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How to Write an Employee Handbook (For Your Small Business)

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This post is part of a series called The Complete Small Business Human Resources (HR) Guide.
How to Build a Culture of Diversity and Inclusion in Your Workplace
How to Offer Competitive Small Business Pay & Benefits

Does your small business need an employee handbook?

To many business owners, an employee handbook may sound like the kind of bureaucratic red tape that only large corporations need to worry about. And some may not know what it is or even have thought about it. But, in fact, once you start employing more than a handful of employees, a handbook can be very valuable.

In this tutorial, you’ll learn how to write an employee handbook. Discover exactly what an employee handbook is, why your small business may need one, and what should go in it. We’ll also look at some useful templates and examples to help get you started making your own small business employee handbook.

Are you ready to write your small business employee handbook
Are you ready to write your small business employee handbook? (Photo source)

1. What Is an Employee Handbook?

An employee handbook, also sometimes called an employee manual or a policies and procedures manual, is a document that tells your staff members what to expect when they work for you.

Although it often deals with practical details like vacation time, benefits, disciplinary procedures and so on, it can also be a great place to introduce your employees to the company in other ways. You can explain your company’s values and the kind of workplace you have in it. You can let employees know who they can contact if they have questions or problems. There’s a lot more you can cover, too—we’ll go into more detail about the contents later in the tutorial.

There’s no set format for writing an employee handbook. This is your document, and you can choose how you want to communicate with your employees—in fact, the tone and format you use can themselves communicate something about your company’s values. The handbook can be playful or formal, contemporary or traditional, graphic-laden or text-heavy. We’ll look at some examples and templates later in the tutorial as well, so you can see how other companies have handled it.

Traditionally, it was a printed book, and many companies still use that format. But you can also make it available in digital form, perhaps accessible on a company intranet or shared file server. That’s particularly useful if your employees often travel or work remotely—then they can access it from anywhere.

The basic purpose of an employee handbook is to set expectations. It lets your employees know what kinds of benefits and support they can expect from you, and also what standards or work and behavior you expect from them in return. It provides clarity on both sides.

When you’re just starting out and only have one or two members of staff, you may not need an employee handbook yet—informal communication may work just fine at that scale. But as you start to expand, you’ll really start to see the benefits of having that clear documentation in place. We’ll look at some of those benefits in the next section.

2. The Benefits of Having an Employee Handbook

If you’re not convinced about the need for a manual or handbook in your business, read this section to discover some of the benefits.

Create Better Workplace Policies

The main point of an employee handbook is to document everything a staff member needs to know to do their job. But sometimes, the very act of documenting all this stuff will help you to come up with better ways of doing things.

You might be writing up the section on attendance policies, for example, when you realize that for some job functions, it may not matter if someone arrives late, as long as they get the work done (while for others, clocking on at a particular time may be very important). So you come up with a more flexible formula than the one you were using before.

Help New Employees Get Up to Speed

You probably know what it’s like to start a new job. So many new faces, an unfamiliar office, different processes and jargon from the ones you’ve been used to at your old job. And you usually have a thousand questions to ask, and you feel bad about asking them because everyone around seems so busy with their own work.

A well-written employee handbook is perfect for helping new employees find their feet more quickly. While they may not read the whole book cover to cover, they can use it as a quick reference to get lots of their questions answered easily.

Avoid Constant Questions Over Policies

If you don’t have an employee handbook, expect constant questions—not just from new employees, but also from existing ones. How many vacation days do we get? Which national holidays do we get paid for? What are the rules on conflicts of interest or working in other places?

There are plenty of things in the workplace that can cause confusion, and you may end up spending a lot of time fielding the same questions—or, worse, having employees following the wrong policies because they didn’t ask.

Have Everything in One Place

Sometimes, companies do have their policies documented, but in a fragmented way. Some things are recorded on the intranet, but in different places, while others were only communicated by email. Whenever employees need to look something up, they have to embark on an elaborate treasure hunt.

