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That’s the total amount U.S. businesses paid in workplace class action settlements in 2020 alone – and small businesses aren’t immune. From discrimination to wage and hour disputes, settlements have been on the rise in recent years and COVID-19 has seemingly accelerated this trend.

Fortunately, you can prevent many of these disputes with one document – an employee handbook.

What is an employee handbook?

An employee handbook is much more than just a document detailing company policies and procedures. It’s a crucial handbook that helps protect your small business, minimize risk, and empower your employees to work more productively.

So, how could a simple document offer this much protection?

It’s because an employee handbook sets expectations for your employees and managers. It ensures they are aware of their responsibilities and helps you meet your obligations as an employer. As a bonus, it gives you another avenue to communicate your organizational values and mission.

Are employee handbooks legally required?

Although there’s not a federal or state statute requiring a handbook, it’s one of the most critical documents small businesses like yours can have. There are many benefits to having an employee handbook.

Here are 11 reasons why your business needs an employee handbook.

11 Reasons Why Your Business Needs an Employee Handbook

1. Introduce employees to your organizational culture    

Culture is the heart of every organization, and it starts with your values. Unfortunately, a startling 19% of employees either don’t understand their company’s core values or they simply don’t know them. Don’t let your business become another statistic.

By including your organizational values and mission in your employee handbook, you can quickly get your new employees up to speed on your culture.  Well defined values, mission, and goals often have a positive effect on the bottom line.

Research conducted by Columbia University has shown that turnover at companies with poor cultures is more than 48%. Companies with better cultures, however, often see higher employee engagement and retention levels.

2. Document and communicate standardized policies and procedures

Having well documented policies and procedures in your employee handbook helps your small business set expectations with employees. This ensures your employees understand their responsibilities and helps hold them accountable for their actions.

Documenting processes also helps create a more inclusive environment. For example, if you have a clearly defined procedure for approving leave requests, your managers will have a standardized process to follow, reducing the chance bias may unknowingly impact their decision. This helps make the process fairer for everyone.

3. Decrease time employees spend looking for answers

How much time do your employees spend looking for answers to their questions? If your business is like most, they likely spend an average of 20% of time looking for internal information or finding someone to assist with a task.

That’s almost a quarter of the workday wasted. Documenting answers to the most asked questions in an employee handbook can help reduce time spent searching for answers. This, in turn, can increase productivity for your employees and HR teams.

4. Provide a guidebook for managers

We’ve all heard the saying, “employees don’t leave companies – they leave managers.” Being a manager can be difficult and it’s even harder without a clear guide to follow or expectations in place.

Employee handbooks can provide your managers with documented procedures for many situations they will encounter. This will help you establish consistency organization-wide and allow your managers to focus on what they do best.

5. Notify employees of their state and federally protected rights as an employee

Employees have many rights that are protected by state and federal regulations. As a small business, you have an obligation to notify your employees of these rights. An employee handbook can help your small business do just that.

From ADA to FMLA, an employee handbook provides a centralized place for your employees to access important information. Just keep in mind it won’t cover everything. You likely will have additional obligations, like required workplace posters, to consider.

6. Comply with state and federal employment laws

There are many employment laws, like those from OSHA and the Department of Labor, you must follow as a small business. Similar to notifying employees of their rights, a handbook also gives you an easy way to document your procedures, and employee and manager responsibilities.

For example, required regulations for businesses to carry workers’ compensation insurance vary from state to state. Once you understand the workers’ compensation insurance regulations that apply to your small business, you can use your employee handbook to share relevant information with your employees.

7. Minimize risk for your business

According to the Society for Human Resource Management (SHRM), if “policies are important enough to put in writing, they need to be included in the employee handbook.” Well documented policies and procedures not only set expectations with employees, your employee handbook can also help protect you from workplace litigation and claims.

Bonus tip to minimize risk as a small business:

The IRS estimates that 40% of small to medium-sized businesses pay a payroll penalty each year for missed deposits, filings, and compliance mistakes.

Make sure your payroll processes are efficient and documented in your employee handbook. Highly experienced full-service companies like CRI Payroll Services can adapt procedures to match your business needs and help you stay in compliance.

8. Minimize workplace disputes

Within any company, workplace disputes are bound to happen. However, you can easily prevent many of these with documented policies and procedures. Having these in your employee handbook ensures consistent policy enforcement and provides more clarity for employees.

9. Protect your brand

Even as a small business, your employees’ social media conduct can often reflect back on your organization. But many organizations don’t have social media expectations for employees.

According to Pew Research, only 32% of employees report their employer has policies about how they present themselves online. Setting reasonable standards and accountability measures in your employee handbook can help you prevent and address negative publicity caused by an employee’s social media.

10. Convey how your company has been and is responding to COVID-19 and adapting to remote work

Employee handbooks should be updated periodically, at least annually, to ensure your content is up-to-date and meets regulations. COVID-19 has prompted many businesses to adapt practices to adhere to ever-changing guidelines.

Right now, at least 14 states have adopted comprehensive COVID-19 workplace safety and health guidelines. A handbook can help ensure your employees know how you are meeting these new COVID-19-related requirements and the measures you are taking to keep them safe.

Remote work was something new for many businesses and employees alike. It can be challenging to navigate working from home, but your employee handbook is a great place to document remote work expectations.

11. Highlight why your company is an employer of choice

What makes your organization a great place to work? Is it your health insurance? A unique benefit you offer that others don’t?

You can use your handbook to document the various benefits and perks you offer that help set your small business apart as an employer. This will also help your employees understand what they qualify for and how to access benefits.

Does your small business have the employee handbook it needs?

There are many reasons to have an employee handbook, but it’s about more than just having a handbook.

What’s in your employee handbook matters too.

Your small business deserves more than a template. With a full range of HR and payroll related products, tools, and true support, CRI Payroll Services can help provide immediate and personalized service to help with many of your Human Resource needs.

Discover how CRI Payroll Services can help your small business achieve more.