Why you need an employee handbook for your small business (how to create one)

  • An employee handbook is a great way to communicate your policies, procedures, and expectations to your employees.
  • Small business owners have a legal responsibility to inform their employees about their rights and protections under state and federal law, and employee handbooks are an ideal place to do so.
  • It can be difficult to know what to include in your employee handbook, but Homebase HR Pro gives you access to certified advisors who can help you create the best resource for your small business and team members.

What is an employee handbook?

An employee handbook, also known as an employee manual, is a resource that employers give new hires before or during their first day at work. It can include information about your business, your mission statement, your values, and your workplace policies and procedures. Your handbook should also detail crucial employee rights information, which employers are legally required to provide to their workers.

Are employee handbooks required by law?

No, employee handbooks are not required by law. Currently, there’s no legal requirement for you to provide an employee handbook to your staff members.

But, according to state and federal law, employers need to inform employees about their paid time off (PTO) and sick leave policies. They also have to advise new hires about certain workplace rights and protections, like those outlined by the Equal Employment Opportunity Commission (EEOC) and the Family and Medical Leave Act (FMLA).

Disclaimer: This article wasn’t written by a legal expert and shouldn’t be considered legal advice. We suggest you contact an employment lawyer or HR expert to answer any legal and compliance questions.

3 reasons why you should write an employee handbook

An employee handbook is a small business best practice for employers and employees alike. Here are the three biggest reasons why:

  1. Help improve employee understanding of company policies: When your mission statement, core values, code of conduct, dress code, anti-harassment policies, and other company culture guidelines are well-prepared and laid out, it can reduce a lot of questions and confusion. These elements help employees feel informed and confident about what’s expected of them in the workplace.
  2. Ensure team members have a written reference of any information required by law: While you’re legally obligated to display labor law posters in public areas of your workplace, employee handbooks provide team members with a central, comprehensive source of information about their legal rights and privileges.
  3. Stay legally compliant: A comprehensive, up-to-date handbook will help you prove your compliance in court if an employee files a complaint against you.

If you don’t currently have an employee handbook for your small business, Homebase HR Pro can help. Our certified HR experts can provide you with employee handbook examples and even create a template that suits both you and your employees. We’ll also send you labor law alerts, so you know when it’s time to update your policies.

What should be included in an employee handbook?

Your employee handbook should contain several sections to ensure new hires understand your business and values as well as the procedures and policies they have to follow. It should also detail the employee rights you’re legally mandated to communicate.

Here’s a more in-depth list of what to include in your handbook:

  • Your business mission statement and background: This helps new hires understand the way you do business, as well as your goals.
  • The handbook’s purpose: Your new employees will want to know why it’s important and how they should use it in the future.
  • An Equal Employment Opportunity statement: Let employees know explicitly that your business doesn’t discriminate based on race, age, religion, national origin, sexual orientation, disability status, or gender identity.
  • Your employees’ rights: For example, you’ll want to explain what legal privileges your employees have access to under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and Title VII of the Civil Rights Act.
  • Your workers’ compensation policies, including how employees can file a claim in case of workplace injury.
  • Your workplace policies and procedures, which include:
    • Role and responsibilities
    • Wages and compensation
    • PTO and sick days
    • Workplace safety protocols
    • Disciplinary and termination procedures
    • Whether your employee has to agree to an at-will employment arrangement, where the new hire can be fired or quit at any time for any legal reason.

6 steps to write an employee handbook

As a business owner who cares about their employees, you want to make sure they’re armed with everything they need to know about your business, their responsibilities, and their rights. With that in mind, here are the six steps you should follow when writing your own employee handbook:

  1. Describe your business and explain the purpose of the handbook
  2. Provide mandatory legal information
  3. Set expectations around wages, hours, and time off
  4. Address safety practices and protocols
  5. Establish workplace expectations
  6. Provide a disclaimer

1. Describe your business and explain the purpose of the handbook

Start by introducing who you are and what your business is all about. Give a brief history of the company. Share your business philosophy and provide insight into the culture you’ve worked to create. Then, briefly explain how employees should use your handbook throughout their tenure with your company.

So, for example, if you own a small chain of cafes, you can tell the story of when and why you opened your first cafe, how your business has grown, and how your business culture and values have evolved since then. Then, let your new team members know that the handbook isn’t just a useful manual for onboarding and training — it’s also a valuable resource they can use to find answers to any questions they may have in the future.

