One of the services we offer at InPrime Legal involves drafting employee handbooks for companies. Among other things, these outline the rights and responsibilities of both employers and employees. Giving a handbook to new hires is a crucial precaution. It clarifies terms, sets expectations and provides an objective reference to settle any issues that arise later.
Obviously, having good rules in place for the relationship is better than having none. But how valuable is this kind of guide, in specific dollar terms?
Recently, we received a note from a client who encountered a payroll problem, and the employee handbook we had revised for the company made a positive difference in the outcome. The client thought this experience might be useful to share with potential or current InPrime Legal members. And we agree!
Substantial Payroll Errors Detected
The client became unhappy with the work performance of one location’s payroll manager. She was constantly failing to get payroll completed in time, which meant she had to issue manual checks. One of the company’s owners decided to take back doing payroll and quickly realized that overtime pay rates for tipped employees were not being calculated correctly. In fact, they were extremely off—at $20-$30 per hour instead of $5.76!
The owner manually overrode the rate and got payroll sent, then pulled every payroll since the business’s opening five months prior to determine how long the mistake had been happening. Unfortunately, the owner discovered the company had overpaid employees by $20,000, a devastating figure to this new enterprise.
To right the error, the owners decided that for the employees still working there, they would deduct the overpayment amount from their checks. Not surprisingly, this set off a firestorm among upset employees—even though they may have known they had been being overpaid but hadn’t say anything—and two quit with the threat of a lawsuit.
Enter the Employee Handbook
We’ll let the words of one of the company’s owners take over from here:
I decided to look in our handbook and sure enough, you had included that we may from time to time make deductions from employees for overpayment of wages. I never would have thought to include that in a handbook until this incident happened. But that is why InPrime is such a great program. We never would have sought out an attorney to redo our handbook—you took that initiative while we were in the program. And it not only saved us $20,000 that we were able to recover from employees, it will save us money when we win this potential lawsuit as well.
Sometimes the return we see from you takes months or years to manifest, but it is 100% there and I thought you should know.
We couldn’t have said it better ourselves.
Importance of an Employee Handbook
If the above experience isn’t enough to convince you of the importance of having a comprehensive employee handbook, here are several more reasons you should consider having one drafted and signed by your employees. It:
• Informs employees about the company’s mission and goals, enabling a smoother transition into the workplace;
• Lets employees know of their rights and responsibilities, giving them a clear idea of what is expected of them;
• Communicates key employee policies and procedures, providing employees a reference to use in decision-making when issues arise;
• Lists avenues of recourse should the employee encounter problems, ideally an individual point person who handles grievances.
• Shows the employer’s desire to comply with existing state and federal laws and helps the employer better defend against potential claims