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Viewpoint
Published in the Rochester Business Journal
February 20, 2004
© 2004 HR Works, Inc.

Employee handbooks for small firms: How formal must they be?
By Candace Walters

For many entrepreneurs and owners of very small businesses, the decision to take on employees represents an exciting step. While a firm that employs only the owner and his or her family members may get along without formal human resource policies, that status changes when others are hired.

At what point in its growth should a very small firm create an employee handbook containing written company policies? And what types of policies should a small-business handbook address?

Why every company needs an employee handbook

Even the smallest companies have policies, whether or not they are written. Many small employers postpone developing a handbook, preferring to write and distribute memos to explain and enforce policies and practices as situations arise. But given the potential liability linked to unclear or incomplete policies or inconsistent enforcement, memos are not enough.

A well-written employee handbook that's distributed to all employees is a vital tool for clarifying employee expectations and ensuring consistency in the workplace. While minimizing legal liability is a crucial objective, it's only part of the case for developing formal employment policies. A sound employee handbook benefits a company by:

• Saving valuable management time regarding personnel decisions. Every company faces recurring situations such as employee absences due to illness, bereavement and bad weather. Lacking written policies, managers can waste a lot of time deciding how to handle these cases
• Providing consistency and assisting supervisors. Interpreting vague policies, especially regarding progressive discipline, is time-consuming and difficult, not to mention legally treacherous. Supervisors armed with clear, written guidelines and training in executing them are better able to make consistent, unemotional decisions that will hold up if challenged later.
• Clarifying employee expectations. The employer-employee relationship has the greatest chance of succeeding when all parties understand their roles and responsibilities. Every handbook should include basic information about work hours; vacation and holiday policies; sick and personal days; overtime pay; dress rules; causes for disciplinary action; and other matters.
• Communicating benefits. Companies spend huge sums of money each year on benefits, including statutory benefits such as New York State short-term disability insurance and workers compensation. An employee handbook is an ideal venue for communicating these programs and reminding employees of their value.
• Fulfilling legal requirements A handbook can be used to fulfill legally required communications with employees including Section 195.5 of the New York State labor law, which states that "every employer shall notify his employees in writing or by publicly posting the employer's policy on sick leave, vacation, personal leave, holidays and hours."
• Enhancing the company's image To a new employee undergoing orientation, a well-written handbook conveys the company's proactive, professional image. For all employees, the handbook reinforces that the business is a success-minded venture that draws on industry best practices.
• Communicating company values, culture and history What small firms often lack in tangible resources they may make up for in passion and commitment. The employee handbook is an ideal opportunity for the founding leader to bond with employees by sharing his or her personal vision and drive for the business.

The contents of a good employee handbook - and errors to avoid

Every handbook should include specific policies regarding:

• Employment at will
• Non-discrimination
• Non-harassment, including policies forbidding sexual, verbal and physical harassment
• Individuals with disabilities
• Code of ethics
• Employment classifications - exempt or non-exempt, temporary, full-time or part-time issues
• Working hours
• Pay practices
• Attendance
• Summaries of each benefit, including eligibility requirements
• Statutory benefits, including mandatory health-insurance continuation, short-term disability insurance, and workers compensation
• Leaves of absence - for disability, military or personal reasons
• Performance appraisals
• Standards of conduct or discipline and termination
• Alcohol and drugs
• Professional attire
• Personal phone calls
• Outside employment
• Use of electronic communication, including voicemail, e-mail, computer files, Internet and cellular phones
• Safety and building security
• Workplace violence

While employers can get into trouble in many ways with poorly drafted handbooks, some common errors involve:

• Using terminology such "permanent employee" and "probationary periods."
• Limiting the company to termination "for cause."
• Failing to emphasize that employment is "at will."
• Failing to address accrual issues with vacation and sick policies.
• Communicating pay practices that violate wage and hour regulations.
• Failing to have the handbook reviewed and kept current by an employment-law attorney.

Creating a handbook -- the right way

A business owner trying to draft a handbook may spin his or her wheels for a couple of years. Some companies borrow another firm's handbook and cut and paste. Others buy a software package that requires a lot of work but fails to address state laws or circumstances unique to the company. Not only do these approaches waste the owner's time, but they also are unlikely to result in a sound, effective document.

Preparing an employee handbook is not a job for the inexperienced, nor is it a creative writing project. Even someone who has worked in a human resource function may not be well-versed in the latest laws, court rulings and best practices - all of which are essential for writing a handbook that will support the employer's goals and will hold up legally if challenged. An effective handbook preparer will be an expert in these areas, and will have the resources to update the document as needed to reflect changes in the law and in company policies.

The process of developing a handbook is also a process of developing policies - a vital task with which small-business owners often need help. An expert handbook preparer, with experience in a variety of industries, can advise the employer on policies appropriate to the company's size, location and industry.

Conclusion

Once a small firm makes the decision to take on employees, developing a well-written handbook containing company policies should follow. While some small employers will continue to squeak by with oral policies, a hodgepodge of memos and on-the-fly enforcement, trends toward increasing legal challenges suggest that such a casual approach to these sensitive areas is risky.

Make no mistake: The scope and long-term impact of an employee handbook call for very serious consideration by every employer, no matter how small. But that doesn't mean the company founder is the right person to draft this critical document. Engaging the services of a handbook professional will not only speed up the project but will bring a vital level of expertise and legal accuracy.

Candace Walters is president and CEO of HR Works, Inc., an HR management outsourcing and consulting firm serving more than 600 clients in the Rochester, Buffalo, Syracuse and Baltimore/Washington areas. HR Works provides HR Department outsourcing, part-time and interim HR managers, affirmative action plans, HR*Stars recruitment services, legally reviewed employee handbooks and supervisor manuals, compensation programs, training and more. To offer comments, write walters@hrworks-inc.com

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