2. Provide mandatory legal information

Employee handbooks help protect you against claims of noncompliance with federal and state employment laws. Governments on both federal and state levels usually require employers to provide certain information to their staff, including the following:

Paid time off (PTO) or unpaid leave policies

Your PTO and paid sick leave policy will depend on your business model as well as the state laws that apply to you. For example, New York state employers that make more than $1 million in net income are required to provide 40 hours of paid sick leave to employees annually, while those that make less are required to provide 40 hours of unpaid sick leave annually.

In general, if your business is covered under the FMLA, you have to offer 12 weeks of unpaid leave per calendar year to any employee who has a serious health condition or a family member with a serious health condition.

You should also make your employees aware of other legally mandated leave policies for circumstances like military service, disability, voting time, or bereavement.

Anti-discrimination policies

You need to include anti-discrimination policies in your handbook, along with any additional state non-discrimination laws that you may be subject to. This not only keeps you legally compliant and protects you from complaints in the future — it also lets employees know that you’re serious about creating a safe, inclusive environment.

The federal anti-discrimination law “prohibits employers from discriminating against applicants and employees on the basis of race, color, religion, sex, and national origin (including membership in a Native American tribe),” according to Title VII of the Civil Rights Act.

Workers’ compensation

Workers’ compensation is a kind of insurance that employers — not staff — pay for. If employees get injured or sick as a direct result of their job, they can file a workers’ compensation claim to receive medical care and/or cash payouts.

In your handbook, clearly outline the workers’ compensation policies outlined in the state and federal laws that apply to you. It’s also important to detail how your employees can file a workers’ compensation claim should they need to.

3. Set expectations around wages, hours, and time off

Now, it’s time to get to the meat of the employee handbook, which outlines the information that employees will most likely refer to on a regular basis.

Time tracking, attendance, and time off

Explain to both full-time and part-time employees how you track their time and how many hours you expect them to work per shift and per week. You should also detail your overtime policy, including which employees are exempt and non-exempt from mandatory overtime. And if you use Homebase, include a guide on how to use our online time clock to verify staff members track their hours properly.

You should also discuss your attendance guidelines, including your policies about tardiness and how many unexplained absences trigger a disciplinary action or termination.

Then, detail your time off policy and make sure your employees know how to submit a time off request. If you have different rules for sick leave and vacation time, break down how the process works for each kind of leave in detail.

Wage practices

Describe how your pay structure works for every type of employee in this section. And if you offer bonuses, explain how team members can earn them and how you distribute them.

Make sure staff know you’ll deduct taxes based on the federal and state rates, as well as any other applicable deductions like for health insurance or 401(k)s.

And finally, include an easy-to-understand payroll calendar, so employees know when you’ll pay them and how often.

Employee benefits

If you offer standard benefits like health insurance or pension funds, explain which employees are eligible for them and what they have to do to enroll. For instance, part-time employees or employees that work less than a certain number of hours per month may not qualify for a benefits package. Also, be sure to include a list of the documents that employees need to set up their benefits, like the necessary forms to enroll in a health insurance plan.

And where applicable, other benefits you should mention in your handbook are:

  • A flexible work schedule
  • Stipends for childcare, education, or wellness
  • A health savings account (HSA) or flexible savings account (FSA)
  • Student loan assistance
  • Dedicated time off for volunteer work
  • Career development opportunities
  • Employee discounts and rewards

4. Address safety practices and protocols

Depending on your industry, workplace safety topics could range from how to operate hazardous machines in a warehouse to the right type of shoes to wear to prevent slipping in a restaurant kitchen. But here are some general practices to include in your safety guide:

Drug and alcohol policies

To keep your workplace safe, you should have some kind of drug and alcohol policy in place. For example, make it clear that employees aren’t allowed to drink alcohol or consume marijuana on duty, even if you live in a state where recreational drugs are legal. You can also add that if managers or supervisors suspect that a staff member has come to work under the influence, they may be sent home without pay.

Some workplaces even implement a drug or alcohol testing policy. If that’s the case for your business, ensure your policy follows any state laws that touch on the subject, and:

  • Outline a clear set of rules that you can apply to everyone consistently and without bias so you don’t test some employees and not others.
  • Make sure employees know they’ll only be tested after giving their informed consent.
  • Explain your procedure for reasonable suspicion drug testing, where applicable.

