Essentials of an Employee Handbook

When you hire someone as an employee, you enter a relationship with that person. Setting the parameters of that relationship as quickly as possible will minimize the potential for future conflicts. An employee handbook is an excellent way to define those parameters. It sets down your policies in black

That said, a poorly written or incomplete handbook won't do your company much good. Worse, a handbook that includes the wrong policies might interfere with your rights as an entrepreneur. It could even cause legal problems for you. To avoid these problems, make sure these five essential elements are included in your firm's handbook:

1. The disclaimer. Every employee manual should have a disclaimer (it's a good idea to include it both at the beginning and at the end) specifying that the handbook is not a contract of employment. Without such a notice, a fired employee might attempt to sue you for breach of contract.
2. Employee definitions. Distinguish between full-time staff and contract employees, but avoid using the word "permanent." "Permanent full-time" and "permanent part-time" are not good definitions from a legal standpoint. Calling workers permanent implies an arrangement that you can't terminate under any circumstances — an implication that could make it difficult to fire an unsatisfactory worker.
3. Sexual harassment policy. Make it clear that you won't tolerate any such conduct. Always designate more than one person with whom an employee can register a complaint.
4. A carefully defined work week. Define your work week as the seven-day period within which you calculate overtime. Never specify a "normal" work week of Monday through Friday. Otherwise, employees might refuse to work after five o'clock during the week or at all during the weekend.
5. Vacation policy. Specify that you must approve the timing of employee vacations. That way you can still be flexible, but you will be able to maintain adequate staffing throughout the year — including during peak vacation seasons.

Also read Top 10 Employee Handbook Mistakes and What to Leave Out of an Employee Handbook, as well as Changing an Employee Handbook.