Employee Handbook: Definition, Features & Costs [+Free Sample]

An employee handbook is a document covering the rules and conduct expected of your employees. It’s a reference for questions your employees have about key policies like benefits, dress code, and work schedules. For you, the business owner, it ensures employees are given the same information regardless of the manager they work for. It also helps supervisors maintain consistency in how they manage employees. The easiest way to create one is to start with an employee handbook template.

How to Use an Employee Handbook

In general, an employee handbook is provided to the employee on their first day at work, either as part of orientation or as a take-home document to review. It’s a non-legally binding company communication that clarifies expectations and benefits for your employees in plain language.

Most include information so that employees know what benefits and perks they get, such as time off for sick leave, or PTO. In fact, specific policies included within an employee handbook may be used to defend your business against legal action, such as a wrongful termination lawsuit.

An employee handbook also serves to set the stage for your business’ culture by showcasing your mission, vision, and values. It reduces organizational friction and noise as employees become clear on expectations for themselves and co-workers.

To ensure compliance, it’s best to obtain each new hire’s signature documenting that they reviewed and agree to the terms within your employee handbook.

Free Employee Handbook Sample

Our free downloadable employee handbook sample covers policies and sections all businesses should consider including. We picked these sections because they’re valid for small business owners in all 50 U.S. states. However, ours doesn’t cover your specific workplace policies and may not be in-depth enough, especially in states that mandate sick leave or add to EEO protected classes (e.g., sexual orientation or identity).

Free Employee Handbook Template (PDF/Word/Google Doc)

Before you finalize your handbook, check local laws as well—like those governing sexual harassment or commuter benefits—to make sure that your handbook is complete.

Employee Handbook Costs

• If you outsource: HR outsourcing firms and lawyers may be happy to create a customized employee handbook for you. You could pay up to $5,000 for this service.
• Legal review: Companies like LegalZoom offer packages that can provide policies that should go in your handbook. In addition, they will review documents for compliance; it’s useful to know your handbook passes the legal sniff test.
• Maintenance: Each year, you may want to spend a day updating your employee handbook, have your lawyer re-review it, and managers retrain employees on it.

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. Like our template above, each of these providers will need your involvement to customize the employee handbook so that it’s specific to your company policies.

Here are some of the best places to find an employee handbook:

1. HR Software

Many human resource information system software vendors include a sample employee handbook in their offerings. Prices run about $2 to $12 per employee, per month for HR software. For example, if you use Zenefits as your HR provider, they provide an employee handbook sample template and can help you customize it to your company-specific policies. View a demo of Zenefits.

2. Payroll Service

To support their customers’ needs for HR tools, many payroll services offer an employee handbook sample as an add-on service. Payroll services run from about $2 to $12 per employee, per month in addition to monthly fees. But not all offer HR features, so you may want to check with your payroll service provider first.

3. Professional Employer Organization (PEO)

While significantly more costly than HR software or a payroll service, a PEO is a nice option for business owners who find the entire employee and HR compliance thing stressful. A PEO partners with your business to manage the back end of HR, including payroll, benefits, and resources (such as org charts and employee handbooks). It’s like having your own HR person.

Justworks is one of the more affordable PEOs, with prices ranging from $39 to $99 per employee, per month, depending on the size of your business. Request a demo of Justworks.

4. HR Consultant

A human resources consultant or outsourced HR service can help you write or refine your handbook policies and look over your final draft. HR consulting firms may charge $125 to $200 an hour. Some offer package prices, such as helping you set up your personnel files and building an employee handbook for a flat rate of a few thousand dollars. However, you can often find freelancers with HR expertise who do this at a more reasonable price.

5. The Society for Human Resource Management (SHRM)

It’s not a bad idea, if you’re in an HR department of one, to sign up for a membership to SHRM. As the industry leader in HR best practices, SHRM provides free downloadable HR policies, templates, and tools, such as an employee handbook sample, as well as education and resources about all things HR. Prices start at $209 per year with discounts for students. View SHRM’s website.

10 Sections Every Employee Handbook Should Include

In our employee handbook sample, we put in ten sections that we view as critical to any company handbook. They cover the company culture information as well as legal documents like nondisclosure agreements and policy statements to protect you and your employees.

