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CEO Online Magazine (Ezine): Human Resources Management (HRM)

Employee Handbooks - Three Reasons every Business Should Have One by Margaret Catalfamo

When you first learned to drive did you just jump in the car and go or did you learn the rules of the road first? When you bake a cake, do you follow a recipe or just throw random ingredients in a bowl and hope for the best? If you have a small business it's no different for your employees; when they come to work having a manual or handbook helps them understand expectations and be a better employee.

Here are three great reasons to develop and use an employee handbook:

1. Provides a source of information about company policies and procedures which is good for both managers and employees. By having a well written employee handbook you provide a source for your employees and managers to use to gain information on the company's policies such as attendance, dress codes, work hours, pay and performance issues as well as procedures on requesting vacation time (if applicable), notifying the company regarding unscheduled absences, and the disciplinary process.

2. Gives clarity and direction for your managers and supervisors on how to handle certain employment issues. By providing written policies and procedures you enable your managers and supervisors to handle all employees consistently and fairly. 3. Sets expectations for employees and helps to avoid misunderstandings and unacceptable behavior.

Based on size, not every small business needs an employment manual. If you only have a few employees and your workforce is stable (limited turnover) you probably don't need a written employee handbook. But, if your small business is growing or you have more than one location an employee handbook will help smooth out your growing pains and keep your processes and procedures consistent. You may even want to create two manuals: one for all your employees which contains the basic information needed as well as general company information; and a more detailed policy manual for supervisors and managers which provides comprehensive information and procedures for each policy.

Most employee handbooks contain the following information:

1. Company Overview: Provide some history on your company, include a vision statement, information about your company's culture, ethics, goals and management philosophy. 2. Equal Opportunity Statement, Non Discrimination, Anti-Harassment Policy, Americans with Disabilities Act Policy 3. Employment Categories: a. Full Time, b. Part Time, c. Temporary 4. Compensation: a. Payment of salary, b. Overtime, c. Employment records d. Raises/merit increases 5. Time Off: a. Vacation, b. Personal time/Absences due to illness c. Leave due to Family and Medical Leave Act, d. Company Holidays 6. Employee Benefits: a. Health Insurance b. Flexible Spending Account c. Group Life Insurance d. Retirement Plan e. Workers Compensation Benefits 7. On the Job: a. Attendance, Punctuality b. Drug and Alcohol c. Dress Code d. Expense Reimbursement e. Disciplinary Process f. Smoking g. Internet and E-mail Use h. Company Equipment and Computer Systems i. Violence in the Workplace j. Safety

This list isn't all inclusive and your company may not need or want to include everything listed above. If your company doesn't have a retirement plan, then don't include it!

If you've decided to create an employee handbook or update your handbook here are a few more suggestions:

1. If you are starting from scratch, pull together all the memos, notices, letters and information you have previously provided to your employees. Sort this information into categories (you might want to use the above list) and decide if it is still relevant and if you want to include it.

2. To make it easier to update your handbook list one policy per page and include an effective date as well as a revision date.

3. Make sure you include language which protects your company. Courts have considered handbooks to be contracts. Including a statement like the below and having your employees acknowledge receipt will help protect your company against lawsuits and misunderstandings:

"I acknowledge that I have received a copy of ABC Company's Employee Handbook. I agree to read it thoroughly, including the statements in the foreword describing the purpose and effect of the Handbook. I agree that if there is any policy or provision in the Handbook that I do not understand, I will seek clarification from the Human Resources Department. I understand that ABC Company is an "at will" employer and as such employment with ABC is not for a fixed term or definite period and may be terminated at the will of either party, with or without cause, and without prior notice. No supervisor or other representative of the company (except the President) has the authority to enter into any agreement for employment for any specified period of time, or to make any agreement contrary to the above. In addition, I understand that this Handbook states ABC's policies and practices in effect on the date of publication. I understand that nothing contained in the Handbook may be construed as creating a promise of future benefits or a binding contract with ABC for benefits or for any other purpose. I also understand that these policies and procedures are continually evaluated and may be amended, modified or terminated at any time."

