11 Great Reasons Why Even the Smallest Businesses Need an Employee Handbook


The limited size of a small business can eliminate the bureaucracy that is typical of bigger companies. Regardless, a small company can adopt some big company tools without forfeiting atmosphere, culture, or flexibility. A good employee handbook is one of those tools.

Human resources professionals typically draft and update a company's employee handbook. An unbridled HR department in a large company might run with this responsibility to produce a handbook with more rules and details than anyone else in the company cares to read. A small company that does not have an HR department will simply not bother with a handbook. In both cases, these companies are forfeiting the following benefits that a well-drafted employee handbook can provide.

#1. Memorializing a Company's Culture

A company can emphasize the human side of its business by articulating the founder's culture and values in a handbook. For example, Valve Software, a 20-year old gaming and entertainment company, has a widely-circulated handbook subtitled "A fearless Adventure in Knowing What to Do When No One's There Telling You What to Do." Valve has adopted a flat management style, and it tells employees that its handbook discusses "the choices you're going to be making and how to think about them [and] how not to freak out now that you're here".

#2. Establishing what is Expected of Employees

The fashion retailer, Nordstrom, has the world's shortest employee handbook. It consists of a card with the single sentence "Use good judgment in all situations." Nordstrom has a lengthier online Code of Business Conduct and Ethics, but the intent is to communicate the company's expectations to its employees in a clear and concise manner that lower level managers might gloss over or omit from employee orientations.

#3. Communicating Company Policies to Employees

The law firm of Moses & Moses says:

A well-crafted Employee Handbook should provide consistent and clear expectations between employers and employees, including the rules governing your business and employee benefits. By providing an Employee Handbook, time is saved by the employer by not having to field numerous employment related questions and the employee will already know what to expect in a given situation before it even arises.

The Motley Fool has an interactive, online employee handbook that articulates policies, definitions, and resources that employees can use to answer their own questions. This handbook doubles down on the company's culture that encourages "Foolishness," including a vacation policy that tells employees to take what they need. Employees who feel left in the dark about policies can turn to a handbook for a clear and concise statement of policies that are important to both them and the company.

#4. Encouraging Employees to Feel Good About a Company

Employees who feel good about their employers will be more engaged and committed to their jobs. Zappos uses its employee handbook to emphasize the importance of its employees' feelings, thoughts, and opinions. The handbook projects an image of company employees who are excited about their jobs and the mission and values they are serving.

#5. Maintaining a Desired Company Image

Companies that expand beyond their initial startup moorings can lose the casual feel that contributed to their early success. The 10-year old internet startup, Disqus, maintains its startup atmosphere with a "culture book" that is separate and apart from an official handbook that includes labor law guidelines and other legalities. The culture book reflects the company's respect for individual personalities and portrays an office atmosphere that runs counter to a staid company environment.

#6. Recruiting New Talent

In 2009, Netflix released its "Netflix Culture: Freedom & Responsibility" internal presentation to a great fanfare of praise. This presentation described the company's philosophy for managing and motivating hourly and salaried employees. As this document expanded into public consciousness, it has been credited with attracting and retaining a talented and creative staff.

#7. Reassuring Employees that They Are Part of a Team

Many small companies take pride in a quirky collection of individuals that run their operations. A new employee who steps into a freewheeling environment may be hesitant to dive in headfirst. The digital ad company, Big Spaceship, uses its handbook to calm these fears and to encourage employees to participate in the culture that the company strives to maintain.

#8. Complying with Applicable Labor Laws

Government rules and regulations require companies to inform employees of their rights under applicable labor and other laws. Even those companies that use their handbooks as statements of corporate culture will generally publish a separate reference document that recites these rules and regulations.

#9. Defending Against Employee Complaints

Employee complaints under equal employment opportunity laws or human rights regulations are a fact of corporate life. A company's first line of defense against these claims will be an argument that it maintains written policies and procedures that it applies consistently to all employees. Employee handbooks are the easiest mechanism to establish that defense and to remind managers of their obligations to apply policies uniformly and fairly.

#10. Explaining Perks and Benefits

A company's perks and benefits are more than just descriptions of vacations and other policies. The legal marketplace consolidator, Upcounsel, Inc., has an online "careers" page that describes its coffee and meal benefits, shower and bathroom facilities, and office electronic game availability. Handbooks are perfect places to list company perks that add simple pleasures to a workday,

#11. Reducing Workplace Tension

Individuals are entitled to personal opinions on controversial topics, but those opinions should not be allowed to interfere with workplace team dynamics. ZGM, a Canadian marketing company, addresses this issue in its handbook with an employee handbook proscription against "politics, sects, packs, niches, hordes, groups, cliques, exclusion, and all things that build walls.


An employee handbook can be comprehensive or skeletal, but in every case, it is the equivalent of a business plan for employees. Companies succeed when their businesses follow a well-crafted plan. Likewise, employees will succeed when they follow the paths laid out in a good employee handbook. Even the smallest of companies can benefit from crafting and disbursing an employee handbook.