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Handbook is Critical to Business: Why Do You Need an Employee Handbook?

No business
is too small to have an Employee Handbook. If you have employees – regardless of the number – you should set up rules and policies for guidance. When your organization is small is actually a good time to establish this guide because it will serve you well as your staff size increases. An established Employee Handbook provides a baseline for governing and a gauge that you can set measurement (and therefore quality standards) by. The handbook also gives your employees parameters or boundaries to abide by and helps them to understand what you expect of them.

One of the most uncomfortable and unprofessional situations to experience is working a company that does not standardize the way it operates. Basically, it is just asking for trouble to have no ground rules to follow. Without the rules you’re just sort of making it up as you go. When there are written guidelines, no one can dispute decisions – whether they are positive (promotions/accolades) or negative (probation/dismissal). It makes things simple because they are plainly stated and available for everyone’s reference.

An Employee Handbook helps you avoid:

  • Detrimental business interruptions, such as favoritism and discrimination, are non-issues.
  • Failure to appropriately respond to crisis situations is eliminated.
  • Confusion about required benefits is cleared up.
  • Unclear holiday or vacation policies are defined.
  • Employee frustration over unclear guidance and expectations.

Creating an Employee Handbook simplifies running your business.

The Small Business Association ( is a tremendous resource for you as a small business as you try to put the best pieces of your business puzzle together.  Almost every general business component that you can think of is covered there. It is vital to review information from such resources to ensure that you are covered in the way you operate, handle hiring and employees, wages, taxes, benefits and customers and in the way your finances and organization structure is defined.

An Employee Handbook is the piece of the puzzle that we’re covering today, but explore the SBA’s site. You’re sure to learn or confirm lots of important business details!

Purpose of Your Employee Handbook

Your Employee Handbook is the most important communication tool between you and your employees. A well-written handbook establishes your expectations for your employees, and describes what they can expect from your company. An employee handbook should describe your legal obligations as an employer, and your employees’ rights.

Components of Your Handbook

The most effective employee handbooks cover:

Non-Disclosure Agreements (NDAs) and Conflict of Interest Statements

Although NDAs are not legally required, having employees sign NDAs and conflict of interest statements helps to protect your trade secrets and company proprietary information.

Anti-Discrimination Policies

As an employer you must comply with the equal employment opportunity laws prohibiting discrimination and harassment, including the Americans with Disabilities Act. Your employee handbook should include a section about these laws, and how your employees are expected to comply.

The Employment Discrimination and Harassment guide provides information on your legal requirements as an employer.


You should clearly explain to your employees that your company will make necessary deductions for federal and state taxes, as well as voluntary deductions for the company’s benefits programs. In addition, you should outline your company’s legal obligations regarding overtime pay, pay schedules, performance reviews and salary increases, time keeping, breaks and bonus compensation.

The following SBA resource pages provide information on your legal requirements as an employer:

• Wage & Hour Laws

Employment Taxes

Workers’ Compensation

Work Schedules

Within the handbook, describe your company’s policies regarding work hours and schedules, attendance, punctuality and reporting absences, along with guidelines for flexible schedules and telecommuting, if offered.

Standards of Conduct

Make sure you document your expectations of how you want employees to conduct themselves in your workplace, from dress code to ethics. In addition, it is important to remind your employees of their legal obligations, especially if your business is engaged in a regulated activity (for example, your company’s legal obligations to protect customer data or to avoid insider-trading activity).

General Employment Information

Your employee handbook should include an a overview of your business and general employment policies covering employment eligibility, job classifications, employee referrals, employee records, job postings, probationary periods, termination and resignation procedures, transfers and relocation, and union information, if applicable.

The following resources provide information on your legal requirements as an employer:

Employment & Labor Laws

• Foreign Workers, Immigration & Employee Eligibility

Performing Pre-Employment Background Checks

Terminating Employees


Safety and Security

This section should describe your company’s policy for creating a safe and secure workplace, including compliance with the Occupational Safety and Health Administration’s laws that require employees to report all accidents, injuries, potential safety hazards, safety suggestions and health and safety related issues to management.

Safety policies should also include your company’s policy regarding bad weather and hazardous community conditions.

Finally, add your commitment to creating a secure work environment, and your employee’s responsibility for abiding by all physical and information security policies, such as locking file cabinets or computers when they aren’t in use.

The Workplace Safety & Health guide provides information on your legal requirements as an employer.

Computers and Technology

Computers and communication technology are essential tools for conducting business. However employee misuse can have serious consequences for your company. Therefore, your employee handbook should outline policies for appropriate computer and software use, and steps employees should take to secure electronic information, especially any personal identifiable information you collect from your customers.

Visit the Information Security page related to privacy for more information on your legal requirements as a business owner.

Media Relations

It’s a good business practice to have a single point of contact for all media inquiries, such as yourself or a public relations professional. You don’t want your employees to bring unwanted attention to your company by speaking about your business in ways that could easily be misrepresented in the media. Your employee handbook should include a section that discusses how your employees should handle calls from reporters or other media inquiries.

Employee Benefits

In your handbook, detail benefit programs and eligibility requirements, including all benefits that may be required by law such as disability insurance, Worker’s Compensation Insurance and COBRA (Consolidated Omnibus Budget Reconciliation Act).

The employee benefits section should also outline your optional plans for health insurance options, retirement, employee assistance, tuition reimbursement, business travel, and any other fringe benefits your business provides to attract and retain employees.

The Providing Employee Benefits guide provides information on your legal requirements as an employer.

Leave Policies

Your company’s leave policies should be carefully documented, especially those you are required to provide by law. Family medical leave, jury duty, military leave, and time off for court cases and voting should all be documented to comply with state and local laws. In addition, you should explain your policies for vacation, holiday, bereavement and sick leave.

Create an Employee Handbook the Easy Way

To save you time and help you avoid the process of creating a handbook from scratch, SBA offers a free employee handbook template in conjunction with This basic Employee Handbook Template covers the topics listed above and can be customized using your company’s specific policies.

Please examine more Employee Handbook information at the SBA site’s section on the topic.

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