(Disclaimer: This article is for general informational purposes only and should not be considered legal advice.)
A small business employee handbook is a document that outlines your business’s policies, procedures, and expectations for employees. This can include information on compensation and benefits, time off, code of conduct, safety procedures, and other specific information relevant to your business.
Building a business takes work, involving long hours, big sacrifices, and probably more stress than you signed up for. So the last thing you want is for your lack of an employee handbook to put it all at risk.
Wondering if you need an employee handbook for your small business? Here’s what you should know.
Why a small business employee handbook matters
1. It helps reduce legal risk
Imagine you let an employee go for consistently not showing up to work, but they claim you fired them for an unfair reason and that you never explicitly laid out your attendance policy. Without an employee handbook (or a signed copy from that employee), it’s your word against theirs.
Pro tip: Get ahead of potential legal issues by documenting your policies and tracking when your employees received them.
2. It makes everyday decisions easier and keeps things consistent
Chances are, as the business owner, you’re also the HR department. When employees have questions, you’re the one they come to with decisions that could affect payroll or productivity:
- How do people request PTO?
- At what point is arriving late a problem?
- What do we do if someone calls in sick the day of an important client meeting?
- Who do employees get approval from for overtime?
You may think these are small questions, but answering them regularly probably takes up a lot of your time. Having an employee handbook doesn’t mean you won’t still need to make decisions as a business owner, but it can help managers and team leaders make decisions consistently and take some of these recurring questions off your plate.
3. It sets clear expectations upfront
Introducing a policy after there’s been an issue could make that policy seem inconsistent or even personal to employees, which may breed ill will. On the other hand, policies that are outlined up front in an employee handbook help set clear expectations for all employees from the get-go.
For example, say an employee gets in trouble for texting you (instead of following your absence reporting procedure) five minutes before their shift to say they won’t be in. If there’s no mention in your employee handbook about the importance of properly reporting absences, this could seem inconsistent or unfair to other employees who may not be aware of this absence reporting procedure.
However, if your employee handbook mentions that, except in cases of emergency or as otherwise provided by law (including leave or reasonable accommodation laws), it’s expected that employees contact a supervisor before the start of their shift if they’ll be absent, tardy, or leaving early from work, it’s less likely that this employee will claim ignorance of the absence reporting procedure.
4. It sets you up for growth
Your communication with five employees will be different than with 15 employees, and definitely different than with 30. If you want to grow your team, it’s important to get ahead of the game by implementing an employee handbook while you still can instead of when you absolutely have to.
When does a small business need an employee handbook?
There’s no single employee number that requires every small business to have an employee handbook, but there are certain numbers of employees that trigger certain laws or requirements:
- According to the EEOC, many (but not all) of the federal employment discrimination laws apply to companies with 15 employees.
- The FMLA applies to private employers with at least 50 employees for 20 or more workweeks in the current or preceding calendar year, according to the Department of Labor.
- According to OSHA, many private-sector employers with more than 10 employees must keep records of workplace injuries and illnesses (with some exempt industries).
You have 1–9 employees
Once you have your first employee, you’ll want to set clear expectations around pay, conduct, attendance, safety, and the work environment. A simple employee handbook for small business is a great place to start.
Compare free and paid plans for employee handbooks to see which will work best for your team.
You have 10–49 employees
With more employees comes more decisions made by managers and more situations in which policies are implemented inconsistently. A formal employee handbook can be especially helpful in this scenario. Also, federal and state laws may start kicking in at this point. For example:
- Employers with 15 to 19 employees are covered by federal laws prohibiting discrimination based on race, color, religion, sex, national origin, disability, or genetic information, according to the EEOC.
- Federal laws prohibiting age discrimination generally apply to employers with at least 20 employees, according to the EEOC.
Note that these are only federal requirements and numbers may be different (and lower) depending on your state or city.
You have 50+ employees
As your number of employees grows, so do your legal requirements. For example, once you reach 50 employees, your private business may be subject to FMLA regulations and your employees may be eligible for certain types of leave with job protection.
Pro tip: Don’t wait for a certain number of employees before developing policies, procedures, and notices for your small business, as you may be legally required to provide certain notices from your very first hire. An employee handbook is one way to house these policies and notices, but some requirements may call for specific or additional notices to be provided separately.
What to include in an employee handbook for small business?
