"Do we get Martin Luther King Day off?" "Does our insurance cover orthodontia?" "Do we have a pension plan?" "What is our sick leave policy?" "Are employees supposed to conform to a specific dress code?" If your employees ply you with questions like these, it may be a good idea to spell out the answers in an employee handbook.
Along with saving you time, such manuals can improve employee morale, prevent disagreements and even keep the company out of court. And with all the facts at hand, your employees can promote the business in the community, spreading the word that it's a good place to work. Chances are you'll subsequently attract a higher caliber of applicants for job vacancies.
Despite these pluses, not all firms need handbooks. In very small companies with a lot of face-to-face interaction, a handbook probably isn't necessary, says William Anthony, a human resources professor at Florida State University in Tallahassee. "However," he continues, "as companies grow to 20 or 30 employees, it's advisable to put policies in writing."
Reasons for Writing A Handbook
Perhaps the most important reason to create a handbook is to document the employer's expectations. Most employees want to be successful; they are eager to know what is expected of them and how they can improve. A good handbook will describe expected performance and how to get a promotion or raise, in addition to clarifying the employer's expectations regarding work hours, dress, and sick or vacation leaves.The process of creating a handbook also helps employers improve their leadership, first by thinking through which policies are useful and practical in their specific operation. Then after concrete policies are established, employers can better manage employees because objectives for each position have been examined, benefits have been considered and perhaps retooled, and personnel policies are in place before contentious issues arise.
Avoid Legal Disputes
Mike Young, president of Vibro/Dynamics Corporation in Broadview, Illinois, is committed to implementing fair, consistent policies. He has an employee handbook. But no staff other than managers have seen it.Young doesn't give out the lengthy handbook because he is concerned it may be used as a weapon in a legal action. He recognizes that in many states, a handbook is regarded as an employment contract, and loose wording such as "we will be fair to our employees" can easily be used against the company.
The reason? Because employers are responsible for preparing the handbook, courts usually interpret any vague provisions in favor of employees if they sue. In addition, listed disciplinary procedures, if not followed to the letter, can be used to contest a firing.
However, loosely defined policies can also work against an employer. Courts generally view both written and verbal policies as a contract. Verbal policies can be implied or given by someone with no authority to make promises. A written document is the company's best chance of not having a court case become the owner's word against that of the employee.
From the standpoint of the firm's bottom line, therefore, a compelling reason to have a good handbook is to prevent or settle disagreements and avoid legal disputes, particularly in the areas of firing and discipline.
To avoid legal pitfalls in the wording of these sections, insert a disclaimer. Courts have repeatedly upheld the employment-at-will doctrine in which the company expressly states that employment can be terminated at any time, for any reason. Some recent court decisions have limited this doctrine, particularly concerning firing because of disabilities or sexual orientation, but generally an employer is legally protected by including a statement such as the following:
"We recognize the employee's right to resign at any time for any reason; similarly we may terminate any employee at any time, with or without cause."
A disclaimer should also appear when there is any mention of firing and disciplinary procedures. Often, policy statements list specific courses of action to be taken prior to firing. However, sometimes the employee's behavior is so egregious that immediate firing is warranted. To protect against a lawsuit in such a case, a statement such as the following should appear with the list of unacceptable conduct:
"This list is intended as an example only and is not intended to indicate all those acts that could lead to employee discipline." With this statement, you won't have an employee contest termination because "stealing" wasn't specifically listed in the handbook, to use a good example.
In the handbook written by John Rush, president of Graphic Communications of San Diego, California, the federal or state regulation relating to each of his company's employment policies is clearly documented, often using the exact language of the statutes. For example, the handbook states: "California law provides that an employee may not be terminated because of involuntary jury service." It then provides the company policy: "An employee who is called to serve on a jury shall be given leave to perform such service."
Another warning when writing a handbook is not to use restrictive language. Words such as "will," "must" or "in all cases" may bind employers to actions they did not want to take in a given case. Collective bargaining jargon like "terms and conditions of employment" or "seniority" also could be interpreted as creating an employment contract.
Finally, avoid "probationary" periods of employment. Otherwise the handbook may imply that employees are entitled to continued employment after the probation is over. Instead use terms such as "training," "orientation" or "trial" period.
Given these sensitivities, it is wise to have an attorney review your handbook before it is distributed to employees. This will also ensure it complies with state law.
Where to Get Help
While there are obvious benefits to legally protecting yourself and your company by having an employee handbook, most small business owners view their staff not as adversaries, but rather as members of the same team, working toward shared goals. With this in mind, the employee handbook can - and should - be a positive tool for encouraging growth, improving morale, and aligning employee behavior with company policies.The tone of the handbook should be positive throughout. The introduction can set this tone by using a friendly letter from the company president in which the general mission or long-term goals of the business are outlined. When practical, explain the reasoning behind specific policies, especially those that may be controversial.
To write a good handbook, one option is to borrow those used by other companies. Ask your spouse, best friend, contractor or another small business owner for theirs, remembering that rather than simply adopting what works for another operation, you'll need to tailor the contents to reflect your own corporate culture, policies, procedures and type of business. A law firm may want to stress honesty and integrity, for example, while a construction company may emphasize workplace safety.
