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Why are employee handbooks important? Here’s 7 reasons


In the daily swirl of building a business, juggling customer needs and working to attract and retain the right employees, the value of crafting and maintaining an employee handbook can be lost on busy employers.

In the long run, however, having an employee handbook in place may help shield you and your company from conflicts and potential litigation.

Yes, beyond serving as a handy reference for your staff and HR team, the most important purpose of an employee handbook is to keep your business on track. So, it’s worth the effort to develop and maintain one.

Let’s take a closer look at employee handbooks – and what forward-thinking business owners need to know about them.

What is an employee handbook?

An employee handbook is a compilation of the policies, procedures, working conditions and behavioral expectations in your business. It should include company-wide policy statements meant to govern the business.

Note that a handbook is not the same as a procedures manual. Instead, it’s an opportunity to create clarity for both employees and management around policies and expectations.

A well-written handbook can foster a stronger, more positive company culture, one in which policies are clearly defined and consistently, uniformly implemented. Individual departments may have additional specific protocols or procedures, but the primary purpose of an employee handbook is to provide a firm foundation for the overall business.

Bound, hard copy handbooks are not required. A handbook can be an electronic file stored online and shared electronically, if employees and management can easily access it. It’s important to have documented acknowledgement that every employee has reviewed the handbook and agrees to follow the outlined policies outlined.

When should a business create an employee handbook?

Ideally, a handbook should be formed at a company’s start, but it’s never too late to craft one.

Creating an employee handbook, however, is not a one-time process.

A handbook is a living document that must be consistently maintained to ensure it reinforces your business practices and that your policies are up to date with the latest federal, state and local laws. Using a handbook to support HR compliance is important because it helps mitigate risks that could potentially lead to costly legal action in the future.

More than simply protecting the company’s bottom line, the real goal of an employee handbook is to create the kind of company culture needed for the business to thrive. It also helps create an environment where employees feel respected, helping them succeed as well as keeping staff engaged and motivated.

A handbook helps make your business a great place to work – and that’s good for business. Not creating and maintaining a handbook, however, is one of the top human resources mistakes companies make.

7 purposes of an employee handbook

Having clarified what an employee handbook is and who needs one, let’s take a closer look at the purposes they serve.

No matter the size of your business, a well-crafted employee handbook:

1. Details your mission, vision and values

A handbook helps convey your company culture, which flows from your mission and values. In fact, everything a business does should be rooted in these three things. These are, after all, your business’ bedrock goals and standards.

You want to hire employees who understand and embrace your mission. You want them to uphold your values and help your company move toward fulfilling your vision.

Thus, your employee handbook should be written so all staff members can understand and connect with your mission, vision and values from the outset.

2. Communicates company policies and expectations

Providing clear expectations informs employees how they can succeed in their jobs. This clarity can make the business successful as well.

Tailored to your company, a handbook should outline company policies as well as indicate how employees are expected to behave and perform. It reflects how you conduct business while providing a framework for workplace behavior and a roadmap on how to treat employees.

Whether it’s how to request time off from work, how to dress appropriately or the importance of refraining from drug and alcohol use, a handbook lets employees know what is expected of them while detailing what will happen if they fail to meet those expectations.

3. Ensures consistent enforcement of company policies

Not only does a handbook provide employee expectations, but also it creates a framework to guide management and leadership.

Outlining what employees can expect from management helps ensure the whole company is working from the same page. Without a handbook, each department manager may do what they feel is appropriate versus following clearly defined and uniform company-wide expectations.

In other words, a handbook ensures consistency from one manager to the next so employees in different departments are treated equally and policies are enforced appropriately. 

4. Sets expectations for employee conduct and performance

With an up-to-date, comprehensive handbook, employees always know what is expected of them and how they can contribute to the business. They understand workplace policies and procedures. They know how management will address problems and complaints.

The handbook creates a shared knowledge base with the rest of the team and helps ensure everyone knows what is important. The clarity around these matters may increase staff confidence in the business and makes their efforts seem worthwhile. This has the potential to heighten engagement and motivation.

5. Addresses employee expectations

Just as companies hire new staff with hopes that they’ll deliver, employees enter an employment relationship with expectations as well. At a minimum, they expect clear communication and fair treatment that meets legal requirements.

By clearly defining company policies and setting a professional tone for the workplace, a handbook demonstrates you understand employees’ needs and are committed to creating a positive work environment.

6. Minimizes risks

Clearly defining workplace policies and procedures can be the first step in defending a business from unemployment or other legal issues.

Employment-related lawsuits and claims are often based on inconsistent treatment or lack of notice of company policies and procedures.

Without a handbook in place, a business potentially faces heightened liability risks. These may include lawsuits, harassment claims, wrongful termination claims and discrimination claims. A handbook also helps ensure your business complies with applicable federal, state and local laws.

7. Helps minimize conflict

When policies and procedures aren’t clearly communicated and consistently implemented, conflicts may arise.

A lack of clarity about policies or uneven enforcement of policies and procedures may lead to perceptions of unfairness or allegations of discrimination, negatively impacting teamwork and productivity. Employees may feel undervalued or mistreated, creating a negative workplace environment.  

Clear policies and equitable implementation help ensure everyone is treated with respect in a non-harassing, non-discriminatory way.

Summing it all up

A well-defined employee handbook and policies that are enforced in a consistent manner helps both businesses and employees thrive. To learn more, download our complimentary e-book: 7 most frequent HR mistakes and how to avoid them.