This can be irritating to your staff, and it’s clearly not an efficient way of working. An employee handbook gathers everything together into one place, so that it’s quick and easy to find information.

Communicate Your Values

While it’s easy to get bogged down in the nitty gritty of policies and procedures, an employee handbook is also your chance to tell your company’s story and get your employees aligned around its values. Why does your company exist? What are you all working towards? What’s your position on things like diversity and social responsibility? This can be a great way to get your employees motivated and energized and to make sure everyone’s on the same page about the firm’s values.  

Avoid Lawsuits

I mentioned in the first section that the basic purpose of the employee handbook is to set clear expectations on both sides. That clarity can also give you legal protection.

For example, let’s say that you have to fire one of your employees for poor attendance or for harassing a colleague. The employee could try to sue you for unfair dismissal, claiming that it was never made clear to them that those things were grounds for being fired. If you’ve set out those policies in your handbook and documented the fact that all employees are given copies of it, then you have a stronger defense.

3. What to Include in an Employee Handbook

As I mentioned earlier, there’s no required format for how to write an employee handbook, but there are some common sections that many companies and small businesses include. In this section, we’ll look at those sections and what you may want to include. But keep in mind that you can always add to this or customize the document to cover what’s important for your business.

Important note: In some jurisdictions, there are labor laws that stipulate particular things you have to include in employee handbooks. Envato Tuts+ has a worldwide audience, so we can’t cover all the local variations here. Be sure to research local regulations that may apply. It’s also a good idea to have an employee handbook reviewed by a lawyer so that you can be sure you’re complying with all the relevant laws and not making yourself vulnerable to future litigation.

OK, now let’s look at the common sections to include in an small business employee handbook.

Company Overview

Employee handbooks often start with a general introduction and overview of the company. You could include a brief history of the business, a timeline of key events, and a statement of important values and goals.

Safety Policies

Your employees spend a lot of their time at work, and their safety is the most important thing. This section tells people what to do in the event of an emergency or accident at work, how to access first aid, fire safety procedures, and so on.

Diversity and Equality Statement

This is your opportunity to show your commitment to equal opportunity in the workplace and to state that you won’t tolerate discrimination or harassment based on age, race, religion, sex or sexual orientation, disability, etc. 

You can also give more details on what constitutes discrimination and harassment, so that people are clear on what’s being covered, and give employees a procedure they can follow if they believe they are being harassed or discriminated against in the workplace. For more on diversity, see our series on diversity in the workplace.

Pay and Benefits

Give the details of when and how employees can expect to be paid, how tax and other deductions will be taken out, and whether they’ll be eligible for overtime (if some employees do get paid overtime and others don’t, or if some are full-time and others part-time, make those classifications very clear). You can also include details of other types of compensation such as bonuses and stock options if applicable.

Then detail any company benefits you offer, such as health insurance, pensions, and so on. You can also include details of paid leave policies here, such as parental leave, sick leave, vacation pay, and so on. For more information on benefits, see the previous tutorial in this series:

Code of Conduct

What standards do you expect from your employees? This is where you can specify everything from a dress code to the expected level of attendance and punctuality. You could also deal with things like use of the internet and social media, if you want to place restrictions on that.

It’s up to you, though, how much detail you go into. Some companies prefer not to provide a punitive-sounding list of rules here, instead giving general guidelines and leaving employees to use their discretion. You’ll see some examples later on. There may still be some things that you need to be strict and clear about with your small business employee handbook, however, such as the need to keep company and client data confidential.

Discipline and Termination

Give employees a clear idea of what constitutes grounds for disciplinary action and what kind of action will be taken. Also let them know what they can do if they feel they’ve been treated unfairly. Then you can set out the policy of what happens in the event of termination.

Keep in mind that any disciplinary procedures you lay out in this section may be binding, so be careful about committing yourself to anything you don’t want to follow in every single case. For example, if you state in the handbook that you give a series of verbal and written warnings for disciplinary issues, you may get in trouble if you later fire an employee without having given all those warnings.

