Employee Handbooks: 
The Pros and Cons of Having One - Plus 10 Key Items You Should Include in your Employee Manual

Read this article by Poul Lemasters, NCBVA Legal Counsel to make sure you know the risks of not having an employee manual - and more importantly - the 10 key items that should be included in your employee handbook.


  • Employee handbooks are far from exciting - but they are a crucial part of any business. Do you have one?
  • If you don’t have one, should you?
  • Do you know that an out-of-date handbook can be as much of a liability as not having one at all?  
  • Do you have the 10 key elements of an employee manual?
  • When is the last time you read and reviewed your employee handbook?

This could be a very short and easy read if you simply go with the cons of having an employee manual and decide you just don’t need or want one. (Spoiler - you want and really should have an employee manual. The pros and cons are a bit of a one-sided argument, and the pros win.) Seriously, an employee manual is something that many businesses either have or should have. There are exceptions, but you can decide yourself what works for you after reading this article.

Should you have an employee manual. The basic contemplation is this; write them down, so you have a reference point; or write nothing down, so you don’t have something that can prove your misdoings.  These two thoughts are opposite extremes, and both have some considerations.  Be clear that I am a proponent of writing things down, but let’s starting with not writing an employee manual.

It does have a sense of simplicity (some may argue laziness).  Not putting your employee policies in writing is a simple concept practiced by a large number of businesses.  Understand that the reason most businesses do not put employee policies into writing is purely by choice and not based on some grand plan.  But there is some logic to this concept.

First, there is the idea of not being able to prove any issues with your employee manual if it’s not in writing.  After all, if there is nothing in the book that says I can’t take a thirty-minute coffee break, then how do you tell me I am doing anything wrong?  The problem with this argument is that policies (even if only verbal) are still binding.  If everyone knows that you only get a fifteen-minute break, then that policy stands.  It may be harder to prove if it’s not in writing, but it still stands. 

The other common argument for not writing employee policies, is based upon improper procedures.  The idea being that it is better to have nothing in writing than have something in writing that your business does not do.  To this argument I agree.  A business with poor, or improper employee policies is potentially at a greater risk than a business with nothing written at all. So, if a business writes an employee manual incorrectly, what is the benefit of having it written?  To name just a few reasons – consistency, accountability and transparency. 

One of the biggest areas of potential liability is inconsistent practices.  Someone stating “We do it this way all the time” is good but showing that your employee manual has a specific way is always better.  In addition, your staff becomes accountable for their actions.  Employees that know what they can and can’t do are now accountable for their actions. For the business it has an objective standard to use for determining who is doing their job correctly.  If there is an issue, the written employee manual provides a baseline to compare someone’s activity. 

Lastly, a written employee manual provides a level of transparency.  In today’s business world it is critical that everything you do has a certain level of transparency.  One example of this can be seen in recent trends in the insurance industry for the deathcare profession.  More and more insurance companies are asking to see employee manuals, among other policies and procedures, for the businesses they insure.  Why?  Because the insurance company needs a clear view of not only the business itself, but also the inner workings of the business so it can properly rate the risk. 

As suggested earlier - you now have the reasons to write your employee manual. The question then hits you, “What do you include in your employee manual?” The list can be daunting, and every business will have different items to consider. Some items like size of your company; types of benefits, as well as local, state and federal laws will also play a part in what you include in your employee manual. The following list contains 10 items that are pretty high on the list - no matter what type or where you are located. Use these as a baseline or a starting point as you create or update your employee manual. And please note - that this is a broad primer and meant to be a guide. Always consult with your own attorney when you make changes to any forms, policies, manuals, or contracts that you use in your business.

1. Employment at-will     

First, let’s make sure we are using the right term. Many people confuse or misuse the term employment at-will and right-to-work. Remember that right-to-work is a term, typically with labor unions, that refers to an employee’s right to refrain from participating in union representation. At-will employment refers to the ability of an employer AND an employee to terminate the employment relationship anytime without any negative consequences.

