Employee Handbook Ultimate Guide (+ Free Template)

An employee handbook is a reference document that helps employees learn about key company policies like general employment information, dress codes, and work schedules. It also covers employee rules and expected behaviors.

For business owners, maintaining an up-to-date employee handbook ensures that employees always have access to accurate company-wide information regardless of their manager or department. Likewise, a comprehensive handbook can help supervisors manage employees more consistently.

To begin creating your employee handbook, download our employee handbook sample.

What to Include in Your Employee Handbook

There are several sections that business owners should include in their employee handbooks. For example, ensure the handbook addresses corporate culture and general employment information.

When drafting an employee handbook, consider including these sections:

• Introduction to company and values: Start your employee handbook by introducing your company’s mission statement, explaining why it was founded and how it came to be.
• Touch on company culture: Company culture is an expression of a business’s personality and atmosphere. Use the employee handbook to describe the leadership style, mission, values, and other elements of the company’s identity.
• Confidential information: Explain to employees that they may be privy to confidential information and that the information disclosed to them should be kept confidential.
• Anti-discrimination policy: This portion of an employee handbook helps you comply with federal labor laws that aim to prevent discrimination in the workplace. Use a portion of your company’s employee handbook to outline relevant federal anti-discrimination policies and any additional requirements imposed by state law.
• Compensation: An employee handbook is an excellent place to detail how the company pays employees, how frequently, and on what day(s) of the month. You should also include any required deductions that will come out of the employee’s paycheck.
• General employment information: This section should clearly define a company’s probationary period (where applicable) and what steps an employee must take if they want to quit. Use this section to detail the concept of at-will employment as well. If your company hires at-will employees, you or the employee can terminate the employment relationship at any time and for any reason.
• Computer and technology policy: Use your employee handbook to spell out your rights as an employer to view and access electronic documents and company electronics like computers. This is also a good place to establish a policy for updating passwords, provide tips for keeping passwords secure, and clarify your cell phone usage policy.
• Leave policies: Let employees know what your paid time off, sick leave, parental leave, and other leave policies are and when they apply. This is also a good place to list company holidays and define the jury duty policy.
• Progressive discipline policy: This section allows business owners to clearly outline the steps to take when addressing employee issues, following the company’s progressive discipline policy. It should also clearly identify prohibited behaviors and include a reminder that at-will employment remains in effect, regardless of the discipline policy.

If you’re looking for guidance on handling employee discipline positively and constructively, our tips on employee discipline can offer helpful advice for your small business.

• Signature: The signature section of an employee handbook verifies that the employee received a copy of the document, read it, and understood it. This step makes the employee take it more seriously and may help as a defense in the event of a wrongful termination lawsuit.

Depending on the nature of your business, it may also make sense to include some or all of the following sections:

• Attendance policies
• Expense reimbursement procedures
• Alcohol, weapons, and drug policies
• Dress code
• Remote work guidelines

What Not to Include in Your Employee Handbook

To ensure clarity and accuracy, certain language and documents should be omitted from your employee handbook.

• Benefits: As benefits are subject to change at any time, these should not be part of your employee handbook. Benefits offerings should be a separate document given to employees upon their hire and updated annually for existing employees.
• Legal documents: Any legal contract that needs to be individually signed by employees, such as non-compete agreements, non-disclosure agreements, and employment contracts, should be separate documents.
• Job descriptions: Any information specific to an employee’s position should be in a separate document, such as the new hire contract or job offer letter.
• Standard operating procedures (SOP): Your SOPs should be a separate manual from the employee handbook. SOPs are step-by-step instructions on performing tasks safely and effectively.
• Unnecessary language: Avoid language in your handbook that insinuates permanent employment, policies that violate the National Labor Relations Act (NLRA), or any language that shows bias towards or against a protected class.
• Onboarding documents: Do not include onboarding documents in your employee handbook. These documents should be given to new hires as extra support to set them up for success in their new role.

