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Updated: April 24, 2024

Creating an employee handbook for your small business

Published By:

Erin Ellison

Brainstorming a small business employee handbook

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When you’re a small business owner focused on running your company, human resource management can fall to the bottom of your list of priorities. Although it’s tempting to put off HR tasks, documenting your policies and procedures in an employee handbook can be essential to employee satisfaction, sustainable growth, and the future success of your business.


Maybe you’re thinking, “my business isn’t big enough to be concerned with HR or an employee handbook.” The reality is, if you have one employee or 10 or 100, it’s a really good idea to have formal written policies and procedures. Here’s why your small business needs an employee handbook (and how to create yours).


What should an employee handbook be?

Your employee handbook should be a way to document all the rules for employees who work at your company. What are they allowed to do, what’s not OK, and how should they deal with issues or problems? A handbook should create clear expectations for everyone, and it should be something management can point to when an explanation is needed.

What are the business benefits of an employee handbook?

It saves time and reduces ambiguity when employees have a place to turn when they have questions about your company policies and procedures. First, it empowers them to find answers on their own, and second, it might make for one less knock on your door to ask about PTO accrual or family leave policy. Our study shows your business already spends nearly 18 hours per month on HR-related tasks, so why not take one off your plate? And when you clearly define the expectations of employees and show them what you’ll provide as an employer, everyone will be happier.


Reducing on-the-job ambiguity makes it easier for employees to focus on their work and connect with coworkers. In fact, studies show that when employees feel their work and contributions are interconnected to the business and its success, they stay with the company longer. Most employees leave because they’re not engaged with the organization they work for — only 32% of employees feel engaged at work. According to Mercer, thriving employees are three times more likely to work for a company with a strong sense of purpose. So, creating a sense of belonging and engagement can ultimately leads to improved retention rates, meaning lower recruitment and training costs.


There are also laws in some jurisdictions and industries that require employers to notify employees of certain workplace rights, and a handbook (or field guide or staff manual) is a perfect place to lay these rights out for your staffers (and remain legally compliant). Spelling everything out also clearly illustrates you are aware of and committed to keeping up with employment laws on a state and federal level.

What do you need to include in an employee handbook?

There are no hard and fast rules for employee handbooks. It all depends on the company’s size, whether it’s publicly traded or privately held, the industry, and the related regulations for employees in those companies. In addition to rules and procedures, a handbook can also do things like relay company values.


Whether yours is long or short, but we recommend erring on the side of comprehensive rather than basic to make sure you cover important topics.


Most employee handbooks will include things like:

  • Company mission, values, and culture statements
  • Human resources contacts and legal information including employment rights and obligations
  • What the employer expects from the employees and what they will provide in return
  • Vacation time, sick days, and paid holidays
  • Policies relating to harassment and non-discrimination


Depending on your industry and how you do business, you might also include additional topics like:

  • Standards of conduct, like your dress code, phone use, and social media policies
  • Your work schedule
  • The benefits you offer
  • Safety and security policies
  • Leave policies
  • Injury and accident reporting
  • Performance management policies
  • Nondisclosure, noncompete agreements, and/or policies regarding inventions


And while there are some excellent examples of custom handbooks and some one-size-fits-most employee handbook templates online, we’d like to share some best practices and guidelines on what to include in yours based on your business values and needs.


Three things every handbook should include are:


Employee status

Most states in the US offer “Employment at Will” meaning that the employer and employee are free to terminate the relationship at any time, with or without cause. Though common, this should be explained in the beginning of your handbook.


Equal employment and non-discrimination

Include your company’s alignment with laws like Equal Opportunity, the Americans with Disabilities Act (ADA), and Reasonable Accommodation. This is a good place to include your things like your commitment to diversity and inclusion as well as policies on workplace harassment and how to report issues or make a complaint.


Workers’ compensation

Since workers’ compensation is often a workplace requirement for your employees, we recommend separating it out in your employee handbook. Many states require that employees be informed of worker’s compensation policies in writing. It also shows that you take worker safety seriously. You can include things like reporting unsafe work conditions and policies and procedures after a workplace injury.