1. Introduction to Company & Values: Your company’s mission statement, why and how you were founded, and some insight into your culture can go here.
2. Confidentiality & Nondisclosure (or Noncompete): A nondisclosure agreement focuses on confidentiality, and a noncompete prevents terminated employees from taking your clients or starting a competing business.
3. Anti-discrimination Policy: This keeps you compliant with federal law. Some states extend protections to pregnant moms and individuals who identify as another gender.
4. Employment at Will: This is where you’ll mention at-will employment, which means either the employer or employee are free to terminate the employment relationship.
5. Compensation & Benefits: Everyone wants to know how they are paid and what benefits they will receive. Include your pay schedule and payday along with any other perks you offer, like flextime or commuter benefits—or, of course, health insurance.
6. General Employment Information: This makes clear the probationary period (if your business has one) and what steps should be taken when an employee wants to quit.
7. Computers & Technology Policy: Spell out your employer rights to view electronic documents; suggest employees keep passwords secure. Clarify your cell phone policy.
8. Leave Policies: Let employees know what your paid time off, sick leave, parental leave, and other leave policies are and what they can be used for, as well as jury duty and holidays (this will save you loads of time answering questions).
9. Progressive Discipline Policy: For the business owner, this is a good section to lay out steps for discipline and demonstrate your commitment to fairness. It should also make prohibited behaviors clear and reduce the risk of an employee winning a lawsuit for wrongful termination. In it, make sure to include a reminder that at-will employment remains in effect, regardless of the discipline policy.
10. Signature: The signature section verifies that the employee received a copy of the handbook, read it, and understood it. That makes the employee take it more seriously and may help as a defense in case of a wrongful termination lawsuit.

You may also want to include sections on some of the following topics, if they apply to your business: attendance, expense reimbursement, alcohol/weapons/drug policies, dress code, remote work guidelines, and anything else that applies specifically to your business.

4 Considerations When Creating Your Employee Handbook

1. Requirements in States That Your Employees Work

Consider your work locations when choosing sections you need to include in your employee handbook. Some examples of location-specific requirements are:

• Does your city or state require sick leave? New York does, so does California.
• Is marijuana legal in your state? It’s legal in states like Alaska, Oregon, Maine, and Colorado, and more states are legalizing recreational cannabis use every year.
• Is it legal to carry a firearm in your state? Arizona, Vermont, and Kansas allow unrestricted rights and more states are adding gun laws annually.
• Are their specific break and lunch requirements in your state? As an example, California requires two lunch breaks for employees who work 10-hour shifts.

2. Size of Your Business

You’ll want to consider the number of employees you have when thinking about what sections to include. Here are a few examples of federal labor laws based on company size:

• 50 employees: You’ll have to abide by the Family Medical Leave Act (FMLA), and you will need to provide health insurance per the Affordable Care Act.
• 15 employees: You’ll have to abide by the Pregnancy Discrimination Act.
• Depending on both the size of your company and its location, you may need a maternity leave policy.

Adding to this, many state and local laws have workplace requirements that kick in based on company size. For example, if you have 20 employees in Seattle, Washington, you have to provide commuter benefits. In California, pregnancy benefits must be provided for employees in businesses with as few as five employees.

3. Employee Demographics

You’ll want to consider the demographic makeup of your employees (e.g., age, gender, tenure with the company) when thinking about what sections you need to include. Some examples are:

• Part time-employees: You may need to clarify how break, lunch, and paid time off policies apply to them.
• 1099 contract employees: You will want to be clear on what parts of the handbook, such as medical benefits, don’t apply to them.
• Younger employees: You may prefer to be very specific with rules about cell phones on the job, dating co-workers, or what’s considered appropriate work apparel.
• Employees over 40: You may want to describe retirement benefits available to them.
• Employees with families: You may want to offer flex scheduling options.
• Remote workers: You may want to clarify how they are to stay in touch.

These considerations may also affect you if your business has hourly workers for whom you need to provide overtime as part of payroll, or if you need to have policies based around alcohol at social events. A lot of things can come into play when you look at the demographics of your team.

4. Company Culture

You’ll want to consider your company culture when thinking about what sections to include. In addition, consider revising the wording to create the kind of workplace vibe you want to create within your document: Some examples are:

• Do you really need a dress code? Or, do you trust employees to choose their own work apparel?
• Do you entertain clients? Do people regularly meet them for dinner or drinks?
• Do you encourage social media sharing? Do you want to encourage or discourage social media posts about company happenings?
• Do work schedules matter? Does your business operate based on work performance or hours worked physically at the job site?
• Do you offer incentives? Does your business provide unique bonuses, such as paying employees for customer or employee referrals or offering safety incentives?