Second, let’s make sure we understand which states are at-will states. To some level ALL states follow employment at-will; however, there are some common limitations to employment at-will in various states including: public policy, good-faith, and implied-contract exceptions. The public policy exception simply means that you can’t terminate an employee if it violates accepted public policy of your state. For example, in some states it is against public policy to fire an employee as a retaliation for filing a claim against an employer. The good-faith exception is the broadest exception and holds that there must be fair dealings between employer and the employee. Only a few states adhere to this exception, and it prohibits terminations made in bad faith. 

The implied-contract exception, which is the most common exception, occurs when an employer creates a contract - despite the fact that the employer did not intend a contract. One way this is done is when an employee manual does NOT state that the employment is at-will. It is important that your employee manual state clearly - and multiple times that the employment is at-will. Depending on your state, a business may also want to refrain from using the term “just-cause” when referring to termination as well. This term has also been judged to infer an implied contract.

2. Receipt and Acknowledgement

This easily could be the most important part of an employee manual, but this list is not a “Top 10” list, so ignore that this is number 2. Your employee manual should absolutely include a page where the employee signs off stating that they have read, reviewed, and accepted the terms in the employee manual. And, you guessed it, included in the receipt and acknowledgement is a statement that this employment is at-will.

Also, remember to have this receipt and acknowledgement signed annually (during the annual review is the best time). Why? Policies change, and manuals should be updated. You want to make sure the employee signs off annually to show that they are aware of any changes and accept the terms at that time. Otherwise, you could find yourself defending an issue based on the terms when they were hired - not as they stand currently.

3. Employee Classification

It is important that all employees understand how they are classified. This can affect compensation as well as benefits. The main classifications to consider are part-time versus full-time and exempt versus non-exempt employees. Typically, part-time employees are under 30 hours per week, while full-time employees are between 30 -40 hours per week. Having this clearly defined will aid in determining benefits.

Exempt versus non-exempt employees relates to overtime pay. If an employee is exempt, then it means that they are exempt from overtime, while a non-exempt employee must be paid minimum wage as well as any overtime. Minimum wage as well as overtime requirements will be dependent on your state, although most states consider any time over 40 hours per week as overtime.  Keep in mind that to be exempt, the employee must fall into 1 of 5 exemption classifications (Executive, Administrative, Professional, Computer or Outside Sales) AND must also meet the minimum salary threshold requirement which is now set at $35,568 per year or $684 per week. Depending on your business, you may also want to define additional classifications such as independent contractors and seasonal employees.

4. Compensation

Compensation is a wide area and should include several categories such as: wage and salary; recording work time/time sheets; overtime pay; termination and severance pay. As stated above, it is important to classify employees so you can clearly state the difference between hourly wages and salary payments. Along those lines, it is also important to define how hourly employees will record their time. Keep in mind that it is the employer’s duty to have a system to track time - including overtime. If an employee makes a claim that they worked overtime and you have no records to show/prove they didn’t - then you will most likely lose the claim.

It is also important to define your termination pay and severance policy. For most employers, they do not have a severance policy. This is ok - and there is no requirement to provide a severance payment. You should clearly state this in your policy so that you can avoid a claim from an employee that you paid someone else severance - so they are now entitled to it as well. The other termination pay issue is what is owed upon termination. Many states require an employer to pay any worked time plus any vacation time as well. You should define if your vacation paid is only the earned and unused vacation - to limit the amount you may be obligated to pay.

5. Harassment

No employer supports a work environment that allows or promotes harassment in the workplace; but it is critical to put your harassment policy in writing. In today’s world, harassment claims are on the rise, and improper or missing harassment policies can fuel the claim. Keep in mind that harassment policies should cover ALL forms of harassment (physical, discriminatory, personal, psychological, cyberbullying) not just sexual harassment which is what we typically hear about today.

When writing, or updating, your policy make sure you include some key elements including: a clear explanation of prohibited conduct; description of the reporting process (make sure that this includes multiple ways to report and not just to your supervisor); a policy that prevents retaliation for anyone reporting a claim of harassment; and an investigative and disciplinary action.

6. Workplace Violence

Sadly, workplace violence is on the rise. While we all want to imagine that this will never happen at our business; and this only happens to the big businesses; the fact is that this can and does happen everywhere. As a business you need to have a policy on workplace violence. Much like harassment, a business should state what is unacceptable activity and also identify that any violations will be dealt with appropriately.

