In our last blog, we discussed the first of five reasons businesses benefit from developing an employee handbook or manual—because it saves money paid on unemployment taxes. We explained how an employee’s right to unemployment benefits is often directly tied to whether or not an employer can prove that it has communicated it’s policies to the employee. Without written policies, employees may receive unemployment benefits they would not otherwise be entitled to, increasing the company’s tax rates.

Today, in the second blog of this five part series, we are addressing the second reason companies can save money and time by implementing employer policies using an employee manual/handbook.

REASON #2: An Employee Manual Provides for a More Organized and Efficient Work Environment.

Without guidance as to what is expected of them, employees often become confused and unorganized in their work. This leads to mistakes and misjudgments which can deal another financial blow to a small business.

For example, suppose an employee who works as a purchasing agent for an employer operates under the mistaken belief that they have the authority to make unlimited purchasing decisions for the company. The employee enters into a contract on behalf of the small business, committing to the purchase of $10,000 worth of inventory. The employee believes she negotiated a great deal for the employer and expects her boss to be thrilled when the boss realizes the employee saved her $5,000 on the deal.

The problem? The employee is not aware that the boss recently made the decision to stop selling the inventory because of the regulatory costs involved, as have all the company’s competitors. Instead of being thrilled, the boss is irate that the employee did not obtain her approval before making the purchase. Now, based on principles of agency law, the small business owner is stuck with inventory that cannot be sold without incurring more cost than she can cover in sales.

This lose-lose situation could have been avoided altogether with a concise employee manual clearly setting out the limits on employees’ authority to make purchases on behalf of the company. A policy setting out the procedure to obtain proper approval and what department heads have authority to authorize purchases could have prevented this financial loss to the business.

In addition to this direct financial loss, the small business is likely to suffer more indirect losses as a result of its failure to communicate policies and procedures effectively to its workers, including the potential for losing a valued and loyal employee, the decrease in morale and productivity if other employees learn of the situation, as well as extended losses from customers as the company earns a reputation for running an unorganized and inefficient operation.

It is difficult to overstate the importance of effective communication within a company and one key tool for ensuring such communication is the employee handbook. Be proactive, let the experienced employment attorneys at Gehres Law Library assist your business in writing or re-writing effective policies and procedures. Contact us today.

Stay with us for our next blog in this series – REASON #3: Prevent and Prevail On Discrimination Claims with an Employee Handbook.