Then you should also include things like:


Employee benefits

Benefits are another piece of the full compensation pie. In this section, you can give an overview of your benefits with a supplemental handout that goes into more detail or spell it all out — good if things rarely change. Either way, you’ll most likely want to work closely with your benefits providers or broker of record have detailed information somewhere about the benefits plans you offer for medical, dental, and vision insurance, disability, employee assistance programs (EAPs), or other financial benefits like 401(k)s and health savings plans.

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Time off and medical leaves

This will be one of the most popular sections of your handbook. Your employees will flip here to find out what holidays they have off, how many days of vacation or PTO (paid time off) they will acquire or accrue, as well as your policy on other leaves of absence like jury duty, bereavement, and family or medical leave. There are a number of new state laws on family medical leave, so take time to be sure you are up to date.


Conflicts of interest and confidentiality

Document in clear language what a conflict of interest or a breach of confidentiality could look like to employees noting potential legal repercussions.


Employment relationship

Lay out things like work hours, overtime, breaks, and employee classification. And while there is no federal law governing personnel files, many states have passed laws granting employees the right to view or copy at least some of the contents of their personnel records. So, you may want to clarify your policy around personnel file record access and administration.


Workplace safety

Whether your business operates on the factory floor or in a well-lit retail storefront, it’s critical to you as a business owner to protect yourself and your employees by developing appropriate and compliant safety measures. While you should work on a comprehensive safety assessment with an industry expert separately, here you can outline safety procedures and policies for upholding a drug-free, alcohol-free, and tobacco-free workplace as well as reporting unsafe conditions.


Workplace guidelines

In this section, we recommend covering employee attendance, day-to-day functions, job performance, and disciplinary procedures. Will you have a dress code — and how will you enforce it? What does general workplace performance look like, and what are the consequences should employees fail to meet it? You might also consider putting something in here about terminations and required notices if someone leaves your employment.


This is not a comprehensive list of what to include in your handbook but rather a guideline to begin thinking about what makes the most sense for your business. And remember, it’s not just about compliance and risk management, although those items are exceptionally important.


Your handbook spells out the basics of your HR policies, but it also serves as a valuable communication touchpoint with your employees. You can use it to lay out the “why” behind your business. What sparked your interest and kickstarted it in the first place? How have things changed since then? By including your origin story, along with your mission, vision, and values statements (if you have those created), you can build a stronger connection between your business and your employees.

How to share your employee handbook with your staff

Once the heavy lifting of creating your handbook is over, your job as a people manager has just begun. It’s important to ensure that your employees are reading and understanding the policies outlined. First days are hectic, but your onboarding process probably should include reviewing the handbook with your new hires. We recommend reviewing some of the highlights together  — or, if they read it on their own, making sure you ask questions to follow up — to be sure everyone is on the same page. This saves unpleasant surprises and headaches later.


Then, you’ll want to get their sign-off that they’ve read and accepted the policies in your employee handbook. Automating this part of the process with document templates and e-signatures through an HR service provider saves time and offers a trackable electronic paper trail.


Lastly, remember that your employee handbook is a living document. It will require regular updates as your business grows and new employment laws and needs come to light. Also, remember that you need to live up to the standards you set in your handbook. Whether it’s a harassment policy or a sick leave procedure, inconsistent enforcement can create potential liabilities — and it also may mean an awkward or uncertain work environment for employees.


We recommend setting an annual reminder to go through your handbook, making notes and seeking out the help of an HR or employment law expert and internal stakeholders along the way. If you belong to a professional or community organization, ask the small business owners in your network about their best employee policies, procedures, and practices. Or reach out to your service providers to see if they have HR tools that you can use.


From health benefits to payroll administration to market-competitive salary packages, building a positive and productive workplace starts with taking care of your employees. Building a well-developed and thoughtful employee handbook as part of your HR practices is a big step in the right direction.

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Erin Ellison is the former Content Marketing Manager for OnPay. She has more than 15 years of writing experience, is a former small business owner, and has managed payroll, scheduling, and HR for more than 75 employees. She lives and works in Atlanta.