When does a growing business need an employee handbook?

In the United States, no federal law requires a private employer to have an employee handbook. That surprises founders who assume the handbook is the document an employer must have, and it shapes the honest answer to the question this guide asks. The need for a handbook is practical, not statutory, and it arrives at a point in a company's growth rather than on a date.

Federal law does require some things in writing, and it helps to keep them separate from the handbook.

Several statutes enforced by the Department of Labor require posters or notices in the workplace. Not every employer is covered by every statute. The Department's Poster Advisor exists to tell an employer which ones apply [1].

The Family and Medical Leave Act covers a private employer with 50 or more employees for each working day during 20 or more calendar workweeks in the current or preceding calendar year [2]. The FMLA also asks a covered employer for written notices [3]:

• It must post the FMLA general notice.
• Once it has eligible employees, it must also give that notice to each employee. It does so by including it in the employee handbook or other written guidance on benefits or leave, if such materials exist, or by handing a copy to each new hire.
• When an employee asks for FMLA leave, or the employer learns that leave may be for an FMLA-qualifying reason, it has five business days, absent extenuating circumstances, to say whether the employee is eligible. Each time it gives that eligibility notice, it must give a written notice of the employee's rights and responsibilities.

So the law does not ask for a handbook. But if you have one and the FMLA covers you, the handbook is where the general notice is expected to sit.

Headcount also brings federal anti-discrimination law into play. The Equal Employment Opportunity Commission states that a private employer is covered by Title VII and the Americans with Disabilities Act once it has 15 or more employees, and by the Age Discrimination in Employment Act at 20 or more, counted over at least twenty calendar weeks in this year or last, while virtually every employer is covered by the Equal Pay Act [4].

None of these laws tells an employer to write a handbook. They are the rules a handbook's conduct, complaints and leave sections are written against, which is why companies approaching these numbers often find the handbook question on the table at the same time.

The United Kingdom asks for more in writing. Section 1 of the Employment Rights Act 1996 requires an employer to give every worker who begins employment a written statement of particulars, generally in a single document, no later than the beginning of the employment [5].

Section 3 requires that statement to include, among other things [6]:

• A note of the disciplinary rules and the disciplinary and dismissal procedure. The employer may give this note by referring the worker to a reasonably accessible document.
• The identity, by description or otherwise, of the person the worker can apply to with a grievance, and how to apply.

The Acas Code of Practice on disciplinary and grievance procedures has been in force since 11 March 2015. It asks for those rules and procedures to be set down in writing and to be specific and clear. Employment tribunals take the Code into account and can adjust awards by up to 25 per cent for an unreasonable failure to follow it [7].

A UK employer can meet section 3 without a handbook. But the reasonably accessible document the statement points to is very often the handbook.

In Nigeria, section 7(1) of the Labour Act requires an employer to give a worker a written statement of the main terms of employment within three months after employment begins. It covers matters such as the nature of the work, notice, wages, hours, holidays and sick pay. Section 7(3) lets the statement refer the worker to another document the worker has reasonable opportunities of reading [8]. Section 91's definition of a worker leaves out people exercising administrative, executive, technical or professional functions, so check whether section 7 reaches a given staff member before relying on it.

The clearest sign is that more than one person is now answering staff questions, and the answers have started to differ. In a company of four, the founder answers every question about time off, expenses or working from home, and the answers are consistent because they come from one head. Somewhere past the first few hires that stops being true. A second person starts answering, then a third, and an employee who asks two of them the same question gets two answers. Nobody intended it, and that is the problem: the rule exists only in conversation.

Several moments tend to bring that point forward. The first manager who is not a founder is one, because that person has to apply rules they did not make and cannot check with themselves. The first remote hire in another state or country is another, because the rules that were never written down were also never checked against that place.

The first leave request that is not a day or two of holiday, such as parental leave or an extended sickness, tests whether anyone knows how leave is requested, approved and recorded. The first disciplinary matter tests whether there is a procedure, and whether the steps taken can be shown afterwards.

The others come from outside. An investor in diligence, an insurer underwriting an employment practices policy or an auditor may ask to see the company's policies, and a customer's security or vendor questionnaire may ask whether the company has HR policies and how staff acknowledge them. None of these readers is enforcing a statute. They read the policies as evidence of how the company runs, so a request like this is a customer's or reviewer's expectation rather than a legal one. It is still the moment many companies discover that the answer is a set of messages and a shared folder.