Acknowledgement of Receipt

It’s important to document the fact that each employee was given a copy of the handbook. So have every employee sign an acknowledgement of receipt of the handbook—this is usually included at the end of the book, for the employee to sign and detach, so that you can keep the copy in his or her personnel file. In case there’s any dispute later, this stops people from claiming they weren’t aware of the policies.

Legal Notices

When you have a lawyer review your employee handbook, they may advise you to include extra wording, stating, for example, that the handbook is a guide, not a contract, and that future employment is not guaranteed. The wording will depend on where you’re based and your particular situation, so be sure to get individual legal advice.

4. Employee Handbook Templates and Examples

Although an employee handbook is an individual document for each company that you’ll probably want to draft yourself, it can certainly help to start with a template to work from. So in this section, I'll link to some useful resources for employee handbook templates. We’ll also look at some real-life examples. These can help you with writing your own small business or employee handbook.

Employee Handbook Templates

There are quite a few websites where you can find employee handbook templates. For example, Human Resource Solutions in the UK provides a free employee handbook template on its website. The document is 40 pages long and quite detailed, so it would be a good starting point for creating your own document.

Or, for something more personalized, try this web-based tool provided by Rocket Lawyer. Instead of providing a template, it lets you build your own document online by providing information about your company and the policies you want to include. You need to sign up for a free trial of Rocket Lawyer membership in order to access the final result.

There are plenty more templates and document builders out there. Try FitSmallBusiness, for example, or FormSwift. Just keep in mind that some of the templates you’ll find online are tailored to the rules in particular countries, so you may need to change them and/or get legal advice if you’re based elsewhere.

Also remember that the more personalization you can do, the better. Use the templates as starting points, not finished products. As you’ll see in a moment, a truly personal handbook can be a very effective way of communicating with your employees. 

Real-Life Employee Handbook Examples

Now let’s look at some real handbooks from real companies. First, take a look at the Rock Spring Farm employee handbook, provided courtesy of Practical Farmers of Iowa. It’s a simple small business handbook that explains a bit about the company and then goes through many of the sections we’ve just discussed. It’s just 12 pages long and quite readable, and there are also some nice personal touches—check out the “Team Secrets” page at the end.

Some companies also choose to take things a bit further. This article by Nasdaq lists some cool examples to take as inspiration.

For example, video-game developer Valve Corporation's handbook has the best subtitle ever:

“A fearless adventure in knowing what to do when no one’s there telling you what to do”

It then goes on, in a wonderfully conversational tone, to walk you through what it’s like to work at Valve. There are some policies and procedures in here, but it really doesn’t feel as if you’re reading a policy document. It feels as if you’re getting a friendly introduction to a place that would be fun to work at.

Image from the Valve Corporation employee handbook
Valve Corporation employee handbook.

Financial website The Motley Fool, on the other hand, goes for an interactive, web-based “Fool’s Rules”, a sort of slideshow in which you can view videos, click for more information in certain areas, and so on. Again, it does cover some of the same ground as a traditional handbook, but in a more creative way, with a heavy emphasis on company values.

Screenshot from the Motley Fool online employee handbook
Motley Fool online employee handbook.

Get Started Writing Your Own Employee Handbook

In this tutorial, you’ve learned all about small business employee handbooks. You’ve seen what they are and the benefits of having them. You’ve learned about some common types of information that companies include in their employee handbooks. And you’ve seen some great examples of real-life employee handbooks, as well as some templates you can use to help you create your own.

You’re now in great shape to start writing an employee handbook for your own business. If you found this tutorial helpful, you should also check out some of the others from this series, in which we’re covering small business HR functions in depth. In the last tutorial, we looked at pay and benefits, and in the next one, we’re tackling training and development. 

Sign up to our Tuts+ Business newsletter using the form in the sidebar, and you’ll hear about future installments in this series as well as more new business articles weekly.

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