Employee Handbooks – A De-Risking Tool

Effective human resource management constitutes the foundation of a successful business enterprise. It encompasses a broad array of actions, including compensation & benefits, hiring, retention, employee relations, termination, and compliance requirements at the federal, state, and local levels. Naturally, this can be an area of complexity and potential risk for business owners.

Developing an ‘ Employee Handbook ‘ can be an invaluable tool for business owners if you want to establish essential values of transparency and consistency across your company. Unlike popular beliefs, large businesses aren’t the only ones who need an employee handbook. Organizations of any size can benefit from a comprehensive set of company policies and procedures. For any business owner, having a handbook is an effective means to reduce employment-related risks and increase the workplace satisfaction of its employees.

What is an Employee Handbook?

An employee handbook can be customized to the needs of any work environment. Generally, an employee handbook is a detailed overview of company policies, essential procedures, guidelines, and employee benefits. The handbook should set clear expectations for employees and include both the employer’s legal obligations and the rights of the employees.

Clear, written guidance helps standardize personnel and benefit policies and prevent misinterpretations of those policies, thereby avoiding misunderstandings, complaints, and job dissatisfaction. Notably, a well-written employee handbook acts as armor in the case of employee lawsuits and claims, such as instances of wrongful termination of services, harassment, and discrimination at the workplace.

Additionally, an employee handbook can be the crucial first introduction to the business for new hires. It helps set the right expectations and gives significant insight to new hires about your company’s mission and vision.

What is included in an Employee Handbook?

A good employee handbook should be part of new employee orientation and contain information about the company, a letter from the CEO or the company President welcoming the new employee, details of the company’s mission, vision, purpose, values, and broad business goals, and objectives. A handbook should also detail the company’s obligations to its employees and non-compete, non-disclosure, and confidentiality agreements if the company uses them.

An employee handbook also gives information about employee compensation, other benefits, detailed knowledge of paid time-off, and other terms & conditions of the employment.

Additionally, a handbook can address day-to-day employment matters such as attendance expectations, work hours, closing due to severe weather conditions, or use of company property.

In a nutshell, a good employee handbook should include-

  • Ethical and Professional Standards of Conduct and Performance: example issues include conflicts of interest, confidentiality, competition, rights to intellectual property, resignation process.
  • Information on Work Schedules
  • Anti-Discrimination & Workplace Diversity Policies: examples include equal employment opportunity, ‘whistleblowing’ & anti-harassment policies, details of reporting procedures, and accommodations for disabilities.
  • Conflict of Interest Statements & Non-Disclosure Agreements
  • Compensation Details: outline wage information, including overtime, bonuses based on performance criteria, salary and promotion, reporting on time, and breaks.
  • Safety and Security in the Workplace: examples include testing for drugs, workplace harassment, safe driving, regulations for all electronic communication, internet usage, social media, and rules for business travel.
  • Information on Employee Benefits: Examples include retirement policies, medical insurance and benefits, training, licenses, and certifications.
  • Company Leave Policies: Examples include sick leave, vacation leave, medical and family leave, statutory domestic violence leave, bereavement leave, voting leave.
  • Employee Complaints and Resolution Tactics
  • Details of the Employment Relationship: example issues include classification categories of the employees, internships, background and reference checks, family, and personal relationships.
  • Use of Company Assets: examples include tools, keys, access to employee and client files (confidentiality rules), computers, networks, communications devices policy.
  • Discipline at the Workplace: examples include appeals (written and verbal), termination and suspension of employment, and re-hiring opportunities.

Why does your company need an Employee Handbook?

Companies in ‘growth mode’ hiring many new employees should review what type of message they are sending out to their employees (new and current). Risk managers within the company should ensure documentation of all company policies and review how they are implemented.

Companies should periodically review and update the handbook and other related documents to safeguard themselves and their employees against constantly changing federal, state, and local statutes, rules & regulations, and cases. It is also essential that companies reevaluate their policies and procedures to consider evolving and changing employment norms. This will also ensure that all the employees have a ‘best-in-class workplace experience and environment. Compliance programs can effectively reduce and monitor their risk of public or private liability for not being fully compliant with all employment policies and procedures.

When implemented correctly, an employee handbook helps lower risks associated with employment for present (and future) company owners, management & stockholders. They also help create a workplace culture wherein all the employees clearly understand their roles, duties, functions, and employment benefits.

Employee Handbooks Establish Consistency in Policies and Application

Many employees perceive they are being treated fairly and equally only when a procedure is well documented and it is consistently applied to them and everyone else. Managers and supervisors can ensure this happens when employees have access to clear guidelines for themselves and what to expect from their teams.

Maintaining and communicating procedures is especially important when employees believe they have been subject to unfair or inappropriate treatment. With clear guidelines, employees know the course of action that will be taken and how such a charge will be investigated.

Furthermore, a handbook can play a critically important role when an employer must take administrative or disciplinary action. If the handbook documents these policies and procedures, it is valuable to have all employees complete a written acknowledgment on reviewing the employee handbook when hired and then on an annual basis (or as necessary when changes are made).

Final Thoughts – Why An Employee Handbook Matters When Planning For an Exit

Ultimately, a well-developed, adequately documented handbook lowers potential risk for the buyer (and therefore potentially increases the value of your business) on multiple fronts:

  1. Lowers potential employment risk – well-documented employment policies reduce the chance that a buyer will face an unforeseen employment liability claim in the future.
  2. Reduces risks to sustaining future performance – well-documented processes and procedures increase the likelihood that the business will continue to perform at a high level after a transition.
  3. Provides clarity for everyone involved – just as handbooks provide clarity to employees of what’s expected of them, they also clarify owners and managers the promises made to employees. This is particularly important when an organization goes through a transition of ownership, leadership, or management.

Dan is the Founder of Quantive and Value Scout. He has two decades of experience in leading M&A transactions. Additionally oversees Quantive's valuation practice and has performed thousands of business valuations.



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