An employee handbook puts your company policies in one place so that your team knows what to expect, and you're not answering the same questions about dress code, hybrid work, or unlimited PTO over and over. When employees have a question about a work policy, the handbook should be the first place they look. A clear handbook can also help show that you apply your policies consistently if an employment decision is ever challenged.
This guide walks through how to create an employee handbook step by step.
How do I create an employee handbook?
To create an employee handbook, follow these five steps:
Introduce your company's history, mission, vision, and values.
Cover required policies and the ones that protect your business.
Add optional policies your team wants to know about, such as a hybrid work policy.
Have an employment attorney review it, and get employee signatures.
Review and update it regularly as laws change.
If you don’t want to start from a blank page, Gusto's Employee Handbook builder comes pre-drafted with policies based on federal law and best practices, plus state-specific policies for a growing list of states. You review, customize, and share it with your team without writing from scratch.
1. Introduce your company's history, mission, vision, and values
Before diving into company policies and procedures, give new hires a reason to care about your company’s culture. Put in a short welcome statement, how the company was started, your mission, and your company values. Share a story or two about a real moment that shaped the business; it will be more memorable than a list of adjectives about your culture.
As you write the rest of the handbook, use plain language, include examples, and explain the "why" behind a policy when it isn't obvious.
2. Cover required policies and the ones that protect your business
No federal law requires a handbook. But once you have one, some laws dictate what goes in it. Here are a few examples:
Law | Who it applies to | What your handbook must include |
Covered employers (generally private employers with 50+ employees) with eligible employees | FMLA rights and responsibilities, if your handbook covers leave or benefits | |
Minnesota Earned Sick and Safe Time | Minnesota employers | Information about employees' sick and safe time rights |
Colorado Healthy Families and Workplaces Act | Colorado employers | Information about employees' paid sick leave rights |
California lactation accommodation law | All California employers | A lactation accommodation policy (or include it in a separate set of policies available to employees) |
Other laws require written policies whether or not you have a handbook. Examples include harassment prevention policies in California and New York, and drug-free workplace policies for certain federal contractors. Including these in your handbook is a good start, but you may also need to distribute them separately.
Requirements vary by state and change often, so check with your state's labor department or an employment attorney for what applies to you. Keep in mind that required notices may be covered by your required labor law posters.
Policies that reduce legal risk
Even when they aren't required, these policies set clear expectations and help you defend employment decisions:
At-will employment: Explain that at-will employment means either you or the employee can end the relationship at any time, for any lawful reason. Add a statement that the handbook isn't a contract. (Montana is the one state where at-will employment is limited after a probationary period.)
Equal employment opportunity and anti-harassment: State that you don't tolerate discrimination or harassment. Explain how employees can report concerns and that you won't retaliate against anyone who does.
Employee code of conduct: Describe the behavior you expect and what happens if someone doesn't meet it.
Conflicts of interest and outside employment: Explain what a conflict of interest looks like, how to disclose one, and whether employees can take on outside work.
Employee benefits: Summarize what you offer, such as health insurance, and who's eligible. Point employees to the official plan documents, which take precedence over the handbook if the two ever conflict.
Leave policies: Cover PTO and sick leave, how PTO interacts with FMLA, and what employees can expect if they're called for jury duty.
For a deeper look at each of these, see our guide to what to include in an employee handbook.
Gusto's Employee Handbook tool tags every policy as "Legally required" or "Reduces risk," so you can see at a glance which ones you can't skip and which ones are worth adding.
3. Add optional policies your team cares about
Once the essentials are covered, add anything else your team needs to know. That might include:
Flexible or remote work arrangements
Social media and cell phone use
Your dress code
Parking
Only include what applies to your business. If your handbook gets too long, employees might skim instead of reading it carefully.
Also, keep in mind that including rules on social media, confidentiality, or workplace conduct can't discourage employees from discussing pay or working conditions. That's protected under federal labor law, even if your team isn't unionized.
4. Get legal review and signed acknowledgments from employees
Once you have a draft, have an employment attorney review it. They can confirm you've covered your state's requirements, that your at-will and "not a contract" language holds up, and that none of your policies create legal risk you didn't intend.
Then have each employee sign an acknowledgment form, usually the last page of the handbook. The form confirms they received the handbook, read it, and understand that you have the right to update policies over time. Keep signed copies in each employee's personnel file. To make sure nobody slips through the cracks, add reading and signing the handbook to your onboarding process.
5. Review and update it regularly as laws change
Employment laws change often. Plan to review your handbook at least once a year with legal counsel or an HR professional, and update it sooner when a new law affects your business.
When you make changes, collect new signed acknowledgments from employees. That draws attention to what's different and gives you a record that employees knew about the update if a dispute ever comes up.
When a law changes in a state where you have employees, Gusto's HR Law Updates let you know, so you don’t have to track every legislative calendar yourself.
FAQs
Where can I get an employee handbook template for small businesses?
HR software providers, including Gusto, often offer handbook templates or builders. Gusto's Employee Handbook tool comes pre-drafted with policies based on federal law and best practices, plus state-specific policies for a growing list of states. Whichever template you use, customize it to your business and have an employment attorney review it.
Is my company required to have an employee handbook?
No. No federal law requires an employee handbook, and no state requires one in general. However, some laws require you to provide specific written policies, and a handbook is usually the simplest place to keep them. It also gives you a written record of your rules if an employment decision is ever challenged.
Is an employee handbook a legally binding contract?
Usually not, as long as it's written carefully. A clear statement that the handbook isn't a contract and that policies can change, paired with at-will language, helps prevent it from becoming an implied contract. Avoid making promises in your handbook that you can’t or won’t keep consistently with all employees.
Do employees have to sign the employee handbook?
Usually not. No federal law requires employees to sign the handbook, and state laws generally don't either, though a few require signed acknowledgments for specific notices, like New York's wage notice. Ask employees to sign anyway, since it shows they received the handbook. If someone refuses, note the date you gave it to them and have a witness confirm it.
Can I use one employee handbook for employees in multiple states?
Yes. Many employers build one handbook around federal requirements, then add a state-specific section or supplement for each state where they have employees. When state and federal rules differ, the rule that's more protective of employees generally applies. Each supplement should reflect that state's leave, pay, and notice requirements.
