How to Create an Effective Employee Handbook

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Do you have a clear understanding of what your company’s policies are? If not, it’s time to set the conditions of employment. An employee handbook and manual are long and complex documents that cover every aspect of employment law. However, in this article, we’ll highlight the essential parts and how they relate to day-to-day operations at your business.

What is an Employee Handbook?

employee handbook

An employee handbook, otherwise known as an employee manual or procedure manual, is a long-form document covering rules and regulations in the company. It covers everything from your mission statement, company culture, company values to employee policies, compensation policies, dress code, code of conduct, and more. 

Employee handbooks are typically handed out to new employees during their first day of orientation. In most cases, the facilitator discusses the various parts of the employee manual to set the conditions of employment clear from the start.

Why Should Companies Develop Employee Manuals?

Employee handbooks are used by companies of all sizes, typically for three reasons:

  • To establish expectations in the workplace. Ensuring each employee knows what’s expected of them from their work tasks to rule enforcement helps create a cohesive environment where everyone feels like they’re contributing.
  • To provide members with resources or instructions about how to do certain things related to their job duties, such as behavior standards, dress code, and safety guidelines.
  • To clarify employment laws and regulations, so there isn’t any confusion among staff members about what they need to know when in terms of annual reviews or disciplinary actions

People from all levels and departments, including human resources, legal staff, department heads, supervisors, and managers, are responsible for devising an effective employee manual.

Benefits of an Employee Manual

employee manual

Although federal or state laws don’t require employee manuals, it’s usually a good idea to have one just in case. Here are some benefits of creating an effective employee handbook:

  • It serves as a set of guidelines for employees, so they know the company policies, procedures, and expectations on their jobs
  • Handbooks can help employers stay compliant with various federal or state laws by limiting liability when there is no other documentation about how something should be handled at work. For example, if someone files a discrimination suit against you because you don’t allow religious headwear during shift hours, your manual may mention that dress code doesn’t include this type of attire which will serve as evidence that this has been communicated before making any decisions on who gets fired or not.
  • Employee manuals also give supervisors and managers clear instructions on managing the company policies and procedures, including disciplinary actions, code of conduct, hiring policy, etc.
  • It also gives supervisors and managers clear instructions on how to deal with various situations that may arise during work hours.

Overall, procedure manuals set your employees up accordingly about what you expect from them in terms of moral fortitude and performance at work. It can be a great tool for making sure expectations are aligned across the board so there’s no confusion anywhere down the line when evaluating progress throughout the year.

13 Sections of an Employee Handbook

An employee handbook covers everything. Although there is no rule of thumb on how long an employee handbook should be, the most common length is between 20 and 100 pages.

The content in your employee handbook depends on what type of business or organization you’re running. However, there are a few standard elements. Here are 13 essential parts of procedure manuals:

1. Preface

In public speaking, experts suggest starting with an executive summary of the entire speech. The same concept applies to employee handbooks. The first part of your manual should contain the basics and introduction. You want to let employers know that this entire manual is all about employment laws, so they’ll know what they’re in for. 

Welcome the employees and let them know you’re grateful to have them onboard. Another crucial part of the preface is also a brief company overview. Include the company’s founder or CEO. Make sure you don’t dwell on this for too long, as you’ll cover this in the next section. 

You may even include a favorite quote or motto from the founder to keep the handbook fun and inspirational. Then follow it up with the purpose of the handbook. You want to let employees know that the handbook contains relevant information that guides them in their work routine. 

PRO TIP: Always include a disclaimer section that emphasizes the employee handbook isn’t a binding contract.

2. Company Profile

This part is where you elaborate on information about your company. Make this section compelling as this can put your company in the best light. Here are some elements you need to include in this section: 

  • Company history. Don’t bore employers with mundane company introductions. Integrate storytelling when writing your company history. Include the reason behind why the company was established in the first place. Focus on the passion that drove you to build the organization.
  • Core values. Your core values will shape your employees’ work ethic, methods, mindset, and behaviors. Make sure you mention the values that your company was built on. 
  • Mission. The company mission should be all about what the purpose of the organization is. Focus on the current issues that led you to establish and offer products or services to resolve those issues. Also, mention who you’re working hard for, such as your target customers. 
  • Vision. Your company vision should be the direction of where you want the company to go. Are you aiming to be the best in your industry? Do you want to be one of the biggest corporations in the future? It doesn’t have to be a precise plan. But at least show employers you’re looking at the bigger picture and long-term goals. 
  • Goals. Indicate company goals to motivate new hires to align their goals with the entire company. 

Company culture. Culture is what brings personality to your organization. The company culture also dictates how employees will act, decide, and behave throughout their time in your company.

3. Orientation

This section makes employee onboarding easy and comfortable. On top of handing out forms for employees to fill out, you also have to start with the dress code. 

Office dress codes can vary. And there are four types:

  • Business formal is the highest and most formal dress code, which requires men to wear suits and ties. As for the women, they can wear a skirt or pantsuit with subtle accessories. 
  • Business professional refers to a less formal version of business formal. You’ll see minimal patterns and colors for men’s suits, ties, and women’s accessories. 
  • Business casual means you don’t have to wear stockings, suits, or ties daily. There’s flexibility in casual clothes such as skirts, cardigans, jackets, khakis. Yet, this dress code remains a level of professionalism. 
  • Casual dress codes are the least formal compared to the others. You’ll see more patterns and bright colors. Men can wear pants or slacks with polos, while women can wear skirts or fitted blouses with a cover-up.

On top of the dress code, this section also includes the parking benefits. For example, is the parking free, is it deductible from your monthly salary, are there designated parking spots. 