Another element which is becoming more commonplace in employee manuals is an active shooter policy and procedure. Again, this is nothing that anyone wants to happen, but it is critical to address the possibility and to have a written plan ready in case it is ever needed. While this is a tough subject, it is important and should be reviewed with employees, so they know how it will be enacted if it is ever needed.

7. Benefits

Unless you have a small business with just a few employees, or your just some very cruel business owner, most employers have to provide some benefits to its employees. Benefits could include health insurance, life insurance, dental insurance, retirement, worker’s compensation, as well as vacation, sick leave, personal leave, and even holidays. Obviously, this list can be longer or shorter - and this is entirely dependent on your business. Whatever benefits you offer it is important to list them and define them in your employee manual.

When identifying benefits, you should consider some basic elements. First, identify who is eligible for what benefits. Most part-time employees do not receive the same benefits as full-time employees - but if you do not identify this it could cause issues. Second, many benefits do not go into effect upon hiring date, so make sure to identify when benefits begin. Third, how do the benefits accrue? Do I get 1 week of vacation and 5 personal days upon my hiring? If so, may I please have my first 2 weeks off from work? When it comes to vacation, holidays, paid time off - make sure you identify how their pay will work and any process in place for receiving the benefit.

8. Disciplinary Actions

Unfortunately, almost all business will have issues with an employee and have to discipline them. The question is how will you discipline your employees? Your manual should identify your disciplinary actions and how the process will work. Many people believe in a progressive disciplinary policy. Simply put, this means that a business has several steps in its discipline process, typically including verbal warning; written warning; suspension; and dismissal. In a true ‘progressive’ policy the business would administer these in order, allowing the employee to rectify their behavior. Each time the consequences becoming more severe, until ultimately, they would be terminated.

The benefit to this process is that it provides a fair opportunity to the employee and typically protects the employer from an unwarranted termination. However, the negative of this progressive approach is that it can limit a business from acting appropriately to more severe issues, and also make the time to termination lengthy, forcing an employer to keep a bad employee for longer than it wants. Also, some courts have held that a progressive disciplinary policy reinforces the doctrine of good-faith and limits an employer in at-will employment.

Another way to handle this is to list your disciplinary actions as a list of options - and specifically identify that this is not a hierarchy. Clearly state that the disciplinary action will correspond with the severity of the violation and may include immediate dismissal. You should also include language that all claims will be reviewed, and the employee will have a chance to explain their actions. This still provides the employer their due-process and can help protect your employment at-will status.

9. Schedule

We live in a world where no one seems to work Monday through Friday, 9-5. Jobs today include odd hours; random days; and more and more opportunities to work remotely. Your company schedule is unique to your business and it is important to define it in your manual. Your business may include Saturday as not only a normal workday - but as the busiest workday. Likewise, your business may not have the luxury of getting to enjoy common holidays. All of these elements should clearly be defined in your manual so that no one is surprised at when they are working.

When defining your schedule, make sure to address common items such as: start and finish times; absence/lateness; and lunch/meal breaks. Keep in mind that many states require rest breaks and lunch/meal breaks in a workday of 8 hours. Also, depending on your state, many rest breaks must be paid while a lunch break - so long as it is long enough - can be provided unpaid.

10. Social Media Policy

In today’s world, everyone -including your own business- is on social media. Social media is a broad concept and continues to grow. While many of us immediately think of Facebook and Instagram, don’t forget that it also includes blogging; social networks; business networks; and online reviews.  While you may want to simply prohibit your employees from using social media or at least not mentioning your business in social media - this is not acceptable. Employees have the right to use social media and the right to talk about their employment.

Rather than prohibit, a business should have a clear social media policy that outlines what the employee CAN do. Focus on protecting confidential information; being honest and respectful in any context; making sure that employees express their personal opinions and not speak for the business; and making sure you identify social media time at work versus away from work.

Overall this is a broad look at 10 items you should have in an employee manual. Is this everything? No - but it’s a great start! Remember that there is no perfect employee manual and every manual will be different based on the type of business, where the business is located, and how many employees a business may have. Don’t let any of these factors scare you from having an employee manual. Start with the basics and know that you can always update and modify your manual as you grow.

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