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Employee Personnel Manual - Should Your Business Have One?

Imagine these scenarios for a moment.

You are the owner of a computer repair business that employs two or three employees. Or perhaps you are the head of a family owned bakery that has operated on the basis of a handshake and a smile since your great grandfather started it a hundred years ago. Maybe you are just about to open a brand new business and haven't even gotten around to making your first hire.

If you are a business owner in a similar situation to those named above you may be asking yourself: why bother to develop a human resources personnel manual? The fact is, however, that both business owners and their employees can benefit from a personnel manual that is unambiguous, adaptable, legally sound and a positive contribution to the workforce environment. Not only can an explicit personnel manual save the business owner from experiencing legal problems but it can also serve as a tool for building morale and attracting a stronger pool of applicants for jobs with your organization.

Here's one example of why a written personnel manual can be helpful. In an article on the website Businessknowhow.com, Peggy Arvidson-Dailey advises that you have a disciplinary and review process in place before you bring on the first member of your employee team. "Questions to address in this process include: How many emergency absences are acceptable in a given time period? How will you deal with customer complaints and concerns? How will you reward outstanding performance? What format will you use to communicate with your team?" (1)

In this article we'll go over some of the issues from pensions to performance reviews that should be covered in a proactive personnel manual. At the end of the article we'll provide you, the business owner, some website references so that you can explore the issue further from the perspective of other business owners and business consultants

The Employee Manual: Balancing the Pros and the Cons

Although there are downsides to adapting a personnel manual that is given out to employees, they are definitely outweighed by the upside benefit according to the Employment Law Information Network (www.elinfonet.com).

The "cons" of having a personnel manual distributed to workers include inflexibility on the part of managers, ambiguous or illegal provisions and manuals that leave out crucial information.

Countering these disadvantages is the advantage of establishing uniform polices that are consistently applied and establish common ground between employer and employee. A well defined personnel manual can also prevent lawsuits, according to an article on the Elinfonet.com website.

In writing a personnel manual, business owners walk a fine line between creating policies that may box them in if an employee challenges them or vaguely worded provisions that may be used against them if a worker decides to sue them. Given that Pennsylvania is a state in which either employee or employer can terminate their relationship at will, the Small Business Administration advises including a disclaimer stating this. "Disclaimers should also appear when there is any mention of firing and disciplinary procedures," said the SBA article on business development. (2) According to HR specialists, a personnel manual should also clearly state that it does not constitute a contract.

You may also want to consider putting your personnel manual online in a secure location, perhaps on an employee Intranet, rather than distributing paper copies.

Whether you give it out to your employees or not, it is probably wise to have your personnel manual vetted by a lawyer experienced in the personnel field.

Business owners don't always need to distribute the personnel manual. But experts highly recommend that they create one and keep it close at hand.

Due Diligence in the Workplace: What to Incorporate in an Personnel Manual

Many human resource issues can be addressed in a personnel manual at your discretion. According to Mary Regnery, Senior Vice President of Human Resources for Fox Chase Bank, "It is often better to be proactive and address a situation in your manual than having to be reactive after an incident occurs."

Here are some key components you may want to include:

  • Employee classification and work hours- Provisions of the Fair Labor Standards Act define whether an employee is considered exempt or non-exempt (see http://www.dol.gov/elaws/flsa.htm for more information). The duties, not the job title, determine the proper classification. It is useful to explain what criteria define a part-time or a full-time employee. (3) Let your employees know the standard company work hours and the set times for lunch and breaks, if they exist.

  • Federal Employment Laws-You are going to want to let your employees know that you comply with the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family and Medical Leave Act and the Occupational Safety and Health Administration Ergonomics Standard. Given the complexity of these acts, consultation with a lawyer is advised.

  • Compensation and Performance-The SBA advises that: "because pay issues are sensitive, it is wise not to include specific numbers." However, general policies about paychecks, promotions and wage increase policies and special situations like overtime and leave without pay should be delineated. The SBA does suggest that a performance review policy be included so that employees know how often and by what criteria they will be evaluated. (4)

  • Benefits- As the website www.realtor.org notes in its article on employee handbooks, sometimes benefits are more of an incentive in modern compensation than an offer of cash or a salary adjustment (5). The handbook should define who is eligible for insurance, what percentage of the cost is borne by the employee, and how long an employee must wait for coverage. Provide brochures from your insurance company on benefits and explain vacation, sick leave, paid holidays and other related company policies. It is best to hand out a one page summary sheet listing all benefits, eligibility, cost to employee, vesting, etc. in order to avoid any confusion as to what benefits you offer.

  • Pensions- Tell your employee about the range of participation opportunities presented to them and let them know when they will become vested in the pension plan.

  • Grievance and Termination procedures-Employees should know that you have a standard procedure for grievances if they have a concern. "Just causes" for which you will fire one of your workers are many and may include absenteeism, dishonesty, criminal activity, and health and safety threats, among others.

  • Standards of conduct-Include policies on sexual harassment, drugs and alcohol, smoking and disciplinary procedures here.

    If you have a written personnel manual that you have distributed to employees, experts advise that you protect yourself by having them sign a card or paper that acknowledges that they have received it.

    Human Resource Personnel Manuals: Setting the Stage for Healthy Business Relationships

    In a forward looking, healthy business, your employees become your most potent asset. When the ground rules are defined and delineated through a human resources policy, workers are more likely to feel secure, motivated and recognized. Whether distributed or not, your policy sets the tone for the owner employee relationship you want to encourage: one that is professional, clear, positive and productive. You will probably find that, once you have done the hard work of writing a manual, it will benefit you well into the future, fostering a staff that works as team for the good of your business.


    Notes
    1. Arvidson-Dailey, P. "10 Hiring Tips for Small Business Owners," found online at http://www.businessknowhow.com/manage/sbhire.htm

    2. "Creating An Effective Employee Handbook: Partners for Small Business Excellence-Small Business Success Magazine", reprinted online at http://sba.gov/gopher/Business-Development/Success-Series/Vol10/handbook.txt

    3. "Creating An Effective Employee Handbook: Partners for Small Business Excellence-Small Business Success Magazine", reprinted online at http://sba.gov/gopher/Business-Development/Success-Series/Vol10/handbook.txt

    4. "Creating An Effective Employee Handbook: Partners for Small Business Excellence-Small Business Success Magazine", reprinted online at http://sba.gov/gopher/Business-Development/Success-Series/Vol10/handbook.txt

    5. "Components of Employee Handbook or Personnel Manual" can be found at the website www.realtor.com

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