Safety and injury policies

Explain in detail what employees need to do to maintain a safe work environment and comply with Occupational Safety and Health Administration (OSHA) standards. This may mean they need additional training or certifications, and if that’s the case, provide staff members with the resources they need to complete them.

In accordance with OSHA, let your employees know they have the right to report an unsafe workplace, incident, or injury. This means they can request a workplace inspection if their work environment is hazardous or not up to standard. They can also file a whistleblower complaint if they feel they were retaliated against after their initial report.


Be very clear on your anti-harassment policies, which should include sexual, verbal, and bullying. Dictate what harassment looks like and clearly establish the consequences of violating the policy.

In addition to that, the law requires employers to establish an official harassment complaint process for their businesses. That means you should provide your employees with a step-by-step protocol they can follow if they’re being harassed.

Depending on what state you operate in, you may be subject to anti-harassment training requirements. If so, detail those programs and how to complete them in this section as well.

5. Establish workplace expectations

Be upfront with your employees about how you expect them to behave while they’re at work. This means your handbook should explain your policies and procedures for:

  • Changing work schedules
  • Showing up to work on time
  • Dress code
  • Regular shift break requirements
  • Workplace behaviors like language use, team cooperation, and customer service

Make sure you also focus on the reasoning behind your policies, linking them back to your core values. If you set your standards early through your handbook, you have a better chance of creating the type of company culture you wish to see.

Disciplinary processes

After detailing what your company values and expectations are, let your employees know what will happen if they disregard or don’t follow your handbook guidelines. Use clear, straightforward language when describing what the disciplinary process involves and the number of warnings they’ll receive before termination becomes an option.

It’s okay to use common example situations to illustrate how your disciplinary process works, but avoid going into too much detail or referring to real-life incidents. In attempting to imagine every kind of infraction, you may provide loopholes that employees will unintentionally exploit. For example, if you tell your restaurant staff they can’t do any work off the clock because it’s illegal, they may misunderstand and stay clocked in at the workplace after they’re done their shift, accruing overtime hours without letting their manager know.

6. Provide a disclaimer

After your new team member reads your employee handbook, make sure they sign a form stating they understand its contents. Be sure to include a caveat stating that it’s not an employment contract — It’s simply a manual that provides information about all your company policies, so it’s not legally binding.

You should also include a note that explains that some company policies may change in the future and that rules may still apply to conduct or actions not mentioned in the current handbook. That way, you still have some control and discretion if unforeseen circumstances arise.

FAQs about small business employee handbooks

homebase customer photo homebase customer photo

When should I write an employee handbook?

You should write an employee handbook before you hire any employees. Although employee handbooks aren’t required by law, employers are legally required to provide certain information to their employees. The best way to make that information available to new hires is with an employee handbook, where you’ll detail your policies about:

  • Hours
  • Wages 
  • Overtime
  • Benefits
  • Paid time off (PTO)
  • Workers’ compensation
  • Sexual harassment
  • Non-discrimination

When will my employees use the handbook?

Your employees will use their handbook:

  • During onboarding and orientation — This is when they get a detailed introduction to your brand, business, policies, and procedures and begin to put them into action.
  • When they have questions about their workplace rights — Employers have a legal obligation to provide information to employees about their hours, wages, overtime policies, and protections under the FLSA, EEOC, and Civil Rights Act. The best place for staff members to find this information is in your handbook, and documenting it also protects you from potential legal issues.
  • When they need to review policies, procedures, workplace expectations, or benefits information — You can’t expect team members to remember everything they learned during onboarding, so it’s a good idea to provide them with a copy of the handbook they can take home. 
  • When they have doubts or questions about safety practices and protocols: While you should also publicly display posters with relevant safety policies and procedures for employees to review while they’re at work, the best way to keep employees informed and safe is to make sure they can reference safety procedures at all times.

Who writes an employee handbook?

A business owner or experienced manager typically writes an employee handbook. But they can ask co-owners, supervisors, or other managers to contribute to it and make sure it reflects their business mission and brand. After that, they should talk to an employment lawyer or reach out to an HR advisor with a tool like Homebase HR Pro. They’ll review your policies to make sure they’re compliant with the local, state, and federal laws that apply to you.

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