A small business employee handbook doesn’t need to be lengthy, but it does need to be useful and relevant to how your business operates. Here are some employee handbook ideas and must-have employee handbook policies:
1. Welcome, values, and mission
While not required, consider opening your handbook with a statement about your company’s values and mission. This could include a brief statement about what your company does, what “good work” looks like for your business, and a summary of the type of work environment you’re trying to foster. This will set the tone for the rest of your handbook and help employees understand your expectations and business practices.
2. Employment basics
Consider including a brief section describing different types of employment (exempt vs. non-exempt, full-time vs. part-time, etc.), the work week, any introductory/probationary period, whom to contact with questions about HR, etc. Depending on your state, you may also want to include a brief description of at-will employment, a legal doctrine which states that an employee may quit or an employer may fire for any or no reason, unless prohibited by law. If you do include an at-will provision, make sure you include appropriate handbook disclaimers.
3. Equal opportunity, anti-discrimination, and anti-harassment
It’s important that your handbook contain anti-discrimination and anti-harassment policies that are tailored to fit the laws in your state. Your handbook should explain to whom an employee can make a report, what steps will be taken once a report is made, and that there will be no retaliation for reporting in good faith. Some states also require that employers provide anti-harassment notices, policies, and even training regarding sexual harassment.
4. Pay and timekeeping
Employees should understand when they’ll be paid, how to report a payroll error, and the process for getting overtime pre-approved. Depending on your state, your handbook may also need to include information on payroll deductions. Even if your business has a policy that no overtime may be worked without prior approval, all hours worked must still be reported and compensated where appropriate.
5. Leave and time off
Depending on your state and city, you may be required to offer certain types of leave to your employees, such as paid sick leave. Your handbook should explain to employees what types of leave they’re eligible for (FMLA, state-specific FMLA-like laws, vacation/PTO, holidays, etc.), how to request leave, if there are any blackout times when leave cannot be taken at an employee’s discretion, and whether unused time is allowed to roll over from one period to the next.
6. Sickness and absence reporting
Your handbook should explain what steps an employee should take if he or she is out sick, such as who to notify, and under what circumstances medical documentation may be required. Make sure to review this section of your handbook regularly to make sure that your policies are up-to-date in accordance with changes in company procedure and sick leave laws. Out-of-date information can lead to confusion and potential legal issues.
7. Standards of conduct
Your handbook is a great place to lay out expectations regarding topics such as substance use, workplace violence, conflicts of interest, confidentiality, use of social media, progressive discipline, etc. While this may be a lengthy section of your handbook, try to keep the language as simple and straightforward as possible. Policies that are overly legalistic will most likely be ignored by employees and inconsistently enforced by managers.
8. Disciplinary process
It’s important for employees to know what to expect if there is a conduct or performance issue. Outline the discipline process you intend to follow and any actions that will/will not result in immediate termination. Make sure your progressive discipline policy is not overly rigid so as to preserve your flexibility in certain situations.
9. Health and safety
Outline your company’s expectations and procedures related to health and safety in the workplace. This may include who to notify in the event of an injury or unsafe condition, safety trainings required, OSHA-related information, and more.
Specific OSHA standards may require written plans or programs, depending on your workplace. It’s still a good idea to promote a safety conscious culture through your handbook and demonstrate to employees that you take safety reports and violations seriously.
10. Technology, devices, and data
Employees should know what to expect when it comes to use of company-provided technology, email monitoring, internet use, use of social media, etc. Consider including a policy on remote or hybrid work, if applicable, that outlines expectations for data security, equipment, use of home office, etc. Be sure to include policies for AI use if applicable.
Employee Handbook Requirements by State
In addition to federal employment laws, keep in mind that your state or municipality may require certain policies or procedures to be in place and may require that certain notices be provided to employees. For example:
- California requires covered employees to receive meal periods and paid rest breaks.
- Covered job postings in Colorado must include certain pay transparency information.
- Covered Illinois employers must provide paid leave that can be used for any reason (there are additional requirements for local paid leave laws in Cook County and the City of Chicago).
Make sure you know the laws where your employees are located. If you have employees in more than one state, you may need to include state-specific supplements/addenda or policies in your handbook.
Employment laws can and do change. Be sure to re-check your state’s employee handbook requirements from time-to-time throughout the year to make sure your handbook is compliant.