The content and organization for your handbook can also be found in other personnel manuals, including proper legal wording and general policies on subjects ranging from alcohol and drug abuse to safety and security, absenteeism and vacation.
The book Developing a Personnel Manual by Lin Grensing-Pophal (Self-Counsel Press, Canada, 1993) points out that much information for your employee handbook already exists in the form of policy-setting memos, literature provided by insurance carriers (including full descriptions of your policies) and standard, unwritten procedures. In addition, industry and regional employer associations sometimes offer free material on the subject, and may be able to provide legal advice at no charge as you construct your handbook.
Another option to creating your handbook from scratch is taking advantage of software packages such as Employee ManualMaker (Jian Tools for Sales, Inc.) that outline the major items that should be included in a personnel policy handbook as well as do's and don'ts to be considered when drafting and revising the document.
And don't forget that employees may also be a gold mine of useful information. John Rush of Graphic Communications in San Diego, California developed his handbook with the help of an employee who had previously attended a seminar on how to write an employee handbook. In reviewing handouts from this seminar, Rush found helpful legal and organizational advice.
In addition to leveraging employees who possess experience in writing handbooks, solicit input from all levels of personnel so your manual addresses a wide range of concerns.
Put It to Use
Once you've taken the time to write a handbook, don't let it sit on the shelf. Plan on updating your handbook regularly, and change your written policies, if needed, to conform to actual practice or changes in the law. But reserve the right to change, add or terminate policies at any time. Finally, state that all new policies override previous ones, both verbal or written.
Key Components to Writing an Employee Handbook
Keep in mind when developing your handbook not to include unnecessarily specific information; shorter is almost always better. Experts consider the following subjects to be the most essential ones to cover:Company overview. Introduce your company with a few paragraphs about its history, growth, goals, ethics and management philosophy.
Equal opportunity statement. State that an employee's religion, age, sex or race will have nothing to do with hiring, promotion, pay or benefits.
Work hours. Define the work week and time allotted for lunch and breaks.
Pay and performance issues. Because pay issues are sensitive, it is wise not to include specific numbers or targets. General statements about when paychecks will arrive, how promotions and wage increases are handled, classification of employees (part-time, full-time, on-call) and policies on pay advances, leaves without pay, overtime and other pay irregularities are sufficient.
Also include the policy on performance review so employees will know in exactly what areas they will be evaluated and how often (i.e., on the anniversary of employment or during a set annual or semi-annual period). You may also want to state that written evaluations can be made at any time to advise workers of unsatisfactory performance. Finally, a statement about in-house vs. external hiring policies may also be appropriate in this section.
Benefits. Ask your insurance company for copies of their own brochures that explain your insurance policies (such as health insurance, parental or maternity leave) in detail. In addition, your handbook need only define who is eligible for insurance, how long a new employee must wait for coverage, and what portion of premium costs is paid by the company. Also list additional insurance such as dental or disability that employees can buy through the company.
Explain policies on vacation and all types of leave, including sick, military, funeral, personal, family, medical and jury duty. List paid holidays.
For ease of use, include an "Information at a Glance" section outlining your benefits packages. Include important numbers (such as group insurance numbers or the company code) and phone numbers employees can use to speak directly with benefits representatives.
Pension or profit-sharing plans. Discuss when and how employees become eligible, whether an employee contribution is permitted or required, and when employees become vested.
Standards of conduct. One of the most important reasons to have the employee handbook is to ensure that staff understand what you expect of them. Toward this end, detail desired behavior (such as dress and timeliness) as well as your policies on sexual harassment, racial and sexual discrimination, use of alcohol, drugs and tobacco in the workplace (including pre-employment screening and post-accident testing), and disciplinary procedures.
Termination. List the just causes for which you will fire an employee, including criminal activity, poor performance, dishonesty, security breaches, insubordination, absenteeism, company policy violations, health and safety threats and dress code infractions.
Also add the disclaimer that the handbook is not a contract, policies can be changed at any time, and all employment is "at will." This means that the company's relationship with employees is not a guarantee of employment, and can be terminated at any time with or without cause or notice.
Finally, outline your grievance procedure.
General information. This section should be geared toward new hires who may not know how to get around, at what time they'll eat lunch, or where they should park.
Consider including these items: area maps, a parking pass, an organizational chart, phone lists, a statement regarding the confidential nature of your business, and policies addressing gifts, use of company cars, traffic tickets and personal telephone calls.
Forms. It is logical to have blank forms attached to the policies to which they refer. While individual businesses will need different forms, consider including blank forms regarding: sick leaves, vacations, seminar attendance, sub-contractor contracts, requests for a quotation, grievance filing, travel reimbursement, performance reviews, pay advances and accident reports.
Reader acknowledgment. Protect your liability and encourage employees to read the handbook by having them sign a receipt. John Rush includes a signature card that employees sign and turn in. Another option is to include two copies of a receipt; one stays with the handbook after being signed while the other goes in the personnel file.
Excerpted with permission from Small Business Success magazine, Volume X, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration and the Partners for Small Business Excellence.