Understanding the importance of employment agreements and handbooks

Overlooking your organization’s Human Resources infrastructure can cause a myriad of issues and can lead to very costly (and mostly avoidable) issues. Two main pillars of HR, at least from a documentation standpoint, are the individual employment agreement and the employee handbook.  

Employment Agreements

The individual employment agreement is one of the most important documents an organization can utilize. All employees should have one in place regardless of whether they are full-time, part-time, fixed-term, hourly or salary. Employment agreements should be utilized at the start of the employment relationship, and updated as the relationship evolves over time.  When drafted properly, employment agreements can:

1. Set out the terms and conditions of employment and those obligations that survive the employment relationship (i.e. confidentiality and non-solicitation);
2. Significantly limit an organization’s exposure to costs upon termination; and
3. Contain variable costs thereby enhancing the perceived value of the business to prospective buyers.

Ideally, written employment agreements (beware of oral employment agreements) are entered into before employment commences. This means providing the written agreement to the candidate before their start date and requiring it to be signed before the employee commences work. If an employment agreement is presented or signed after the commencement of the employee’s start date (including existing employees) the employee’s agreement to sign the document must be conditional upon receiving some additional benefit (i.e. signing bonus, promotion, new bonus plan, salary increase, etc.).

There are many considerations when drafting an employment agreement, so professional advice should be sought in advance. While not an exhaustive list, things to consider when preparing an employment agreement are: type of relationship (full-time, part-time or fixed-term), start date, duties of the employee, remuneration, hours of work, vacation entitlement, overtime entitlement, termination and resignation, and post-employment obligations.

Getting it right from the start goes a long way toward reducing unnecessary legal exposure and risk.

Employee Handbook

The second important document from an HR perspective is the employee handbook. The employee handbook:

1. Clearly outlines the organization’s policies and procedures to answer employee questions and avoid confusion – it contains legally required policies and ones that are recommended;
2. Reduces the risk of legal disputes and/or litigation;
3. Sets clear expectations for both employees and supervisors/managers; and
4. Communicates organizational values.

Drafting an employee handbook requires both knowledge of the particular organization and applicable legislation. There is no one size fits all approach when it comes to employee handbooks. Therefore, precedent-type documents or handbooks available on the web are strongly discouraged. The employee handbook should reflect your organization’s culture as well as the applicable employment standards, health and safety and human rights legislation in the province or provinces where the organization operates. For similar reasons, using an employee handbook drafted for a different country is also problematic.

In terms of process, all employees should be provided with a copy of the employee handbook or access to an electronic version. The handbook should contain an acknowledgment that the employees sign. The handbook should also be updated regularly to ensure compliance with legislative changes. Lastly, managers and supervisors should receive regular training on the policies to ensure they are implemented correctly and effectively.

While it is recommended that these documents are in place when an organization is first starting out, it’s never too late to implement proper HR infrastructure.

Learn more: Watch the webinar Understanding the importance of employment agreements and handbooks