SME’s Guide to Creating Your First Employee Handbook

Hiring staff is a big responsibility and it’s vital that as a business owner, you approach HR correctly with good policies and best practices in place. Whilst there are many HR factors that you will need to consider, creating an employee handbook (also known as a Policies and Procedures Manual) should be a priority if you are looking to grow your team.

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Why Do I Need an Employee Handbook?

It’s important that such documentation exists because they set the correct tone from the get-go and establish a level playing field of transparency and trust among your growing business team.

The handbook is a public statement about how your company will deal with situations in the workplace, how you will implement employee legislation and what standards you expect from your people. Because the same standards apply to everyone, it is a statement of your intention to treat everyone equally which is important for both morale and from a legal point of view.

The most widely recognised benefit of having an employee handbook is the fact that it can help when your business is faced with employee legal disputes. The book is both a reference for managers on how to handle situations as well as a guide for employees to understand their entitlements and your legal obligations as an employer.

This might sound alarmist, but what does the alternative look like? I.e. not having these measures in place. How would an employee know that they can’t take copyright materials with them when they leave, for example? This in particular is important because when it comes to intellectual property it’s much easier to hold someone for breach of company policies than it is to take them to court for theft. In fact, one of the biggest benefits to having an employee handbook in place is the way that it works to mitigate the risk of employee misconduct and discontent in the first place.

Prevention is better than cure, after all.

How Does a Handbook Differ from a Contract?

A contract of employment is written for, and legally binds, only the individual employee who signs it. It contains only the legal rights and obligations of employees and they must be consulted and agree to any changes made to it.

Compare this with an employee handbook which should contain expected behaviours and practices that may not be enforceable by law such as punctuality. This book applies to everyone in the organisation, not just one employee, and you have the flexibility of updating the handbook when necessary so long as doing so is communicated.

What is Best Practice for my Business?

To follow best practice, you will ideally have both an employee contract for each person as well as a more general employee handbook in place at all times.

It is helpful if you include the phrase “the employee agrees to comply with all current and future policies of the employer” within the employee handbook, as well as a clause that allows you to make changes to any of the policies and procedures in future.

While it is sometimes necessary in business to be agile and react quickly to external and internal change factors, it is best practice to consult meaningfully with your employees and/or their representatives if you plan to amend policies or introduce new ones, especially where there will be an impact on their work, environment or benefits package.

What Areas Should the Employee Handbook Cover?

Regardless of the size of your company, the following policies are considered “must-haves” within your employee handbook:

  • equal opportunities policy
  • recruitment selection process
  • discipline and grievance procedures
  • dignity at work policy (including bullying and harassment)
  • unauthorised absence riles
  • your employee “Code of Conduct”

There are some other essential policies and procedures to outline, however some of these can be incorporated into the employee contracts / agreements, depending on what works best for you:

  • annual leave and public holidays
  • time in lieu policies and statutory flexible working arrangements
  • sickness reporting, pay rates and long-term absence procedures
  • salary and pension information
  • statutory retirement rules

In addition to these lie the “advisable policies”, not required by law but best practice would cover their inclusion in your employee handbook:

  • induction information
  • performance and capability policy (to include appraisal process)
  • training policy
  • redundancy policy
  • diversity policy
  • whistle-blowing procedures
  • financial procedures
  • digital policies around internet and mobile phone usage
  • data protection policy
  • special leave policy
  • career break policy
  • volunteering
  • risk management
  • child or vulnerable adults protection (where appropriate)
  • health and safety

If your company has a board it’s also advisable to include a section on their responsibility, composition and the process for appointing new trustees.

What Defines a Good Policy?

Though an employee handbook should communicate your intention to protect both your employees and your business, it isn’t simply a line of defence. It should equally be a force for good – including policies of positive messaging underpinning your company ethos. That makes it a great induction tool, introducing new employees to your corporate vision, mission and values.

A well-written policy will clearly link to your business strategy and have a solid purpose. They will be written free of jargon, using plain English and be easily understood by everyone.

Good policies are flexible, too, adapting to changes inside and outside the business. You will develop good policies with the involvement of your team and any stakeholders such as employee representatives, ensuring they fit your business culture.

And what good is a policy if it languishes in draft? The best policies are those which are communicated out succinctly to all those it applies to. Bear in mind that some policies may require briefings, talks or training before they can be properly understood and applied.

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About the Author

Jerome Forde is a HR and employee relations specialist with almost 30 years’ senior-level experience in complex public, private and not-for-profit organisations. Jerome founded FordeCloud, a HRIT platform that uses the most advanced cloud technology to bring a virtual HR office to start-ups and SMEs.