Legal Considerations When Creating an Employee Handbook

In addition to keeping your company’s employee handbook relevant by including content tailored to your business’s size, location, and culture, consider these legal factors. In our increasingly digital and remote work environment, it’s crucial to remember that employment laws applicable to an employee are typically determined by where the employee is located, not where your company’s office is or where it’s officially registered.

This means your handbook must cater to the laws of various jurisdictions if you have remote employees spread across multiple states and cities.

State Requirements

Consider your work locations when choosing sections to include in your employee handbook, and remember to incorporate all applicable state-specific regulations for each state where your employees reside. Some examples of location-specific requirements are:

• Sick leave requirements: If your city or state requires employers to provide employees with a minimum amount of sick leave, include that information in your company’s employee handbook. For example, California’s paid sick leave regulations require employers to provide employees five days (or 40 hours) of sick leave per year.
• Legality of marijuana use: In states where marijuana is legal, outline your company’s policy on its use by employees. Marijuana is now legal in almost half the states in the US, including Alaska, Arizona, California, Colorado, Connecticut, Washington, D.C., Delaware, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington. In most states, even where it’s legal, you can still restrict employee use, similar to alcohol.
• Gun laws: If your state allows the open or concealed carry of firearms or other weapons, consider using your business’s employee handbook to detail when (if ever) employees can carry firearms while working. For example, some states allow the open carrying of firearms without a permit, and more states add gun laws annually.
• Break and lunch requirements: Neither the Department of Labor (DOL) nor the Fair Labor Standards Act (FLSA) imposes specific break and lunch requirements. However, some states enforce their own break time laws. For example, California requires a 30-minute unpaid meal break for employees who work five hours minimum and an additional 30-minute unpaid meal break for employees who work more than 12 hours a day.

Business Size

When deciding which sections to include in your employee handbook, consider the number of people your business employs. The following rules apply:

• Family Medical Leave Act (FMLA): If you have 50 full-time equivalent (FTE) employees or more, you must allow up to 12 weeks of unpaid leave for certain medical conditions, such as childbirth, adoption, caring for an immediate family member with a serious medical condition, and for the care of oneself who has suffered a serious medical condition.
• Affordable Care Act (ACA): Companies with 50 FTE employees must provide affordable health insurance to at least 95% of their workforce.
• Pregnancy Discrimination Act: Companies with 15 employees or more must abide by this law that states a company cannot refuse to hire a woman because she is pregnant. Plus, depending on the size and location of your company, you may need a maternity leave policy, especially if you have employees in a state where maternity or parental leave is required.

Many state and local laws also impose work requirements on businesses above a certain size. For example, employers with 20 or more employees in Seattle, Washington, must provide commuter benefits. Additionally, California law mandates that small businesses with at least five employees offer pregnancy benefits.

Types of Employees

Remember to thoughtfully evaluate the types of workers your business employs when deciding what to include in the employee handbook. Relevant considerations include whether your business has:

• Hourly employees: If you employ hourly or part-time workers, clarify how break, lunch, and paid time off policies apply to them. Likewise, use the employee handbook to describe how the company compensates for overtime.
• 1099 independent contractors: Clearly state which policies and parts of the handbook don’t apply to contractors. However, you don’t have to provide a handbook to independent contractors; instead, give them an independent contractor agreement outlining what is expected.
• Remote workers: Now more than ever, it’s crucial to include details about remote employment in your employee handbook. Consider clarifying whether remote employers are entitled to any additional benefits and if they have specific work hours.
• Seasonal workers: If you employ seasonal workers, whether full- or part-time, you should clarify which benefits do and do not apply to them. For instance, seasonal employees may not be eligible for certain benefits but would be eligible for overtime pay.

Benefits of an Employee Handbook

An employee handbook ensures your employees know exactly what is expected of them. Beyond that, having an employee handbook is beneficial for the following reasons.

