An employee handbook is an important communicative tool between a company and its employee. It sets out all the policies that a company uses in the regular course of business, explains company programs, and communicates general information that serves as a guideline and point of reference for both the employer and the employee.

Because it details expectations from the company to its workers, as well as outlines what the employee can expect from the company, the employee handbook is a necessity in the workplace. The handbook provides all information that employers are legally required to provide, and also compiles important policies in one easily accessible place.

As a tangible document with a written set of rules and expectations, the employee handbook ensures fairness by creating a uniform policy that all workers must adhere to and by standardizing the enforcement of these policies. In addition to securing consistency by applying the same procedures for all workers, the handbook serves to communicate common expectations between the company and its employees. For example, expectations regarding sick days and vacation holidays are addressed in the manual to prevent misunderstandings.

Misunderstandings between an employee and his or her employer can lead to lawsuits which are costly for both parties. A well-drafted employee handbook greatly reduces such confusion and minimizes risk of litigation. Even in times of a lawsuit, the manual can serve to limit a company's liability and work as a defense-some courts have considered these handbooks to be a contractual obligation, as an employee signs an acknowledgment form recognizing and agreeing to company policy. Furthermore, the employee handbook functions as documentation that a company is committed to compliance with federal and state laws and regulations. The inclusion of acts such as the "Family and Medical Leave Act" can demonstrate a company's intent to adhere to employment laws and provide a fair working environment.

Aside from providing legal information, the employee handbook creates a positive company image by laying out benefits and company spirit. Having a tangible document that clearly addresses company policies and benefits reinforces employee morale and solidifying company ethics.

Although not legally obligated, many companies choose to adopt an employee handbook for a variety of reasons. Having a well-written employee handbook accessible reduces the chance of miscommunication and save time in answering repeated questions.