4. If you have standard forms include a copy of each form with the relevant policy. If you don't have standard forms, now is a good time to create them.

Once you have completed your handbook, don't just leave it on the shelf. Make it a part of your new employee orientation. Review it with all employees at least annually and make sure your managers and supervisors thoroughly understand your policies and procedures. What's worse than not having an employee handbook? Having one and not following the policies and procedures.

Whether you develop your employee handbook yourself, hire someone to do it, or buy a canned version, it is a good idea to have your attorney review the handbook before you distribute it to your employees. Employment laws differ from state to state and having your employment attorney review the manual is just good business sense.

Conducting Human Resource Audits

Every organization, whether it has one employee or 500 employees, should have an annual Human Resources Audit. An HR audit is similar to an annual health check. It is a means by which an organization can measure where it currently stands and determine what it has to accomplish to improve its HR functions. An audit involves systematically reviewing all aspects of the human resources functions. It also ensures that government regulations and company policies are being adhered to and your organization is not at risk for fines and penalties. An audit is not only a "check up" - you should be prepared to make the necessary changes identified by the audit. A Human Resource audit can help prevent costly lawsuits and fines by identifying weaknesses and correcting them. Who Should Conduct the Audit?

An HR audit can be conducted by your HR staff, an outside consultant or an employment law attorney. This individual must have significant HR experience and should use a checklist or structured method to assess a company's risks and needs. In addition to bringing key advice and knowledge of all pertinent laws to the table, an audit conducted by an outside consultant can add an extra layer of credibility to the findings of the audit. Records from a self-audit do not have the same credibility as audits done by independent sources; however it is better to do a self-audit than not audit at all.

What is reviewed during an audit?

Most audits are comprised of a series of questions separated by topic or functional area. A compliance audit is not a one-day project. It will touch all areas of HR, and may require looking at documents and policies and interviewing HR staff as well as selected employees and managers in other areas of the company. The amount of effort required depends on the size and type of company.

Most audits start with a review of existing employee handbooks and policy and procedures. This provides a starting point to assess needs and risks, identify conflicts or outdated policies and procedures and delete them, and fill gaps where policies are missing. Some of the other areas to target in an HR audit include:

Staffing: An audit of recruiting and hiring practices can quantify turnover trends, reveal gaps in meeting needs and help the organization predict future openings. It can also identify potential issues with discrimination or diversity.

Compensation/Employee Classification: An audit of these areas includes reviewing compensation, overtime, employee classifications (exempt/non-exempt), and time records.

Federal, State and Local Regulations: An effective audit examines compliance with applicable federal, state and local laws -- and can prevent lawsuits and fines. Incomplete or missing I-9 forms can result in an employer being fined between $100 and $1000 for each failure to accurately complete an I-9 form.

Administration: An audit of this area examines regular HR duties, such as benefits administration and attendance tracking, and checks the handling of personnel records and confidential files.

Employee relations: An audit of employee relations issues includes review of communication processes, discipline procedures, and performance measurements.

By regularly auditing your Human Resource functions you will mitigate your risk. If you have significant compliance concerns for your company, you may want to consider an audit structured as an attorney-client privileged investigation. By having an attorney conduct the audit, you can identify and correct problems and protect certain information that may otherwise be accessible to government investigators.

The information provided in this article is based on general human resource management fundamentals, practices and principles and is not intended to be considered legal advice. Consult your employment law attorney for legal advice or legal opinions.

About the Author

Margaret Catalfamo is a small business consultant who provides practical, comprehensive advice and support in the areas of Human Resources, Business Start-Up, and Strategic Planning. For help conducting an H.R audit contact her at: Resource_Alternatives@comcast.net or visit http://www.ResourceAlternativesConsulting.com

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