8 Keys to Creating an Effective Employee Handbook

Most companies have policies or procedures governing their employment practices, but they're sometimes maintained informally. This can lead to inconsistent application and confusion about employer and employee rights and responsibilities. An employee handbook formalizes those policies so that employees have a written resource to read and reference. Here are some key steps to consider as you create an employee handbook or update an existing one.

#1: Know your history.

Your company's history, practices, and culture will help set the tone of your handbook and determine what policies to include (see below). Also staying on top of new and changing compliance requirements may necessitate new or updated policies. Think about the information you most need to convey to employees, areas of misunderstanding or confusion, and frequent questions you receive from employees.

#2: Identify required policies.

Although there's no law that requires a written employee handbook, there are laws that require employers to maintain certain policies in writing. For example, a growing number of jurisdictions require employers to maintain written policies on harassment, discrimination, leave of absence and other time off, and/or workplace safety and health rules. In addition, some state and local laws require employers that maintain an employee handbook to include certain information. For instance, Colorado requires employers with an employee handbook to include a copy of the Colorado Overtime and Minimum Pay Standards (COMPS) Order (or poster). Review all required policies that are applicable to your business and include them in your handbook.

#3: Include other must-have policies.

Even when there isn't a specific requirement, certain policies are essential for conveying important information. Some examples include:

  • A prominent at-will statement in the beginning of your employee handbook (except in Montana, where at-will employment is not recognized). This statement reiterates that, absent certain exceptions, either you or the employee can terminate the employment relationship at any time and for any reason. 

  • Employment classifications, meal and rest periods, timekeeping and pay, employee conduct, attendance, and punctuality. 

  • Anti-harassment, nondiscrimination, leave of absence, and workplace safety and health.
#4: Know what policies to avoid.

Just as important as understanding what policies to include is knowing what policies to avoid. These include blanket policies on criminal convictions, withholding final pay until company property is returned, refusing to pay unauthorized overtime/early punch-ins, requiring a doctor's note for every sick day, prohibiting lawful off-duty conduct, prohibiting employees from discussing their pay with coworkers, probationary/introductory periods, and English-only policies.

#5: Draft policies that reflect company values.

Many employers set a higher standard than what's required by law. This can be reflected in the language used and the policies selected. For example, to help maintain a harassment-free workplace, many employers will adopt a broader definition of sexual harassment than what's outlined in federal, state, or local law.

#6: Set the tone.

Employers often include a welcome statement or section in their handbook to help set the tone. This part of the handbook often provides a brief history of the company, defines the company's mission, explains what makes the company unique (e.g., its core values and work culture), and describes the purpose and importance of the employee handbook.

#7: Create an acknowledgment form.

Each employee should be required to sign and date an acknowledgment stating that they're responsible for reading, understanding, and complying with the employee handbook. Also, consider including a statement reinforcing the at-will employment relationship. Explain that the employee handbook is not an employment contract, management retains the right to interpret policies, and the company reserves the right to revise the handbook at any time.

#8: Gather feedback.

Ask a few people within your company to provide feedback on your draft handbook and acknowledgment form and then consider having legal counsel review your handbook to help ensure compliance with all applicable laws.


As you're building your employee handbook, develop plans for training supervisors on how to interpret and apply the policies, introducing and distributing the handbook to employees, and reviewing and updating the handbook as laws or company practices change.

This story originally published on HR Tip of the Week – a blog providing practical information on hiring, benefits, pay, and more – by ADP®. Learn more about how ADP’s small business expertise and easy-to-use tools can simplify payroll & HR at adp.com.

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