• Clear expectations: When you spell out your policies in a handbook, it ensures everyone understands the company’s expectations.
• Risk management: A well-maintained handbook can protect your business against employee lawsuits and claims, like wrongful termination, harassment, and discrimination.
• Legal compliance: An employee handbook ensures you comply with federal and state laws and safety requirements.
• Protects your company: Having a handbook helps protect your business from certain claims and lawsuits, such as wrongful termination and discrimination.
• Company introductions: The employee handbook introduces your company’s mission, values, and culture.
• Enforcement of policies: Having employees read and sign the handbook allows for successful enforcement of company policies.

Using an employee handbook template for small businesses can simplify creating your own while ensuring that you include all the necessary sections. Our free downloadable employee handbook sample covers policies all businesses should consider for their own handbook. We picked these sections because they’re valid for small business owners in all 50 US states.

However, remember that the template provided may not cover all of your business’s unique policies. It may not be in-depth enough to meet certain state requirements, like mandated sick leave or Equal Employment Opportunity (EEO) protected classes (e.g., sexual orientation or identity). Before you finalize your handbook, check local laws—like those governing sexual harassment—to make sure your handbook is complete.

Where to Get an Employee Handbook

Before you start developing an employee handbook from scratch, consider that you may already be working with a provider that can offer you an employee handbook sample. Consider the following providers that provide handbook creation tools.

Employee Handbook Costs

Creating an employee handbook for your company may involve working with in-house HR professionals, a consultant, or an attorney specializing in employment. There are also annual costs associated with maintaining an employee handbook, but they are worth it because your employees will have access to the most up-to-date resources.

You may encounter these common costs and services when drafting an employee handbook:

Outsourced HR Services

HR firms and attorneys can create a customized employee handbook if you don’t have an in-house HR team. By hiring a third party specializing in human resources and employee communications, you can protect yourself from problems resulting from a vague, incomplete, or misleading employee handbook. Depending on your needs and location, you could pay up to $5,000 for this service.

Legal Review

Business owners and HR professionals writing employee handbooks should seek legal review to ensure they are legally sound. This review can ensure compliance with relevant employment law and protect business owners in case of an employee lawsuit. However, an attorney may charge hundreds of dollars an hour—especially in a large market.

If you don’t want to hire an attorney, legal companies typically offer packages that make it easy to create a handbook by answering a few simple questions. These services can range in price from free to over $2,000 per month. Learn more about the best online legal services for your small business.

Maintenance

In addition to drafting an employee handbook, commit time annually to updating the document to reflect current policies and legal requirements. Then, have your lawyer review the updated version, and schedule employee training to ensure everyone is on the same page. Again, if you don’t want to incur legal fees, consider a monthly membership to an online legal service.

Importance of Employee Handbook Annual Audits

Let’s take a moment to emphasize a crucial practice: the annual handbook review. Just like a car needs regular maintenance to run smoothly, your employee handbook also requires periodic checkups to ensure it’s up to date and compliant with ever-changing labor laws.

Conducting an annual audit of your handbook should focus on a few key areas:

• Legal compliance: Laws and regulations related to employment are frequently updated and vary from state to state, and even between cities. While an HR consultant can help you stay current with changing laws, you can also manage this yourself by incorporating any necessary legal updates during your annual review process.
• Company changes: As your business grows and evolves, so do its policies and procedures. An annual audit allows you to update the handbook to reflect new strategies, technologies, or changes in your company.
• Employee expectations: A current handbook helps set clear expectations about employee roles, rights, and responsibilities. It also provides them with current information on company policies and procedures.
• Consistent enforcement: Regular updates ensure that managers across your organization have the same information, promoting consistency in policy enforcement.

Employee Handbook Frequently Asked Questions (FAQs)

Bottom Line

Employee handbooks are an important way to protect business owners while helping employees understand company culture, job expectations, and current policies. A good handbook can save you time, money, and headaches in answering employees’ questions. Additionally, a well-crafted employee handbook can safeguard against wrongful termination lawsuits.

To create a simple and effective employee handbook, consider using our free employee handbook template for small business as a starting point. If you’d prefer payroll and HR software that makes creating and managing your policies quick and easy, consider Rippling. Rippling lets you easily manage your employees’ payroll, benefits, expenses, devices, apps, and more all in one place.

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