Once you have decided what sections you need for your handbook, use our free employee handbook sample and add on where necessary.

Frequently Asked Questions (FAQs) About Employee Handbooks

Employee handbooks can serve as both a communication tool and coaching in case employees claim they don’t know about a policy or procedure. Some common questions about employee handbooks have been answered below.

Are employers required to provide an employee handbook?

No. There’s no law that states a business must provide an employee handbook to its workers. It’s a best practice and is the easiest way to document federal- and state-mandated workforce policies. For example, you must document your business work hours, payroll cycle, and pay date. If you offer benefits, those must be documented. Why not put all these documents in one place?

Do I need a lawyer to review my employee handbook?

Once you’ve finalized your employee handbook based on a template, then yes, consider having your attorney look it over to ensure there are no issues before you implement it. This is especially true if you have businesses in multiple states where state and local workforce and anti-discrimination laws may come into play.

An employee handbook isn’t meant to be a legally binding document in the sense that it’s not written in legalese. Instead, it’s meant to explain many legal concepts, like overtime and sick leave, in easy-to-understand language. It may contain legally binding documents, such as a nondisclosure agreement signed by employees.

However, if you have a dispute with an employee about a workplace policy or practice, especially if it’s not one mandated by law, a judge will likely want to see what your employee handbook says. That’s to ensure you’re not discriminating against an individual or failing to comply with your own written guidelines. Whenever the policy isn’t clear, the judge is very likely to side with the employee, not the employer.

Can an employee handbook be changed?

Yes, an employee handbook can be changed. It’s a living document that represents your business policies. Anytime you change an employee benefit, company policy, or business practice, you should update your handbook to keep employees in the loop. At a minimum, you’ll want to review your handbook annually to ensure the information in it is up to date. That’s because work practices and labor laws change frequently. For example, perhaps your managers have informally agreed that employees can text in if they are sick. If your handbook currently says texting is unacceptable (like in our template), you will want to change your handbook.

How can I address resistance to new policies in the employee handbook?

Some employees need time to understand and digest new policies. That doesn’t mean they’re resistant, but rather they need to understand the why and how. Allow managers and employees to voice their concerns. Answer their questions. If necessary, adapt your policies based on feedback from the users it impacts most—your staff. However, once you’ve determined the policy is valid, you’ll need to enforce it consistent with how you enforce any expected workplace practice.

What is the risk if management doesn’t abide by the employee handbook?

If you and your leadership team don’t abide by the policies in the employee handbook, you’ll be undermining your own rules and running the risk of them not being taken seriously. In a worst-case scenario, you may be accused of discrimination. Therefore, notice whether there has been favoritism or criticism going on that feels unwarranted.

Make an effort to rectify this as soon as possible. For example, if Jenny always gets to work from home on Friday, you may need to offer that perk to other office staff. Or if you, as the manager, often cross the line with inappropriate jokes, your employees may think that’s acceptable too. They’ll mimic your behavior rather than follow the handbook, potentially creating disciplinary havoc or even potential legal issues at work.

What’s the difference between an employee handbook vs employment contract?

An employee handbook is not a legal agreement, whereas employment contracts are legal and valid signed documents that can be upheld in court. They look very different than an employee handbook. Nonetheless, if an employee handbook isn’t written properly, you may be creating an implied contract that violates the at-will doctrine.

Here are three ways an employee handbook differs from an employment contract:

• Audience: An employee handbook goes to everyone and supports a group work environment. In contrast, an employment contract is a one-off agreement made with one person only, such as an executive.
• Language: An employee handbook is meant to be comprehensible by all employees. It’s not written in a lawyerly language. An employment contract often contains legal jargon and official terminology.
• Topics: An employee handbook covers a range of topics from discipline to how to call in sick. An employment contract tends to cover higher level performance issues like confidentiality, severance pay upon termination, and penalties for non-performance.

Bottom Line

Employee handbooks are useful to have since they not only protect the business owner, but they also provide a good baseline for employees to understand your company culture, what’s expected of them, and how things work at your firm. Having a good handbook can save you time, money, and headaches in answering employees’ questions. A well-written handbook can also serve as a defense in case of a wrongful termination lawsuit.