• Marlene

5 Essential Employee Policies for Small Businesses


Whether you have one employee or a handful of employees it is essential to build out company policies while structuring your small business and establish workplace guidelines and expectations to protect your company and its employees, which helps everyone succeed.


The first is more of an important housekeeping and compliance measure than a policy, but is a crucial consideration. When hiring employees (which are different from independent contractors, check out our blog post on employees vs. independent contractors HERE), you have to decide if they will be a contractual employee or an at-will employee.

  • A contractual employee is where a contract exists between the employee and employer, and usually has limitations around how the employee can be terminated or can quit, set expectations and obligations, and sometimes a pre-determined time period under which the employee must work for the company or pay a penalty for termination. Contractual employees are rarer in small businesses and usually are reserved for very high level positions with significant salaries.

  • “At-Will” employment is where no contract exists, and can be terminated by either the employee or employer at any time, for any reason or no reason at all. At-will does have limitations, however, and an employee can still bring a claim for wrongful termination if they are terminated in violation of applicable laws like the Americans with Disabilities Act or anti-discrimination laws.

After deciding which type of employees you have (or both), you want to make sure that for contractual employees, you have a clearly written contract outlining the terms of employment. For at-will employees, make sure you have termination procedures, you communicate only the necessary aspects of the job, and you do not have a formal contract. For at-will employees, we usually recommend simply providing an offer letter and non-disclosure agreement (if applicable).

The second vital policy you should outline to your employees is your payroll procedure and classifications of the employee-whether they are exempt or non-exempt for overtime compensation. Exempt status is typical of an employee who earns a certain salary level or has a specific high skilled job, and a non-exempt employee is an hourly paid employee. When creating your payroll policy and classifying employees it is wise to speak with an attorney to make sure they are classified correctly or it could have major consequences.

The payroll policy and procedure should also outline your pay period such as when pay days will be and the meal/rest period guidelines. Detailing your other deductions such as health insurance, etc., may also help make sure you and your employees are on the same page and clearly outlines how their pay is reflected.

The third essential policy is an Attendance Policy, which should outline the company’s position on attendance and the call off procedure expected, as well as potential consequences for failure to adhere to the company’s Attendance Policy. An Attendance Policy will better safeguard the company in handling any attendance issues whether disciplinary and/or termination of employment. The policy should include verbiage of how the business is affected when attendance is lacking. Having clear policies around this can also help if a company needs to fire an employee for failing to come to work and wants to challenge an unemployment claim.


Another key policy is the company’s time off and paid time off policy, which should include: how much sick time is provided, how to request time off, who must approve the time, and how much notice is required to make time off requests. The policy should always articulate the most common and expected questions employees will have for employers, such as:

  • Can sick and vacation be split up or taken in specific increments?

  • How does paid time off accrue?

  • When can accrued time start being utilized?

Without fail, the question will arise as to what happens to paid time off not utilized at the end of the year, or upon termination. Employers should clearly communicate if time rolls over or if it is paid out upon termination, and upon what conditions. Employers should also check that their policy accounts for all federal, state, and/or local laws or regulations applicable to

their business and related to time off and sick leave. Leave policies are key to establishing rules of engagement and expectations, but also an opportunity to show how much the company values its employees.

Finally, a cornerstone policy for any business is a code of conduct policy. This helps establish the company’s desired workplace culture and how the company responds in handling misconduct. This policy can address a variety of subject matters, including, but not limited to: anti-discrimination, anti-harrassment, dress code, social media rules, company equipment, customer/client/co-worker engagement, etc. A good employee handbook or policy manual should seek to anticipate the types of issues and procedures a company needs to communicate to employees. Employers should always provide adequate time for new employees to review the company policies & procedures and sign an acknowledgement they have read and understand them. Reaching out to an attorney to help draft your handbook or manual can be a great way to ensure you account for the important policies and comply with all applicable laws. And remember, good employee communication helps your company avoid issues and focus on growth!


DISCLAIMER: This blog post is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.