How to Legally Prepare & Use an Employee Handbook

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Based on our experience representing clients in labor disputes, many small and medium-sized enterprises ( "SME" )frequently fail to comply with legal procedures in matters such as job and salary adjustments, and disciplinary dismissals.

To optimize effective internal management, making an employee handbook is a crucial step. The preparation of an legally effective employee handbook requires the participation of management, HR, employees, and legal counsel. Here is a brief summary for reference.

1.Legal Regulations

According to Article 4 of the Labor Contract Law of the PRC, when employers formulate, amend, or decide on regulations directly concerning employees' interests, such as remuneration, working hours, rest and vacation, occupational safety and health, insurance benefits, staff training, labor discipline, and labor quota management, they should go through discussions with the employee congress or all employees, propose plans and opinions, and reach agreements through equal negotiations with trade unions or employee representatives. In one words, the law stipulates that employers must display or notify employees of the regulations and major matters directly affecting their interests.

This is a mandatory legal requirement that serves as the basis for determining the legality and validity of an employee handbook. In summary, employers must fulfill the requirements of "legal content," "democratic procedure," and "display and notification."

2. How to proceed?

1) Democratic Procedure

When formulating or amending internal regulations, employers should fully follow the democratic procedure. The following are general steps to be taken:

a) Elect employee representatives, or all employees can join the meeting if it's a small company.

b) Submit the purpose, content, and procedures of the regulations to the staff congress for discussion, keeping records and signatures of all attendees.    

c) Propose schemes or suggestions for the regulations from both the employer and employee representatives, maintaining records.

d) Conduct equal negotiations with the trade union or employee representatives, accepting reasonable suggestions and documenting the rationale for rejecting others.

2) Display Procedure

This procedure is very important to make sure the legality of the employee handbook, the company not only should go through the procedure, but also document they have done so:

a) Written Notification: Distribute the draft to various departments and require all employees to sign for receipt.

b) Electronic Distribution: Send the draft, revised version, or discussion version via email, OA system, WeChat groups, DingTalk, etc., setting up automatic replies to confirm receipt. Place a paper version of the handbook near notice boards for easy access.

c) Meeting: Notify and convene a meeting of employee representatives/all employees, explaining the significance and background of the handbook revisions, encouraging feedback, and recording the meeting.

d) Announcement: Post the handbook on the company bulletin board or website. Regardless of the method, collect and display the received comments, indicating which parts were revised based on employee suggestions and which require further management discussion.

3. Key points:

1) The formal release of the employee handbook should be in the name of the company, instead of a specific department.

2) Upon hiring new employees, ensure they sign a confirmation stating they have received and agree to abide by the employee handbook, such as: "The employee confirms receipt of the employer's legally formulated Employee Handbook and agrees to abide by its terms."    

Lastly, but no less important, after all the work that goes into creating an employee handbook, the company must ensure that HR is actually managing according to the guidelines set out in the handbook. This is particularly crucial when dealing with unsatisfactory employee performance leading to termination. It is essential to ensure that the provisions outlined in the employee handbook regarding training, reassignment, notification, and reminders have been followed, and that there is legal evidence to support the entire process.