Finally, include the identification when coming to the office every day. The I.D. employees need to wear or keycard provision for entering the office.

4. Health and Safety

Your employee’s health and safety should be a priority, and that’s why this section should be in your employee handbook. Here are some things you need to cover:

  • Safety procedures. Discuss where the fire exit is, where to find fire extinguishers, first aid kits, etc.
  • Emergency procedures. This part should provide a step-by-step guideline on answering emergency procedures such as natural disasters or violence. 

Accidents. In case of accidents, you should include a proper method of filing and reporting an incident.

5. Employment Classifications and Schedules

The employment classifications and schedules part of your employee manual is also another vital section. This discusses the type of employment employees are offered, such as part-time, full-time, project-based, contractual, etc. 

Additionally, the schedule for work and overtime work is also explained in this part. For instance, federal or state laws mandate overtime policies. You may include the legal clause in this section and refer employees to a more detailed one online. Finally, discuss how much they’re paid for overtime hours and the maximum overtime hours they’re allowed weekly or monthly. 

Also, discuss the schedule of the work hours. Do employees have a rigid nine-to-five schedule where they clock in and out? Are you an output-based company where employees have flexible work hours? Can employees opt for a work-from-home set-up?

Finally, discuss the attendance policies. Employee attendance is crucial for evaluations, productivity, and overall performance. Set regulations on what the disciplinary action is for tardiness and reward employees with perfect attendance.

6. Compensation and Benefits

Here comes the fun part of the employee handbook — compensation packages and benefits! Employees look forward to this section, so make this one good. Here are the topics you need to cover in this part:

  • Pay. Although this part has probably been discussed in the initial onboarding process, you may want to reiterate some vital details such as the monthly pay, pay-grade structure, distribution, and frequency. 
  • Insurance. Health insurance packages are one of the factors that help employees decide whether or not they want to work for a particular company. You can offer some insurance benefits: vision, dental, life insurance, employee discounts, disability, etc. 
  • Retirement benefits. Let employees know what retirement benefits they have, such as an RRSP or a 401(k).
  • Bonus. Do employees get a commission from sales? Do they get incentives for being high flyers? Are employees entitled to holiday bonuses? Include all the bonuses and incentives, so employees know what to work hard for to achieve it. 
  • Additional benefits. Some companies offer free subscriptions to gyms or online tools. Some even partner with restaurants or cafes, so employees get a discount whenever they dine in. Additional office perks can also mean providing free counseling services for the employees’ mental health.

7. Leave

There are federal and state leave laws that companies must adhere to. And this should be included in this section. Discuss how holidays affect their pay and schedule, and mention the types of leave that are paid and unpaid. Here are the most common ones:

  • Bereavement leave
  • Maternity or paternity leave
  • Vacation leave
  • Personal/special leave
  • Community service leave
  • Study leave
  • Sick leave
  • Long leave of absence

If you want more details about each type, check this article out.

8. Performance

The performance section of the handbook serves as a guide or motivator for employees to do better. High achievers always look forward to performance evaluations as they strive to climb the corporate ladder. 

A healthy company culture also provides growth opportunities for all employees through regular assessments. Therefore, write down what the key performance indicators are to be eligible for a promotion. Other performance factors should also include employee attendance, diligence, individual goals, efficiency, productivity, etc. 

Moreover, let employees know that the management keeps an eye on these metrics via regular performance reviews. Set a schedule. Are you doing it biannually, quarterly, or annually? What is the type of performance assessment employees should expect? 

Knowing that these growth opportunities are in place gives employees a sense of relief that excellent performance doesn’t go unnoticed.

9. Appropriate Use

This section should list down all the company equipment, tools, and amenities. Then discuss how employees should handle company property. 

Proper use of computers, security systems, company telephone, vehicles, and proper internet usage are some common topics in this part.

10. Code of Conduct

Instilling the right values and culture encourages appropriate employee behaviors. Therefore, make sure to discuss the code of conduct or conduct policies they must adhere to. Some are: 

  • Anti-harassment policy
  • Anti-discrimination policy
  • Anti-theft policy
  • Drug and alcohol use
  • Code of ethics
  • Conflicts of interest, etc.

Ensure to thoroughly discuss each, so employees are well-informed whenever one of these situations arises. Additionally, teach employees how to properly report in case there’s a violation of these policies. Like reporting emergency cases, there should also be a proper step-by-step guide on filing an official incident report.

11. Discipline and Termination

The primary objective of this section is to let employees know that there are proper disciplinary measures for every committed misconduct. Here are the usual steps:

  • Step 1 – Counseling and verbal warning
  • Step 2 – Written warning
  • Step 3 – Suspension and final written warning
  • Step 4 – Recommendation for termination

In some cases, the issue can undergo an appeals process wherein employees may appeal for dispute. 

In case of resignations, you must also include the process for resigning, which is providing a two-week notice. Finally, establish if you want employees to go through exit interviews.

12. Glossary

This is the section where you list down all business jargon used in the employee handbook. Jot down all the words, abbreviations, or acronyms.

13. Agreement

The last part of your employee manual is the agreement section, where you attach all forms or agreements. The employee then signs and acknowledges the receipt of the agreement. By signing, the employee also confirms that they understand every section in the employee handbook.


An employee handbook is indeed critical when onboarding new hires. It can help guide employees, and it also helps keep things consistent throughout the organization. It’s a comprehensive guide that educates employees about their work environment and provides guidelines for day-to-day operations and management expectations. Before printing the employee manual, make sure to let a professional browse through it to ensure legal protection for both parties.

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