An employee handbook is a mainstay in most workplaces. The document is given to every new hire and outlines a company’s policies and procedures regarding benefits, vacation time, and employee conduct. But does a small business, which might have fewer than 20 employees, really need an employee handbook? HR expert Tom Armour thinks so. A former HR executive for a number of Fortune 500 companies, Armour is a co-founder of Higher Return Selection, a five-year-old consulting firm that helps small to medium-sized businesses attract and retain talent. In his view, not only do employee manuals make clear a company’s expectations for a new employee, but they also help provide the blueprint for the culture the business wishes to create and foster. Recently, Armour spoke with business writer Iris Dorbian to discuss what should be in a small company’s employee handbook.
ID: Does a small business really need an employee handbook?
TA: Yes, for several reasons. One, it's the appropriate thing to do if a policy or requirement is important. It's very useful for clarifying expectations, such as confidentiality. Who says a 21-year-old coming out of college understands that? They don't teach that at school. So it's important to have a policy for those really critical things.
A second thing that small businesses should really understand is that the policies help support the culture of the organization. And the third reason is to have uniformity. If you don't have a policy then you're subject to having every department doing their own thing. That’s where you can end up with subcultures within the company.
ID: Can't a company simply have employees sign confidentiality agreements?
TA: For sure. However, for more junior positions and positions that are not at the college grad level, they are not the norm because you typically don't get people to sign legally developed documents. It's a very good practice for leaders or sales people, but not just so much for a bookkeeper.
ID: In addition to company policies on confidentiality, what are some other details that should be incorporated in an employee handbook for a small business?
TA: I think small businesses need to keep handbooks brief. I recall years ago working for Silicon Valley companies that had policy manuals that were three inches thick. That would destroy a small business. I find for most of the small businesses I work with, six or 10 policies are what they typically need. If I were talking to a client, I would tell them to start with some form of standards of business conduct. It protects the company from improper commercial practices. It should also talk about proper expense reporting and having a workplace free from harassment and violence.
ID: What are some of the challenges or issues that small businesses face when drafting employee handbooks?
TA: Here’s the wrong approach: I came to a client a few years back and this fellow had a technology company. He felt like he needed an employee handbook because that's what the books and journals say at the business schools. He went out and hired an HR consultant to write a handbook and paid about a $1,000 for it. The handbook was 100-pages long. When I read it, it was obvious that it was simply copied from another manual and wasn’t really applicable to this business.
I'll give you another example. Technology firms typically write different policies than construction firms. A small software company is going to have a different policy than a small construction company. One would be very focused on hourly paid employees while the other company, the tech company, is structured around the idea of working to develop code and software and leaving the exact hours up to the employee.
ID: You like to break down policies into two categories. Can you clarify?
TA: I like to separate the word policies from guidelines. Policies are those things that are just absolutely required—no debate. An example of a policy would be freedom from harassment in the workplace. That's a policy driven by law. But dress code is something that's not driven by any law. It's really up to the style of a company. In my view, that should never be a policy. That should be a guideline. It's important not to call everything a policy because then you diminish what's important.
ID: So guidelines shouldn't be in a handbook but policies should be?
TA: Yes. And policies are usually those things absolutely required by law.
ID: You mentioned before that small business handbooks should be kept brief? How many pages usually?
TA: It depends on the business but I would say that they don’t need to be more than 20 pages
ID: What would be some other tips for small businesses when it comes to creating an employee handbook?
TA: Try to develop a policy that's suitable for your industry. Also, don't write them as legal documents. There are lots of lawyers out there that advise businesses to write these things, which read like legal documents. If the employee needs to go to a lawyer to understand the terms and conditions, you've probably missed the mark. I think they have to be written in a very upbeat spirit that assumes the employee intends to do well and you're just showing them how.