The Biggest Handbook Risk is Often a Bad Handbook
Having an employee handbook is better than not having one at all, usually. However, an employee handbook that includes policies that do not reflect your actual business practices, promises benefits that are not offered, or fails to keep up with changes in the law could expose you to additional risk. For example, outdated handbook language around leaves of absence may hurt you in an employment dispute, even if your company’s practices have changed.
Even using a boilerplate or template handbook can pose risks if it includes policies that are too rigid, overly broad, or do not take state-specific laws into consideration. Your employee handbook should accurately reflect your company rather than some generic model pulled off the internet.
How to Create a Handbook for Your Small Business
Handbook Step 1: Start with Current Policies and Practices
Your handbook should accurately reflect the policies and practices that are currently in place in your business. Consider practices around scheduling, time off, absences, payroll, expected employee conduct, how managers should address employee performance, etc.
Handbook Step 2: Include Required Policies
Be sure to include employee handbook policies that are required by law for your industry, location, and size business. Wage and hour, leave, anti-discrimination, and reasonable accommodation laws, among others, may require certain policies and procedures to be followed based on your number of employees, where your employees work, your industry, etc.
Handbook Step 3: Have Employees Sign an Acknowledgment
Have each employee sign an acknowledgment stating that they received a copy of the handbook and the policies and procedures it contains. This can protect your business down the road if there’s ever a dispute with an employee.
Handbook Step 4: Review and Update Your Employee Handbook
Review your employee handbook on a regular basis to make sure it’s still up-to-date and accurate. At a minimum, your handbook should be reviewed when laws change, practices within your business change, or if there’s a significant change in your employee population.
Don’t wait until next quarter, start working on your small business employee handbook today with a small business employee handbook template, employee handbook builder, or a chat with your attorney.
Handbooks.io Makes it Easy to Build Your Employee Handbook
Whether you’re building your first employee handbook with your first five employees or updating the one you created when you had fifty, Handbooks.io can help.
Handbooks.io offers professionally written employee handbook templates that are customized for small businesses. Depending on your plan, you may have access to features such as:
- Templates customized for your industry, construction, healthcare, hospitality, churches, restaurants, retail, and more
- Customized for your size business and where your employees work, review policies based on federal, state, and local laws
- Policies written in plain language to make them easy for you and your employees to understand
- Editable Word downloads or print-ready PDF downloads
- Keep your handbook up-to-date, receive ongoing policy updates with an annual subscription and review and apply these updates from your Handbooks.io dashboard
Once you’ve reviewed the required policies for your business, you can make your employee handbook your own. Tell your employees about your PTO policy, dress code, the values you hold your team to, and more! We’ll walk you through each section so that your handbook represents the policies and practices in place at your business.
Employee Handbook FAQs
Do small businesses need employee handbooks?
While small businesses aren’t generally required to have employee handbooks, there are many laws that require small businesses to have certain policies, procedures, and notices in writing. An employee handbook is a convenient way to consolidate these policies and it can also serve as proof that your employees received your policies. Note: even if you include required notices in your employee handbook, you may still be required to post some notices or provide them separately.
How many employees do you need before you need an employee handbook?
There’s no magic number! While some policies are only required once you reach a certain number of employees, we recommend having some form of written policies in place from employee #1. Ultimately, it comes down to where your employees are located, the policies and procedures you have in place, and other practices at your business.
What happens if my small business doesn’t have a handbook?
Without an employee handbook (or other documentation showing your policies and that your employees received these policies), you won’t have much (if any) proof that your employees were educated on your workplace policies and procedures. This can hurt you in the event of an employee dispute, such as wage and hour issues, harassment claims, wrongful termination, etc.
How often should I update my employee handbook?
We recommend reviewing your employee handbook at least annually and any time there’s a significant change to your employee population (such as where they’re located), a change in laws, or a change in policies or practices within your business. Having an employee handbook that isn’t up-to-date or doesn’t comply with the law can put you at risk and can also be used against you in the event of a dispute with an employee.
What’s the biggest mistake small businesses make with their handbook?
Not updating it! As mentioned above, having an outdated employee handbook can put you at greater risk than not having one at all. For example, your handbook could contain information about your sick leave policy that no longer jibes with the law, benefits you used to offer but no longer do, or policies that are overly-restrictive, like not allowing your employees to discuss wages, which is protected activity.