Think You Don't Need an Employee Handbook? Think Again

The beginning of the end started when an employee who’d been let go filed for unemployment, recalls Kellie Boysen. In the process of determining whether that employee was eligible, the state discovered he’d been improperly paid as an independent contractor. Suddenly, the company owed three years back pay in overtime along with unemployment and Social Security taxes. Heavy fines ensued, and workers compensation rates shot up dramatically. The firm was left with thousands in attorney fees. In the end, that one mistake cost several hundreds of thousands of dollars—and put the business under.

“You get a lot of people saying, ‘It will never happen to me,’ says Boysen, owner and consultant for Alternative HR, a Wrightsville, Pa.-based specialist in the construction industry. “If I only had a nickel for every time I heard that. It does happen. And it only takes one.”

But the truth is, a simple document could have saved that company—and thousands of others that unnecessarily go out of business every year. This one document not only offers legal protection, but also saves untold thousands in bogus unemployment claims and discrimination lawsuits. It’s called an employee handbook. And less than 5% of remodelers actually have one, estimates Mark Paskell, owner of the Contractor Coaching Partnership, which offers business coaching for residential contractors.

“The vast majority of residential contractors become contractors to build things. They’re craftsmen, not business people,” says Paskell, who’s also the National Association of the Remodeling Industry’s Boston chapter president. “They don’t think about things like employee handbooks.”

Handbooks Defined

But increasingly, to stay competitive, avoid legal problems and stay in business, they need to, he says. That’s because in its most basic form, an employee handbook provides a blueprint for how the company is supposed to operate. It establishes work roles and responsibilities along with basic safety protocols. It also dictates how employees are supposed to behave from the time a consumer lead comes in to the final close of the project, Paskell says.

Without a handbook, “Work gets done either incorrectly or out of sequence and has to be redone,” he says. “People get hurt. Consumers begin to question your professionalism. You lose money.”

And employee handbooks aren’t just for large businesses. They’re also important for small and family-owned businesses. “Family businesses use the metaphor all the time about being on the same page,” says Wayne Rivers, president of the Family Business Institute. “But in reality they’re very weak about documenting rules and procedures. This is an opportunity for them to literally get on the same page.”

Getting on the same page doesn’t just make sense; it saves money, especially when it comes to hiring and firing.

“I see it time and again where all they can say is, ‘It didn’t work out.’ And they lose unemployment claim after unemployment claim and end up having to pay much higher unemployment rates because of it,” says Boysen, who’s also a volunteer for SCORE, a nonprofit aimed at helping small business supported by the Small Business Association.

Handbooks Hurdles

So why don’t more remodelers have handbooks? The simple answers are time and money, but Paskell says it’s more complicated than that. “There isn’t a well-defined career path for residential contractors,” he says. “The schooling is commonly referred to as the school of lumberyard hard knocks.”

Boysen says those hard knocks can be more than remodelers bargained for without a handbook. “There are a lot of very talented individuals in remodeling,” she says. “They know they can do a better job than the bigger company they’re working for. But they’re not aware of the business end of dealing with employees and laws—until it comes to bite them.”

But the thought of sitting down to work on something like a handbook puts most remodelers off. There’s also a basic misunderstanding that they will curtail autonomy, says Rivers. “They say, ‘I want to be free to do whatever I want, whenever I want,’” he says. “But if you have this stuff written down so you don’t have to figure out the answer all the time, you’ll have more entrepreneurial freedom.”

What’s more, when that stuff isn’t written down, it can lead to serious problems, warns Boysen. “The smaller the business, the issues are fewer and further between,” she says. “So you don’t remember how you handled a situation the last time it came around. That’s what leads to inconsistencies. And that’s what leads to lawsuits.”

Getting Started

The best way to start a handbook that will provide that needed consistency is to work with an expert. “You can’t just write a policy and say, ‘This is what we’re going to do,’ and expect it to protect you,” says Boysen. “If it’s in violation of the law, it’s actually going to hurt you.”

A human resources pro or attorney knows state and federal laws, and can help remodelers develop policies that are in accordance with those. But the key word there is “help,” Paskell says. Owners can’t just hand the job over to the HR pro. They have to take the processes they have in their heads and put them down on paper. “If you hire the appropriate person with the skill to get this done, they’ll ask the right questions,” he says.

Downloading templates or using resources such as the Small Business Association can be a good place to start, but beware a one-size-fits-all approach. Boysen says many smaller businesses don’t realize they don’t have to follow the same federal and state rules as larger businesses. For instance, the Family Medical Leave Act (FMLA) only kicks in for companies when they have 50 employees within a 75-mile radius. A handbook policy in line with FMLA can unnecessarily burden a small company.

And handbooks don’t have to be tomes, or financial sinkholes. Boysen recommends a 20-25 page document for companies with 20 or less employees that costs around $500. Adds Rivers, “Don’t let the perfect be the enemy of the good. It’s better to have something rather than nothing. You can always revise it later.”

See other REMODELING stories regarding handbooks, policies, and procedures

12 Must-Have Employee Handbook Policies

Here are 12 basic policies that should go into employee handbooks, according to Kellie Boysen, owner and consultant for Alternative HR and the Small Business Association: