not necessary to duplicate the information in the employee handbook. However, you may wish to do so in order to provide your employees with a single place to look for all necessary employment information.

Employee contracts

In addition to an employee handbook, you also may want to enter into a formal employee agreement with some, or all, of your employees. This may be necessary if you wish to have the employee legally bound to confidentiality, nondisclosure, noncompete, and ownership of intellectual property requirements.

Some companies use a single, comprehensive employee agreement. Other business may use separate employment, confidentiality, nondisclosure, and noncompete agreements.

Contents of an employee handbook

Employee handbooks vary in length, design, and detail. However, essentials for an employee handbook include statements that:

  • The employee handbook does not constitute an employment contract.
  • Employment is "at-will," and that either the employer or the employee may terminate the employment at any time, with or without notice or reason.
  • Your company is an equal opportunity employer, and has a policy against unlawful discrimination and harassment in the workplace.
  • The terms of any employment contract or specific benefit plan document will control in the event of any discrepancy with the handbook.
  • Changes may be made to the handbook at any time, with or without notice to the employee.

Other subjects commonly covered in employee handbooks include:

  • A general statement of the company's mission, values, and philosophy
  • Company work hours, days of operation, and paid holidays
  • Policies and procedures for evaluating employee work performance, such as annual performance reviews and improvement plans
  • Policies regarding vacation time, as well as leave—with or without pay—for such things as illness, bereavement, and other personal time
  • Permissible and impermissible use of company property
  • Confidentiality requirements
  • Policies regarding employment outside of the company
  • Grievance policies and procedures
  • Dress code
  • Prohibition of alcohol or drug use in the workplace
  • Social media use and content guidelines
  • Notices about special legal and ethical concerns related to government regulation of your business
  • Disciplinary policies and procedures, which may include what specific actions may be taken for specific policy violations and for repeated violations
  • A list of employee benefits, although benefit details are usually set out in the particular benefit plan documents

Any of these, or other, subjects can be covered comprehensively in the handbook, or can be summarized in the handbook and covered in more detail in a separate document. For example, the handbook may simply indicate that the employee will have an annual performance review, with the criteria and procedures for review being contained in the particular employee's employment contract or in some other document.

It is also standard practice to have the employee sign an employee handbook acknowledgement form at the time a copy of the handbook is given to the employee. This will prevent the employee from later claiming they were not aware of the handbook, in the event disciplinary action becomes necessary.

Disadvantages of an employee handbook

There is always the risk that a court may determine that the employee handbook is binding, and penalize the company for not following the policies and procedures outlined in the handbook.

For example, a court might decide that you were wrong to fire an employee if the handbook says that a written warming is the result of a first-time violation. Especially if a detailed and progressive employee discipline policy is to be described, it would be wise to have an attorney review your handbook.

Creating, and periodically modifying, an employee handbook can be a time-consuming process. Such time and effort may not be practical for a small company with only a few employees. However, creating an employee handbook can be an important part of your company's plan to hire and retain good employees. Even if you only have a few employees now, a basic employee handbook can be created, and then expanded as your workforce grows.

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Edward A. Haman, Esq.

About the Author

Edward A. Haman, Esq.

Edward A. Haman is a freelance writer, who is the author of numerous self-help legal books. He has practiced law in Hawa… Read more

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.